Pensions in Danger

November 27, 2004

In November, the Pension Benefit Guaranty Corporation (PBGC), a federal agency which insures pension plans, announced that during the last fiscal year its deficit doubled, reaching $23.3 billion. Economists and politicians are already raising the possibility that the PBGC, which has lost more than $10 billion/year for the last 3 years, may go bankrupt. The result could be the loss of pensions for millions of workers. Already the PBGC has arbitrarily refused to honor its commitment to pay the pensions of tens of thousands of steelworkers whose company-funded plans have gone bankrupt.

The PBGC is financed by premiums paid by companies that provide traditional pension plans for workers. But Congress has repeatedly refused to raise these premiums even as more company-funded pension plans are going into default. In fact, this year Congress passed a measure allowing corporations to reduce, by $80 billion over 2 years, payments to their pension funds, thereby increasing the risk of private bankruptcies and adding to the liabilities of the PBGC. Already dozens of large companies, with pension liabilities of $96 billion, have been put on a government watch list for possible default on their pension plans in the near future.

In sum, the big corporations and the government are deliberately underfunding the pension plans of millions of workers, threatening their retirement years.