Combined pension liabilities from companies that each have more than a $50 million shortfall hit a record high of $353.7 billion in 2004, according to the companies' filings with the PBGC, Bradley Belt, the agency's executive director, testified today before the Senate Finance Committee. That's up from $279 billion for the previous year. The plans had an average funded ratio of 69% for 2004. The reports are required only of pension plans with more than $50 million each in unfunded liabilities.
Mr. Belt also said the PBGC is unaware of any analysis indicating that the Bush administration's proposal to raise pension insurance premiums will drive companies into bankruptcy. The proposal will increase the PBGC's total annual flat-rate premium income by only $300 million to $900 million, he said.
At the same hearing, the chief executives of some of the largest airlines testified in support of the Employee Pension Preservation Act, introduced in April by Sens. Johnny Isakson, D-Ga., and John D. Rockefeller IV, D-W.Va. The bill would let airlines extend required pension payments, giving them more flexibility in funding the plans and possibly averting PBGC takeovers.
Gerald Grinstein, CEO of Delta Air Lines Inc., Atlanta, said the company is not seeking a subsidy, and the Senate bill "decreases the likelihood of adding more liabilities to the PBGC." Mr. Grinstein told the senators that "there's plenty of blame to go around for past mistakes, but my job here is to make sure the company continues to operate."
Douglas M. Steenland, president and CEO of Northwest Airlines Corp., Eagan, Minn., said that the company believes that freezing its $6.3 billion pension plan and moving to a defined contribution plan will be the best solution for the company.
