Pensions & Investments' Dec. 12 editorial, “Strengthening PBGC,” looks at the trees but does not appear to see the forest.
The Pension Benefit Guaranty Corp.'s financial difficulties will remain formidable and, likely, unsolvable given its current funding source.
A classic “death spiral” has existed the past 30 years. Having a defined benefit plan is voluntary — a basic fact that legislation has blithely ignored. When PBGC premiums rise, as they relentlessly have since PBGC was formed in 1974, defined benefit sponsorship becomes less attractive. The resulting shrinkage base of DB sponsors shrinks funding sources. Congressional response has been to raise premiums on the declining number of sponsors, thus making it even less attractive to sponsor a DB plan.
This spiral is predictable. If there was genuine interest in salvaging the private-sector defined benefit universe, a solution that I have been espousing for decades is to expand the funding base - either to the sponsors of all qualified plans or some federal source. Until a change in funding source occurs, the various parties are doing a modern version of shifting the deck chairs on the Titanic.