WASHINGTON – Deficits at the government's pension insurance program surged to a record $11.2 billion in 2003 -- three times larger than any previous shortfall, with the outgoing director warning Thursday that taxpayers could be called on for a bailout.
Steven Kandarian, executive director of the Pension Benefit Guaranty Corp., said the program wasn't yet in a financial crisis. But he urged Congress to act soon to reform the nation's private pension system, which is being squeezed by low interest rates, a subdued stock market and laws that do not require employers to maintain full funding levels in their retirement plans.
The agency's single-employer program posted a net loss of $7.6 billion for its 2003 financial year ending Sept. 30, added to a $3.6 billion shortfall in 2002.
Falling interest rates and a record number of pension plan bankruptcies -- mostly in the steel industry -- sent the program deeper in the red.
PBGC still can continue to pay retirement benefits to workers and retirees enrolled in bankrupt plans, but the growing financial troubles threaten "the agency's ability to continue to protect pensions in the future," said Kandarian, who announced last week his plans to leave after more than two years at the helm.
One very real solution to the pension problems is "the taxpayer might be called upon to make those payments" to workers if the PBGC falls further into debt, he said.
The PBGC was created in 1974 to guarantee payment of basic pension benefits. About 44 million American workers and retirees currently have pensions under PBGC control. The agency is financed by insurance premiums paid by companies that sponsor pension plans and by PBGC's investment returns.