The financial position of the Pension Benefit Guaranty Corp. again is rapidly deteriorating, triggering fears that a taxpayer-funded bailout may be needed to shore up the government's pension plan insurer.
The PBGC disclosed last week that its deficit hit a record $33.5 billion at the end of its 2009 fiscal first half on March 31, compared with $11.2 billion at the close of fiscal 2008.
The deficit eclipses the prior highest deficit of $23.5 billion from 2004. Losses from completed and probable terminations, lower interest rates used to value the PBGC liabilities, and investment losses were key factors contributing to the deficit.
And the worst may be yet to come. According to PBGC estimates, auto sector pension plans alone are underfunded by about $77 billion, $42 billion of which would be guaranteed by the PBGC if those plans failed.
But it isnt just ailing auto companies and their massively underfunded pension plans that pose a threat to the PBGC, whose insurance programs are funded by premiums paid by employers with defined benefit plans. At a Senate Aging Committee hearing last week, an official of the Government Accountability Office said large pension plan terminations from employers in a variety of industries could hit the PBGC.
While the events surrounding the automakers and their plans are clearly an area of concern for the PBGC, the recession has likely affected many industry sectors, said GAO Director of Education, Workforce and Income Security Barbara D. Bovbjerg. While past big claims were concentrated in industries such as steel and airlines, there is cause for concern that future claims will come from a much broader array of industries.
The PBGC will be challenged as never before due to a declining economy, Ms. Bovbjerg said.