U.S. Pension Woes Put Gov't Insurer Deeper In The Red Congress Working On A Fix Legislation would boost firms' premiums, but not enough to offset failures.(A)

Byline: JED GRAHAM

The Pension Benefit Guarantee Corp., the government agency that insures private pensions, already had a $23 billion deficit before the recent bankruptcies of Delta and Northwest Airlines.

If those companies unload their pension obligations on the government in bankruptcy proceedings, as some observers expect, the PBGC's deficit could jump as much as 50%.

The problem isn't just that major steel and airline companies have gone belly-up due to pressure from changing industry economics and more agile competition.

"There's a serious structural imbalance between the (insurance) premiums that Congress allows the PBGC to charge and the risk that Congress puts on the shoulders of the PBGC," said Douglas Elliot, president of the nonpartisan Center on Federal Financial Institutions.

Legislation moving through Congress this fall is geared toward creating a better balance between the risk that the PBGC bears and the premiums paid by companies with defined-benefit pension plans.

The good news is that the legislation, if passed, should eventually cut the PBGC's long-term funding hole roughly in half, Elliot says. The bad news is that the PBGC's finances will still get worse in the medium term.