Shortfalls in private companies' pension plans soared to $111-billion last year, the highest level ever reported by the Pension Benefit Guaranty Corp.
That was four times the $26-billion shortfall that companies reported for 2000, according to the PBGC, the government's insurance program for private workers' pensions. A shortfall is the amount of money that would be owed to pension participants if a plan was terminated.
The disclosure of record pension shortfalls comes at a time when corporate scandals, from Enron to WorldCom, are rocking Wall Street, shattering investors' confidence. Congress sent legislation to President Bush on Thursday creating stiff penalties for corporate fraud and document shredding in hopes of easing the economic jitters.
"The implications of such massive shortfalls in pension funds are staggering," said Rep. George Miller of California, the top Democrat on the House Education and Workforce Committee. Miller urged the Bush administration to investigate and ensure that workers' retirement savings are not in danger.
But PBGC spokesman Jeffrey Speicher said the shortfall is "not as dire an indicator that you might think."
All companies with employer-sponsored pension plans are required to file a report with the government when a plan's unfunded liability hits $50-million or more. But in reality, those plans, on average, are still at least 80 percent funded or more, Speicher said.
"It's a volatile number and it fluctuates due to various factors, such as interest rates and the performance of plan assets in equities markets," he said. "These plans on average are still well-funded."
Also last year, the PBGC paid more than $1-billion in total benefits to almost 269,000 people, the first year that payouts topped that amount.
The government corporation in 2001 took over 104 terminated single-employer plans covering almost 89,000 people. This year, PBGC has taken over plans covering 140,000 people.
In March, PBGC had its largest pension takeover, assuming control of three underfunded retirement plans covering 82,000 workers and retirees of bankrupt steel company LTV Corp., whose pension plans were about $2.2-billion in the red.
PBGC protects the benefits of about 44-million participants and beneficiaries in slightly more than 35,000 ongoing defined benefit pension plans.
PBGC was created in 1974 to insure payment of basic pension benefits of more than 44-million American workers and retirees. It is financed largely by insurance premiums paid by companies that sponsor pension plans and by PBGC's investment returns. Participants of a plan taken over by the PBGC receive, on average, about 94 percent of the benefits they had earned.