WASHINGTON – The record shortfall at the government's pension insurance program (search) soared by another $300 million in the last quarter to hit $5.7 billion as of July 31, the director told Congress on Thursday.
The financially troubled Pension Benefit Guaranty Corp. (search) was designated a "high risk" agency by congressional investigators in July.
Executive Director Steven Kandarian told the House Education and Workforce Committee (search), which oversees pension issues, that changes to pension funding rules and to the agency itself were needed soon.
"We should not pass off the cost of today's pension problems to future generations," Kandarian said. "If companies do not fund the pension promises they make, someone else will have to pay."
The program burned through a surplus of $7.7 billion last year to record a a loss of $11.3 billion. This year's deficit is $5.7 billion so far, based on unaudited figures.
The agency's financial troubles stem from an increase in the number of large, failing plans it has been forced to take over from struggling private employers. The shortfalls have been concentrated in the airlines, steel and manufacturing industries.
The PBGC is funded with premiums paid by companies that sponsor pension plans and returns on those investments. The agency receives no tax dollars.
Low interest rates, the sluggish economy, stock market losses and an increase in retirees all have hurt the private pension system. Fewer employers are choosing to offer such plans, which promise a monthly benefit to their workers who are not required to contribute. Current law also allows private companies to avoid making minimum contributions to their plans for years.
PBGC estimates that almost 80 percent of the 32,000 pension plans offered by single private employers are underfunded. The projected deficit for all of those plans was more than $400 billion as of last year -- a record, Kandarian said.
"The funding of America's private pension plans has become a serious public policy issue," he said.