Steven A. Kandarian, PBGC executive director, today warned that the agencys shortfall has grown to about $5.4 billion the largest ever from $3.6 billion as of Sept. 30. Speaking before the House Select Revenue Measures Subcommittee, Mr. Kandarian said continued failures of companies in the airlines and automotive industries could further increase the deficit. Airlines now represent $26 billion of total pension underfunding, while firms related to the automotive industry have a collective deficit exceeding $60 billion, Mr. Kandarian said.
Also at the hearing, Peter R. Fisher, Treasury undersecretary, said plan sponsors should continue using a higher interest rate for calculating pension liabilities for two more years, giving the Bush administration and lawmakers more time to come up with a replacement for the 30-year Treasury bond. Mr. Fisher said lawmakers need to act quickly on this extension to give companies enough time to plan their pension funding requirements for 2004. The temporary law, which expires at year-end, allows plan sponsors to base their pension liabilities on 120% of the interest rate on the 30-year Treasury bond.