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LOSSES FROM UNDERFUNDED PLANS INCREASED PBGC'S DEFICIT IN 1991

 LOSSES FROM UNDERFUNDED PLANS INCREASED PBGC'S DEFICIT IN 1991
 WASHINGTON, Feb. 18 /PRNewswire/ -- In its 17th Annual Report, released today, the Pension Benefit Guaranty Corporation (PBGC) reported losses totalling more than $1 billion from underfunded pension plans in fiscal year 1991. With these losses, the deficit of PBGC's single-employer plan insurance program rose to $2.5 billion, based on assets of $5.7 billion and liabilities of $8.2 billion. The deficit has grown 127 percent over the last two years.
 "Despite aggressive efforts to prevent losses and build a financially sound insurance program, PBGC is increasingly vulnerable to large losses and its exposure is growing. Clearly, fundamental changes are needed to strengthen the pension safety net that protects 40 million Americans. The Bush administration has initiated legislation to assure that PBGC can continue to support the defined benefit pension system," PBGC Executive Director James B. Lockhart said.
 "Steps must be taken now to make sure that pension promises made to American workers are kept and American taxpayers are not faced with having to foot the bill. The president has proposals in his Economic Growth Package which assures workers' pensions are safe and intact when they retire," said Secretary of Labor Lynn Martin, who chairs PBGC's board of directors.
 Lockhart stressed that PBGC has sufficient revenue from premiums and investment income at present to continue benefit payments for many years. The deficit reflects long-term obligations of the federal pension insurance program and represents the benefits PBGC is committed to pay for which it has insufficient assets.
 During 1991, PBGC suffered the largest losses from plan terminations in its history -- Eastern Air Lines pension plans that were underfunded by $700 million and Pan American World Airways plans underfunded by more than $900 million, including non-guaranteed benefits. Pension underfunding associated with troubled companies grew by 75 percent to $13 billion, and total underfunding among plans insured by PBGC grew to about $40 billion.
 PBGC paid $516 million in benefits, an increase of 39 percent from 1990, to more than 142,000 retirees. Another 183,000 people who have not yet retired are entitled to receive benefits in the future and 47,000 additional participants are in plans that PBGC expects will terminate. In total, 372,000 people rely or will rely on PBGC for their pension benefits. PBGC has trusteed more than 1,650 terminated plans.
 The report cites the success of PBGC's new investment policy to minimize the effect of interest-rate changes on the corporation's financial condition. Record investment income of $945 million fully offset the $942 million growth in liabilities resulting from interest-rate changes and the passage of time.
 PBGC has two insurance programs, which are funded and administered separately. The combined results of both programs produce a total deficit of $2.3 billion, with total assets of $5.9 billion and total liabilities of $8.2 billion.
 Despite the record investment income and $741 million in single- employer program premiums in 1991, the $1 billion in losses from completed and probable plan terminations produced a net loss for the single-employer program of $597 million.
 The report details the administration's legislative proposals to reform the single-employer program, which are among the president's initiatives in the proposed Economic Growth and Job Creation Act of 1992. The administration wants to clarify PBGC's position in bankruptcy proceedings to reduce losses, to improve the pension funding rules so that plans are fully funded in 10 years to 20 years, and to guarantee future benefit increases only in plans that are fully funded. Once a plan is fully funded, previous increases would be guaranteed. In addition, the administration is proposing converting the budget accounting for government insurance companies, including PBGC, to better reflect the real costs of these programs.
 The multiemployer plan insurance program showed continued financial gains, with net income increasing to $55 million from the $9 million reported the previous year. By yearend, program assets had grown 34 percent, to $254 million, while liabilities increased by 16 percent to $67 million. The program has an accumulated surplus of $187 million.
 PBGC is a federal agency created under Title IV of the Employee Retirement Income Security Act of 1974 to guarantee payment of basic retirement benefits earned by more than 40 million American workers and retirees participating in private-sector defined benefit pension plans. PBGC insures about 85,000 single-employer and multi-employer pension plans.
 -0- 2/18/92
 /CONTACT: Judith E. Bekelman, director, communications and public affairs, or Jane Hoden, public affairs specialist, of the Pension Benefit Guaranty Corporation, 202-778-8840/ CO: Pension Benefit Guaranty Corporation ST: District of Columbia IN: FIN SU:


SB -- DC029 -- 0092 02/18/92 15:59 EST
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Date:Feb 18, 1992
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