The federal agency that stands behind U.S. corporate pension funds reported its worst year ever Thursday, as losses from collapsing steelmakers drove it to a record $3.64-billion deficit in 2002.
The Pension Benefit Guaranty Corp., which insures the pensions of about 44 million Americans, had started fiscal 2002 with a $7.73-billion surplus but experienced a dramatic reversal.
PBGC Executive Director Steven Kandarian said he would not call the situation a crisis, because the agency had enough assets to pay benefits to retirees for years to come.
But some changes to the pension funding system might be needed, and proposals could come within weeks, he said.
The Treasury said it was working on funding formula changes that could ease the $300 billion in current underfunding of company pension plans that loom as potential liabilities for the PBGC. Such changes would have to be approved by Congress. On Capitol Hill, lawmakers said they would hold hearings on the issue.
The PBGC was established in 1974 to protect traditional, or defined benefit, pension plans that promise workers a specific payout based on salary and years of service.
Although the dominance of these plans has declined as more employers switch to 401(k) plans -- in which employees can invest their pretax contributions in a menu of investment options -- the defined benefit plans still are a big presence in publicly traded companies.
Businesses pay insurance premiums to the PBGC, and the agency shoulders the burdens of insolvent pension plans.
The steel industry is by far the biggest part of the PBGC's current problem, accounting for $7.57 billion of the $9.31 billion in losses the agency assumed from pension plan terminations last year, the agency said.