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To: sciAticA errAticA who wrote (32787)	5/1/2003 9:05:33 AM
From: sciAticA errAticA	Read Replies (1) \| Respond to of 74559

Deficit Grows At Agency That Backs Pensions By Albert B. Crenshaw Washington Post Staff Writer Thursday, May 1, 2003; Page E02 The federal agency that guarantees the pensions of workers whose employers go bankrupt sank deeper into the red in the past six months, to a deficit of about $5.4 billion, officials disclosed yesterday. The Pension Benefit Guaranty Corp. is in no immediate danger of being unable to meet its obligations to retirees, the officials hastened to add, because, despite the growth in future liabilities, the agency only pays out a fraction of its assets each year in benefits. The balance sheet has deteriorated by $13.1 billion -- from a surplus of $7.7 billion just 18 months ago. And overall, the nation's 32,000 traditional pension plans are under-funded by about $300 billion, PBGC Executive Director Steven A. Kandarian told a House Ways and Means subcommittee. Kandarian said the agency is worried that proposals pending on Capitol Hill could allow employers to fund their pensions at lower levels than are now required. That would ease the funding burden on many troubled plans, perhaps enabling them to weather the current economic storm, but it could also result in even greater demands on the PBGC from those that do not survive. Pension plans have been hit by a combination of declining stock market returns, which reduce the value of their assets, and declining interest rates, which increase the computed size of their payment obligations. One key problem for companies has been a federal law that requires them to use the interest rate on the 30-year Treasury bond in calculating their liabilities. That rate is at historic lows, which translates into substantially higher pension liabilities for employers. Two years ago, Congress enacted a temporary relief measure, but that will expire Dec. 31. And employers say they need to know now what the funding requirements will be for next year. They also say the Treasury bond rate ought to be replaced permanently with something that better reflects the market, such as an index of corporate bonds. Yesterday, however, Peter R. Fisher, undersecretary of the Treasury for domestic finance, told the panel that his agency has been unable to work out a solution to the problem and recommended that the temporary fix be extended two years, while Treasury, Congress and others study the issue. Fisher said the problem is difficult to solve because a rate that is too high could result in further underfunding, while one that is too low would be unduly burdensome and might cause employers to drop pensions plans. An increased rate would also result in lower lump-sum payments to workers eligible for them -- which Fisher conceded is "a very difficult political issue." © 2003 The Washington Post Company washingtonpost.com