A new report that showed the Pension Benefit Guaranty Corp.'s deficit could swell to $34 billion in the next 10 years has sparked fresh debate as to whether a multibillion-dollar infusion of taxpayer cash will be required to keep the agency afloat.
“The realistic option is that Congress will have to provide a bailout,” James Keightley, a former PBGC general counsel who is now a partner at the law firm Keightley & Ashner LLP, Washington, said in an interview.
“After the money they (federal agencies) have thrown at saving financial institutions, $30 billion is chump change,” Mr. Keightley said.
However, not all agree on the need for a bailout, with some pension industry analysts saying concerns about the PBGC's health are way overblown — at least in the short term. They say the PBGC, which had $68.7 billion in assets as of Sept. 30, 2009, has plenty of cash to pay off the pension benefit obligations of the plans it takes over for years.
“I expect to be dead before the PBGC needs a bailout,” said Dallas Salisbury, president and CEO of the Employee Benefit Research Institute, Washington, and a former special assistant to the PBGC executive director and acting director of public affairs at the PBGC.
PBGC's solvency is on the front burner again because the agency's annual report for 2009, released May 4, projected a possible deficit of $34 billion by 2019.
The report said the agency's single-employer pension plan program could have a deficit of $30 billion in 10 years, while its multiemployer plan program could see a shortfall of $4 billion by then.
The deficits represent the average possibilities for the two pension programs calculated using the PBGC's pension insurance modeling system, or PIMS.
As of Sept. 30, the PBGC's single-employer program had a deficit of $21.1 billion, with $68.7 billion in assets and $89.8 billion in liabilities, according to the agency's annual management report, which was issued in November.
The multiemployer plan program, as of Sept. 30, had an $870 million deficit, with assets of $1.45 billion and liabilities of $2.32 billion.