Former PBGC chief economist Richard A. Ippolito suggests that the PBGC be privatized. In a new paper, Mr. Ippolito said the only way to ensure corporations don't dump their underfunded pension plans on taxpayers is to turn the PBGC into a true insurance company that sets premiums according to the risk of each plan sponsor. Without any changes to the current premium structure, he said, the PBGC's deficit could increase to $18 billion over the next decade.
"Eliminate the loopholes that permit sponsors of underfunded plans to evade the variable rate premium and require sponsors to calculate market value underfunding," Mr. Ippolito suggests. He did not return calls seeking comment.
However, Ron Gebhardtsbauer, a senior pension fellow at the American Academy of Actuaries in Washington and chief actuary at the PBGC from the mid-1980s through the early 1990s, said it's difficult to predict bankruptcies because even top-rated companies may end up seeking court-sanctioned protection from creditors. Moreover, the last time some experts suggested the PBGC be privatized, an idea raised more than a decade ago when the PBGC was in the red, "no insurers said they wanted it," Mr. Gebhardtsbauer said.
