The Pension Benefit Guaranty Corp.'s financial problems are driven by an increasing number of bankrupt pension plans, from such companies as Bethlehem Steel and US Airways, and record low interest rates, officials said.

Outgoing executive director Steven Kandarian said the agency could continue to pay pension benefits to retirees in bankrupt plans "for a number of years," but the growing deficit "puts at risk the agency's ability to continue to protect pensions."

He urged Congress to act soon to reform the nation's private pension system, which also is being squeezed by low interest rates, a subdued stock market and laws that do not require employers to maintain full funding in their retirement plans.

Underfunding for all pension plans is estimated at more than $350 billion.

PBGC's single-employer program posted a $7.6 billion net loss for the financial year ending Sept. 30 on top of a $3.6 billion shortfall in 2002.

The agency took over 152 bankrupt single-employer pension plans last year covering 206,000 people. The majority of participants were in just two plans — Bethlehem Steel and National Steel. In 2002, PBGC became trustee of 144 plans with 187,000 participants.

It paid a record $2.5 billion in benefits in 2003, an increase of nearly $1 billion from 2002.

Just two industries — airlines and steel — account for about 40 percent of the $85.5 million in potential liabilities the agency faces in "reasonably possible" exposure from financially weak employers.

Kandarian warned that "the taxpayer might be called upon to make those payments" to workers promised benefits under traditional pension plans if the agency falls further into deficit — a remedy he said he does not favor.

Officials from PBGC and the Labor and Treasury departments are putting together a proposal for sweeping reforms of the private pension system. Kandarian, who announced his departure last week, citing family reasons, said the plan is in its final stages and could be offered to Congress soon.

PBGC was created in 1974 to guarantee payment of some benefits earned in traditional pension plans, which are offered by employers and promise workers a set benefit based on salary and years of service. Workers are not required to make contributions as they do in 401(k) plans.

The agency is financed by insurance premiums paid by companies that sponsor pension plans and by PBGC's investment returns.

PBGC also guarantees benefits earned in multi-employer pension plans, which often are collectively bargained by employers and unions. PBGC's multi-employer program has rung up a deficit — a record $261 million.

Rep. John Boehner, R-Ohio, chairman of the House Education and Workforce Committee, called PBGC's growing deficit "startling" and pledged to work on a comprehensive reform package.