Just when you thought Social Security in trouble, consider pension plan woes

While the debate intensifies over the future of Social Security, another federal agency that many probably couldn?t even name is fighting a widening problem of endangered employee pension plans.
On March 11, the same day that Vincent Snowbarger, deputy executive director for the government?s Pension Benefit Guaranty Corp., visited Boulder to address a University of Colorado business school symposium, his agency took over responsibility for the pensions of more than 36,000 active and retired ground workers at United Airlines.

The action, the agency said, was necessary ?to protect the pension insurance fund against further losses.? According to the government, the ground workers? pension plan has a $2.9 billion shortfall, with only $1.2 billion in assets to cover $4.1 billion in promised benefits.

This wasn?t the first time the Pension Benefit agency stepped in with United, which is fighting for its life in bankruptcy court. In December, it also took over the pensions of some 14,000 active and retired United pilots.

Snowbarger was candid as he described the worsening problem his agency faces. As a keynoter for the Leeds School of Business symposium, an event focused on ?Social and Ethical Issues of Corporate Retirement Security,? he described the agency?s future as ?the perfect storm.?

Responsible for insurance programs of 31,000 defined benefit plans at private-sector companies, Snowbarger said, ?We are kind of an insurance company, but actually we aren?t.? While able to set premiums for businesses, it?s unable to ?accept or decline? customers like an insurance agency, including companies where plans could be in trouble.

?We believe if you keep a promise, you ought to keep it,? Snowbarger said, referring to corporate America?s retirement promises. While only about 20 percent of U.S. workers are covered by a deferred pension plan, many that do exist faced serious challenges brought on partly by the latest stock market crash.

The pension agency is funded by insurance premiums from employers with insured plans, as well as its own investments and the funds it gets in pension takeovers. It?s not funded by general tax revenues, Snowbarger emphasized ? at least not yet. For plans it oversees, it provides a guaranteed maximum. That guarantee at age 65 is now $45,613 a year, but payments are lower for many retirees, including those retiring early, depending on their company?s plan.

The agency says it now pays benefits to about ?518,000 retirees in 3,479 pension plans that ended.? But including workers who haven?t yet retired, the agency is responsible for ?current and future pensions? of about 1.06 million people.

Last year, the Pension Benefit agency suffered $12.1 billion in losses, and the near-future forecast is not improving, Snowbarger said, unless Congress enacts administration-backed reforms.

It?s an unusual and difficult position in D.C. politics for his agency, Snowbarger said. It must lobby for reforms that are opposed by both ?corporate management and labor.?

As an example, Snowbarger said the agency is prevented by law from revealing to investors, and in many cases even congressmen, when a company admits that its pension plan is under-funded. If that information could be released, he said, pressure from stockholders might force a company to improve its plan?s performance.

Although airlines like United and U.S. Airways are today?s headlines, and failing steel companies were the problems of the near past, Snowbarger said the country?s manufacturing sector still has the largest exposure to pension woes.

But the list is long and covers many sectors, he said. ?Kmart is on our watch list,? he noted. ?The good news is that they combined with Sears.? The bad news, he added, is ?Sears is also on our watch list.?

As health care keeps people alive longer, the average length of retirement has stretched to 18.1 years, increasing the overall tab for pension plans.

Snowbarger said that for every new GM car produced in the United States, an average of $1,700 of its cost must go to fund autoworkers? pensions.

The Pension Benefit agency, Snowbarger said, is telling Congress it needs help to reduce even worse losses if more companies continue to fail. Generally, its reforms would:
? Find ways to induce employers to fully fund their plans.
? Improve disclosure, with better information to workers, investors and regulators.
? Make insurance premiums better reflect costs and risks of plans.

Reforms with this simple caveat, Snowbarger said. ?The last thing we want to do is put people out of business that are paying our premiums.?

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