PBGC Reports Widening Deficit in Fiscal 2010

(November 16, 2010) — The Pension Benefit Guaranty Corp. (PBGC) revealed that its total deficit has increased 4.5% to $23 billion in the year to September 30, up from $22 billion the previous year.

The federal agency, which assumes the pension liabilities of companies in bankruptcy, has been pummeled in recent years by the economic downturn which has caused more corporate bankrupts and pension failures.

“This financial position is the result of inadequate plan funding and misfortunes that have befallen plan sponsors. In part, it is a result of the fact that the premiums PBGC charges are insufficient to pay for all the benefits that PBGC insures, and other factors,” the government’s pension insurer said. The PBGC said its total obligations increased by $11.5 billion to $102.5 billion. Yet, the agency has $79.5 billion in assets to pay those obligations. “The deficit — the difference between our assets and liabilities — is not an immediate cash crunch, since we have the assets to pay for the foreseeable future,” PBGC spokesman Jeffrey Speicher told aiCIO.

According to the firm’s most recent annual report, the PBGC took over a surprisingly low number of failed corporate pension plans — fewer than 1% of the 27,500 plans that it backstops in its last fiscal year. “We took in 172 new pension plans last year,” Speicher stated. “But the deficit is a long-term issue and doesn’t impact our day-to-day functioning. It doesn’t prevent us from carrying out our mission outlined by Congress to pay benefits to pensions that have failed. We’re doing our job,” he said.

The insurer is now responsible for about 1.5 million people in 4,200 failed plans and pays $467 million for pensions for 801,000 retirees every month on average.