Workers expect their defined contribution plans to play a greater role in their retirement income than annuities.
WASHINGTON - The federal agency that insures pensions for more than 40 million Americans last year ran the widest deficit in its 38- year history.
The Pension Benefit Guaranty Corp. said its deficit grew to $34 billion for the budget year that ended Sept. 30. That compares with a
$26 billion shortfall in the previous year.
Pension obligations grew by $12 billion to $119 billion last year. Assets used to cover those obligations rose by just $4 billion to$85 billion.
The agency has now run deficits for 10 straight years. The gap has grown wider in recent years because the weak economy has triggered more corporate bankruptcies and failed pension plans.
If the trend continues, the agency could struggle to pay benefits without an infusion of taxpayer funds.
Agency Director Josh Gotbaum said Friday that continued deficits "will ultimately threaten" the PBGC's ability to pay pension benefits.
"There's no imminent threat that we're going to stop cutting checks," Gotbaum said during a conference call with reporters. However, he said, Congress must act "long before 10 years from now" to increase the insurance premiums that companies pay to the agency.
The Obama administration has proposed raising the premiums and tailoring them to the size of companies and their level of financial risk. Under the plan, bigger companies and those at greater risk of failing would pay larger premiums. The fees haven't been raised in six years.
The American Benefits Council, which represents businesses, called the $34 billion deficit figure misleading and said it was based on faulty math.
"The public should not be led to believe the PBGC is in danger of a bailout, and Congress and the Obama administration should not use this number as a pretext to raise (insurance) premiums," the group said in a statement.
The PBGC was created in 1974 as a government insurance program for traditional employer-paid pension plans. If an employer can no longer support its pension plan, the agency takes over the assets and liabilities, and pays promised benefits to retirees up to certain limits.