Posted on: Wednesday, March 12, 2003
Pension plans short on money
By Leigh Strope
Associated Press
WASHINGTON — Employer-provided pension plans are underfinanced by more than $300 billion, raising government concern that regulations don't require large enough contributions from some companies.
Steven Kandarian, executive director of the Pension Benefit Guaranty Corp., told Congress yesterday that none of the companies with underfinanced pension plans is violating the law.
That law "is inadequate to fully protect the pensions of America's workers when their plans terminate," Kandarian said at a Senate Finance Committee hearing. "The funding targets are simply not high enough for the plans of companies at the greatest risk of termination."
Slumping financial markets and low interest rates in the past three years have devastated the defined-benefit pension plans. The PBGC's largest takeover was earlier this year, when it assumed control over Bethlehem Steel's pension plans, which were underfinanced by $3.9 billion.
In January, the PBGC announced it had burned through its entire $7.7 billion surplus last year, posting a record $3.6 billion shortfall after securing a record number of underfinanced pension plans at bankrupt and financially troubled companies, particularly in the steel and airline industries.
The PBGC guarantees a portion of workers' retirement pensions through premiums charged to employers and investment returns. It receives no tax dollars.
Many companies are not required to make annual cash contributions to their pension plans, Kandarian said. Allowing companies to compute contribution requirements based on assets and liabilities that are averages of prior years can further hurt financing, he said.
The PBGC is not in immediate danger of bankruptcy, but the looming tidal wave of underfinanced pensions still should be dealt with now, he said. Government officials plan to recommend changes in coming months.
Henry Eickelberg, staff vice president for benefit programs for General Dynamics Corp., said companies are choosing to freeze or terminate their plans because of unfriendly statutory and regulatory requirements.
