- The Washington Times - Monday, May 25, 2009

The recession is forcing into bankruptcy a rising number of U.S. companies with underfunded pension plans, leaving the Pension Benefit Guaranty Corp. with billions of dollars more to pay out in pension checks to retirees in the future.

The government agency’s deficit tripled in the past six months to a startling $33.5 billion — the highest in its 35-year history.

The PBGC says it will be able to meet its obligations for many years to come. Still, it is closely monitoring weak companies with underfunded employer-sponsored pension plans in all sectors of the slumping economy, including auto, retail, financial services and health care. Hundreds of thousands of autoworkers’ pensions soon could become the responsibility of PBGC.

Lawmakers are demanding tougher rules to insure strict oversight of the heavily indebted agency and protect its long-term solvency.

“I have thousands of autoworkers in my state who are out of work,” said Sen. Claire McCaskill, Missouri Democrat, as she looked at acting PBGC director Vince Snowbarger during a hearing last week. “When I see them, a lot of them grab me — physically grab me — and look in my eyes and ask, ‘Is my pension OK?’

“The responsibility of this agency is very intense over the next 24 to 48 months. You need to be a rock,” she told Mr. Snowbarger at Wednesday’s hearing before the Senate Special Committee on Aging.

Sen. Herb Kohl, Wisconsin Democrat, said he would introduce legislation to expand the three-member PBGC board that includes Treasury Secretary Timothy F. Geithner, Commerce Secretary Gary Locke and Labor Secretary Hilda L. Solis. The three have yet to meet since joining the board this year.

“The Government Accountability Office [GAO] has indicated for years that the PBGC board members do not have enough time or resources to provide the necessary policy direction and oversight,” Mr. Kohl said. “The role of the PBGC is too crucial to allow its governance to slip through the cracks.”

The GAO said the board still falls short in overseeing the PBGC’s performance, investment decisions and hiring, roles that have become critical as the agency may have its largest pension takeover since being created by Congress in 1974. The potential for General Motors Corp. and Chrysler LLC to end their pension plans could “dramatically increase” the deficit at the PBGC, the GAO said.

Chrysler, which filed for bankruptcy protection on April 30, is seeking court approval of a settlement among the company, the PBGC, Cerberus Capital Management LP and Daimler AG to partly fund the plans and avoid such a termination, Chrysler lawyers said in a filing in U.S. Bankruptcy Court in New York. As of November 2008, Chrysler’s pension plan was unfunded by $9.3 billion.

GM is facing a government-imposed June 1 deadline to reduce its costs and debt obligations or face bankruptcy.

The potential for General Motors and Chrysler to end their pension plans has left the PBGC facing the prospect of adding 900,000 current and future beneficiaries. The PBGC, which pays retirement income to almost 44 million Americans, estimates that $77 billion of the automotive industry’s pensions are underfunded, with about $42 billion of that not funded at all.

The PBGC also faces increased exposure from companies in other sectors of the economy, including retail, financial services and health care.

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