Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, November 23, 1993 TAG: 9311230086
SECTION: BUSINESS PAGE: B-7 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
The Pension Benefit Guarantee Corp. said the gap between assets and promised benefits in the 50 largest underfunded pension plans grew by 31 percent in 1992 to $38 billion from $29.1 billion a year earlier. It was the fifth-straight annual increase.
The PBGC, the government pension insurance agency, is liable for $31.7 billion of the underfunding.
Labor Secretary Robert Reich has estimated that total underfunding for all pension plans grew from $27 billion in 1987 to $45 billion in 1992.
"These results underscore the need for pension funding reforms and provide additional evidence that current law is not working," said PBGC Executive Director Martin Slate. "The Clinton administration has reforms now before Congress to strengthen the law and to improve pension security."
The PBGC said most U.S. pension plans are fully funded and emphasized that inclusion on the list does not reflect on a company's financial health nor necessarily mean pension benefits are in immediate jeopardy.
"Many companies on the list are strong and will be able to fund their pension plans," Slate said. "However, to better prepare themselves for retirement, participants should know more about their plans funding and PBGC's guarantees."
The National Association of Manufacturers has criticized the annual list, saying it creates unnecessary anxiety. It contends that many companies have legitimate reasons for underfunding their plans, including newly negotiated union contracts and worse-than-expected investment returns.
The PBGC guarantees pensions up to $29,250 a year per plan participant. But some workers and retirees in underfunded plans remain at risk, because PBGC guarantees sometimes do not cover all benefits the sponsoring companies had promised.
Underfunding increased in 1992 primarily because of falling interest rates that reduced investment earnings, the agency said. But it added that funding by many companies did not keep pace with growing liabilities because of weaknesses in current law.
In addition to threatening workers and retirees, underfunding poses a risk for the PBGC itself. The agency already faces a $2.7 billion deficit, which could grow with the failure of additional plans.
Despite the deficit, however, Reich and other officials contend the agency is not near the kind of crisis that led to the savings and loan bailout.
The PBGC was created by Congress in 1974 to guarantee payment of basic private, defined-benefit pensions. Its programs cover more than 41 million workers and retirees in 67,000 plans.
by CNB