Former PBGC chief economist Richard A. Ippolito suggests that the agency 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 Pension Benefit Guaranty Corp. 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," he suggested in the paper, which was published by the Cato Institute Aug. 24.
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 in an interview that it's difficult to predict bankruptcies because even top-rated companies might end up seeking court-sanctioned protection from creditors. Moreover, privatization was suggested more than a decade ago, when the PBGC was in the red, and "no insurers said they wanted it."