July 24, 2003
U.S. BUSINESS NEWS
GAO Sees 'High Risk'
At U.S. Pension Insurer
By ELLEN E. SCHULTZ
Staff Reporter of THE WALL STREET JOURNAL
A U.S. General Accounting Office report concluded that the Pension Benefit Guaranty Corp.'s single-employer pension insurance program is at "high risk," and added it to the list of major federal programs that need "urgent attention" and change.
Many large employer pension plans have become underfunded because of asset losses and low interest rates, which increase risk for the Pension Benefit Guaranty Corp., a quasi-public insurer that takes over pension plans of bankrupt companies and pays a portion of the pension benefits. The GAO noted that the insurer's single-employer insurance program has moved from a $9.7 billion surplus in 2000 to a $3.6 billion deficit in fiscal year 2002.
David Walker, the comptroller general of the GAO, an investigative arm of Congress, said in a statement that the office favors tougher rules requiring employers to increase minimum funding of their pension plans, and also favors increases in the premiums that employers pay to the Pension Benefit Guaranty Corp., moves that are supported by the Treasury and the insurer.
The Bush administration has recommended better disclosure of pension underfunding, as well as rules that would prohibit companies from increasing pension benefits if the pensions are severely underfunded. It has also proposed tougher funding requirements. "Comprehensive reform of our pension-funding rules is needed," said Pension Benefit Guaranty Corp. board Chairman and U.S. Secretary of Labor Elaine L. Chao, in a written statement.
Employers vigorously oppose the administration's funding-overhaul proposals, because the tougher rules would require many of them to contribute more cash to their underfunded pension plans, which they don't want to do, because they want to use the money for other things.
The administration's proposals weren't included last week in pension legislation sponsored by Reps. Rob Portman (R., Ohio), and Ben Cardin, (D., Md.). Currently, that proposed bill would enable employers with badly underfunded pension plans to put even less money into them in the next three years, by adopting a higher corporate bond rate to value their liabilities.
The House Committee on Education and the Workforce announced its intention to hold a hearing on the financial health of the Pension Benefit Guaranty Corp. during the first week of September.
Write to Ellen E. Schultz at ellen.schultz@wsj.com1 |
