Pension Agency Has $13.1 Billion Deficit

The deficit reported by the Pension Benefit Guaranty Corp. for the 2007 budget year compared with a shortfall of 18.1 billion in 2006.

Much of the change "is due to the fact that no large (pension) plans failed this year" and that other factors resulted in a lower calculation of liabilities, said Charles E.F. Millard, the agency's interim director. The agency cited strong investment returns and a growing economy as contributing to the lower deficit reported Wednesday.

In its annual financial report, the agency said it had assets of $67.24 billion as of Sept. 30 to cover liabilities of $80.35 billion.

The latest deficit was the smallest since 2003, when it was $11.2 billion, agency spokesman Jeffrey Speicher said.

The agency's operations are financed by insurance premiums paid by companies. It also earns money from investments and receives money from pension plans it takes over. The agency is not financed through tax revenues.

The agency was created in 1974 as a government insurance program for traditional, defined benefit pension plans. Those plans give retirees a fixed monthly amount based on salary and years of employment. Companies that sponsor these plans pay insurance premiums to the agency. If a company cannot support its pension obligations, the agency takes over the plan and pays promised benefits up to certain limits.

The maximum annual benefit for plans taken over in 2007 is $49,500 for workers who wait until age 65 to retire. Workers who retire before 65 get smaller benefits.

In recent years, ailing companies increasingly have jettisoned pension liabilities to the agency. The problem has been pronounced in industries such as steel and the airlines, which are heavily unionized.

A pension law enacted last year was designed to help shore up the nation's troubled pension system. Supporters hope the changes will help prevent a multibillion-dollar taxpayer bailout of the agency.