WASHINGTON — In an ominous setback, the government agency that insures the pensions of 44 million Americans has amassed a record $33.5 billion deficit — triple what it was just six months ago.
The bleak financial snapshot, in a report obtained by the Associated Press, raises new fears that a federal bailout eventually will be needed for the Pension Benefit Guaranty Corp. The beleaguered agency is being saddled with the underfunded pension plans of companies going bankrupt in the worst economic slump since the Great Depression.
A rare midyear financial update requested by Congress shows the agency’s deficit swelled from $11.1 billion at the end of its fiscal year on Sept. 30 to its highest level in the agency’s 35-year history.
The agency’s acting director says, however, that the more than 640,000 people who currently receive PBGC checks have no need to worry about the deficit. “We have plenty of money to make those monthly payments promised to them for the near future,” Vince Snowbarger said Tuesday.
“We’re comfortable that for the time being we’ve got a way to make sure those payments are going to be there. Long term, there is going to have to be some resolution of that deficit.”
The agency does not insure 401(k) plans, but its fate is important not only to the workers covered by more than 29,000 employer-sponsored benefit pension plans but to all taxpayers who could be asked to foot the bill on a bailout if the agency ever becomes insolvent.
Its balance sheet has taken heavy hits in recent years. Nine of the 10 largest pension plan terminations in its history, including United Airlines, Bethlehem Steel and Kaiser Aluminum, have occurred since 2001.
Created by Congress in 1974, the agency quietly operates in a brick office building a few blocks from the White House. When a company’s pension plan is terminated, the agency takes over and pays benefits to the retired workers covered by the plan — although retirees don’t always get 100 percent of what their employer promised.
A flurry of pension plans that have either been terminated or probably will end up being taken over by the PBGC is the largest reason for the agency’s rising deficit.