Posted on: Wednesday, June 8, 2005
Congress told of rise in pension shortfalls
By Glen Johnson
Associated Press
WASHINGTON — Lax reporting rules created by Congress, coupled with corporate America's eagerness to take advantage, have left millions of workers' and retirees' pension plans underfinanced without their knowledge, senators were told yesterday.
United Airlines may have set an unsavory example for others in the airline industry, Senate Finance Committee members were told during a hearing on Capitol Hill. After declaring bankruptcy in 2002, the airline won court approval last month to shed $9 billion in pension obligations — shifting responsibility to the federal Pension Benefit Guaranty Corp.
That has contributed to a $23.3 billion deficit at the agency, which insures private pension plans, and triggered fears of another massive taxpayer bailout similar to the 1980s savings-and-loan crisis. The agency's head told senators the number of pension plans that are more than $50 million short of promised benefit levels has risen from 221 in 2000 to 1,108 in 2004. Those funds have an average of just 69 percent of promised benefits on hand.
"The law represents the floor of acceptable behavior, not the desired state," David Walker, head of the nonpartisan Government Accountability Office, told the committee. "Unfortunately, when it comes to pension funding, too many high-risk companies do what is legally permissible — rather than what is right — when deciding how much money to put into their pension plans."
The statistics and comments prompted calls for swift legislative action this year, adopting bills pushed by President Bush, Sen. Jay Rockefeller, D-W.Va., or Rep. John Boehner, R-Ohio. In general, the bills create schedules to eliminate the funding shortfalls and revise rules that allow companies to mask underfinancing.
"The facts are alarming. The time to act is now. Tinkering with the current rules won't do. Another temporary Band-Aid won't do," said Sen. Charles Grassley, R-Iowa, chairman of the Finance Committee.
