Presenting the Pension Benefit Guaranty Corp., the Next Gigantic Black Hole in the U.S. Government's Balance Sheet
The Pension Benefit Guaranty Corp. already has an $11 billion deficit that seems sure to grow larger.
With companies reporting shortfalls in their pension funds, it's all but certain that the PBGC will be forced to take over the pension plans of a rising number of bankrupt businesses.
The future financial health of the agency is hard to forecast. It is hinged on interest rates, the length of the recession and the PBGC's own luck in playing the market, where it has billions invested.
The agency has $63 billion in assets. But it is obligated to spend $74 billion on pension benefits in the coming years. The PBGC might have time to rebound, but over the long term it might require a bailout.
"Someday—probably more than 20 years from now—there's a significant chance that somebody is going to have to pay the piper," said former PBGC Director Charles E.F. Millard.
The PBGC is the "government corporation that insures the pensions of 44 million workers and retirees." You get one guess who is going to have to pay the piper on this one. The fund takes over private-sector defined-benefit plans when they are terminated. As the AP reports, nine of the 10 biggest pension terminations guaranteed by the PBGC have occurred since 2001.
Jon Entine looked at the ticking time bomb that is union and public-sector pensions in the February issue of Reason. Read it and weep here.
