Companies with underfunded pension plans should be required to provide information on the condition of their plans as part of an overhaul of the pension insurance system, the head of the federal agency that backs them said Friday.
The executive director of the Pension Benefit Guaranty Corp., Bradley D. Belt, spoke a week after Senate leaders broke an impasse over the legislation, allowing the House and Senate to begin talks on how to safeguard the promised benefits of millions of Americans who have defined-benefit pension plans.
Lawmakers’ goal is to send a bill to President Bush by April 15. Without new legislation by then, companies will have to use an old interest rate formula to calculate their pension funding obligations that could drive up what they owe to their funds.
The federal agency, which insures the pensions of some 44 million workers, reported a $22.8 billion deficit for 2005 as big airlines and other companies in bankruptcy dumped their pension liabilities on the agency. That means the money available to pay benefits to retirees whose pension plans are taken over by the agency is eventually going to run out absent new legislation, Belt said in an interview with The Associated Press.
“People recognize that the current system is broken. Something needs to be done,” he said.
At the same time, he insisted that changes need to be made to both the House and Senate versions of the legislation, which he said are even less adequate in some respects than current law.
Transparency of information on underfunded company pension plans is one such area, Belt said. The House bill would exempt some companies with underfunded plans from having to file reports on their plans annually with the PBGC. Last year, the agency received such reports from 429 companies with plans that are underfunded by more than $350 billion.
The House plan, drafted amid heavy lobbying by business interests, would slice the number of such companies having to file reports to about 40, agency officials estimate.
The reports are considered nonpublic information. Belt said that should be changed and the information made public so that employees and investors can be aware of it.
The PBGC was created in 1974 as a government insurance program for traditional employer-paid pension plans. Companies pay insurance premiums to the agency, and if an employer can no longer support its pension plan, the agency takes over the assets and liabilities and pays promised benefits to retirees up to certain limits.
The defined-benefit plans that it backs are most prevalent in older industries such as automobile manufacturing, steel and airlines — now reeling from record fuel costs, historically low fares and cutthroat competition.
“It is a large and growing enterprise,” said Belt, sitting in his airy 12th-floor office in a downtown office building that houses the agency. “Unfortunately, we’re growing for all the wrong reasons.”
As CEO of the agency, Belt, who was appointed to the job in April 2004 by Labor Secretary Elaine Chao, is responsible for its management of the pension plans and of assets totaling more than $56 billion.
Last year alone, the agency gained 269,000 new “customers” — workers in 120 pension plans that had been taken over by the PBGC — expanding its workload by 20 percent.
“The decisions the PBGC makes each and every day matter to a large segment of the population,” Belt said. “We’re responsible for cutting their benefit checks.”
On Tuesday, General Motors Corp. became the latest major employer to convert its traditional defined-benefit pension plan to a system in which the company makes a set contribution that supplements workers’ savings.
Effective Jan. 1, GM will freeze the accrued pension benefits for approximately 42,000 U.S. salaried employees and put those employees into new plans, a tactic many large companies are using to trim their skyrocketing pension costs. The change won’t affect retirees or GM hourly workers.