Administration Announces Plan to Shore Up Troubled Pension Plans

The Clinton Administration unveiled legislation Thursday designed to shore up financially troubled pension plans that threaten the retirement security of millions of workers and retirees.

“The financial security of thousands of Americans covered by single-employer pension plans is at risk because their pensions are underfunded,” Labor Secretary Robert B. Reich told reporters.

Reich said the underfunding has grown from $27 billion in 1987 to an estimated $45 billion last year and “poses an unnecessary and unacceptable risk for workers and retirees.”

The underfunding also jeopardizes the Pension Benefit Guaranty Corp., the government insurer. It already faces a $2.7-billion deficit, which could grow with the failure of additional plans.

The proposal would double the insurance premium for the most troubled plans, which Reich said “would guarantee increased financing of underfunded pension plans” at the same time it reduces the PBGC deficit.

It also includes requirements for faster and more certain contributions to underfunded plans.

The PBGC insures 65,000 single-employer, defined-benefit pension plans covering more than 32 million workers. Officials said 8 million people are in underfunded plans, including 2 million in what are considered “troubled” programs that pose the greatest risk.

The agency guarantees up to $29,250 a year per plan participant. But some workers and retirees in underfunded plans remain at risk because PBGC guarantees sometimes do not cover all benefits the sponsoring companies had promised.

Despite the deficit, Reich and others maintained that the agency is not near the kind of crisis that led to the savings and loan bailout.

“PBGC’s responsibility for benefit payments under those plans is spread out over a number of years,” Treasury Assistant Secretary Leslie B. Samuels told reporters.