WASHINGTON — The federal agency that insures the pensions of one in seven Americans said Monday its annual deficit increased 4.5 per cent to US$23 billion.
The Pension Benefit Guaranty Corp. also said it paid US$5.6 billion in benefits to participants in company pension plans that failed in its fiscal 2010 that ended Sept. 30. It noted that 147 pension plans failed, up from 144 a year earlier.
The PBGC’s finances have been battered in recent years by the weak economy, which has brought more failures of pension plans.
The $23 billion deficit compares with a shortfall of $22 billion the previous year. The PBGC said its total obligations increased by $11.5 billion in the latest year to $102.5 billion. On the other hand, the agency has $79.5 billion in assets to pay those obligations.
The recent stock market rally helped the PBGC make a 12 per cent return on its investments this year, earning $7.8 billion. In addition, it collected $2.3 billion in insurance premiums from the companies whose pension plans it insures.
The agency has been in the red for 30 years in its 36 years of operation. It has plenty of money to operate now, but experts say it eventually will run out of money to pay the pension recipients it supports unless company pension funds adopt less risky investment strategies or Congress raises the insurance premiums companies must pay.
Companies whose pension plans failed in the latest year included Crucible Materials, Fraser Papers, Hartmarx and St. Vincent Catholic Medical Centers.
“In tough economic times, Americans count on the PBGC to protect the pension benefits they worked so hard to earn,” PBGC Director Josh Gotbaum said in a statement. “When companies cannot make good on their pension commitments, we’re a safety net. We make sure that retirement checks don’t stop when pension plans do.”