UpFront | Published in January 2013

Pension Premium

PBGC notes record ­deficit for 2012

By Kristen Heinzinger | January 2013
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Ana Benaroya

The Pension Benefit Guaranty Corporation (PBGC) has reported its efforts to preserve pensions in 2012, along with its deficit increase to $34 billion—the largest in its 38-year history. Continuing factors included lower interest rates used to measure benefit payment obligations and anticipated increases in multiemployer financial assistance. “PBGC continues its work to preserve pensions and to provide some of the best service anywhere,” says PBGC Director Josh Gotbaum, “but continuing financial deficits will ultimately threaten its ability to pay benefits.”

According to Gotbaum, the Obama administration, like previous administrations, had proposed that Congress give the PBGC’s board the ability to set premiums. “We continue to hope that PBGC can have the tools to set its own financial house in order, the way other government and private insurers do.” The agency’s assets on hand are sufficient to pay pension benefits for years, but, Gotbaum says, measures to reduce the deficit will be less disruptive if initiated sooner rather than later.

In fiscal year 2012, the PBGC helped protect 130,000 people in American Airlines’ plans and in other plans in ongoing bankruptcies. It also helped to protect 37,000 people in plans sponsored by companies that emerged from bankruptcy without terminating their plans, including the Great Atlantic & Pacific Tea Company (A&P), Lee Enterprises and Houghton Mifflin Harcourt Publishing Company.