A news release from the Pension Benefit Guaranty Corporation (PBGC) said that sobering word came from agency Executive Director Bradley Belt in Congressional testimony Tuesday.
According to the announcement, the 2004 shortfall data comes from firms with more than $50 million in unfunded liabilities – 1,108 plans covering 15 million workers and retirees with an average funding ration of 69%. The agency said the estimated total underfunding of all insured companies was $450 billion as of September 30, 2004.
The 2004 totals of ailing plans compares with 2001 data, which showed 221 plans with $19.9 billion in underfunding, with an average funding ratio of 82.8%.
Belt’s testimony also contained a detailed analysis of the pension plans of United Airlines, which won bankruptcy court approval to turn over its pension plans to the PBGC ( United, PBGC Hammer Out Plan Takeover Pact ). Although the plans have an aggregate funding shortfall of almost $10 billion and an average funded ratio of 41%, the company was able to go for years without making any cash contributions to the plans, without paying additional premiums to the PBGC, and without sending underfunding notices to plan participants, Belt asserted.
“United offers important, albeit painful, lessons that illustrate the flaws in current law and which should guide us in reforming the defined benefit system and pension insurance program,” Belt said in his testimony.
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