Sunday, May 15, 2005

PBGC the new Social Security?

A shift to a reduction in social security benefits coupled with a move toward private accounts is going to make private pension plans much more attractive. However, the government virtually invites companies to neglect their pension plans and let the Pension Benefit Gaurantee Corp cover the unfunded liability. The trouble us, as more companies realize that they do not need to fully fund their pension plans, the PBGC takes on a far greater liability, and it's gotten to the point where they can't cover their OWN liability!

In short, the PBGC is becoming the new social security, and "fixing" social security by forcing people to count on their own individual pension plans is just going to exacerbate the problems with the PGGC, which is already in trouble because its rules are still too business friendly.

Pension unit chief walks cautious line
Never before have American workers worried so much about their pensions--and with good reason.

An unprecedented wave of pension collapses is straining the nation's insurance system. The Pension Benefit Guaranty Corp., which is run by the government and financed privately by plan sponsors, ended last year with a record $23.3 billion deficit.

On the heels of a court-approved deal last week in which the agency will assume $6.6 billion of United Airlines' $10 billion in pension liabilities, other carriers are pressing Congress for relief.

Even bigger problems loom. The agency estimates a $450 billion shortfall in corporate America's pension funds.

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