Strengthening the U.S. Agency that Protects Pensions


2005-1-20

I'm Phoebe Zimmermann with the VOA Special English EconomicsReport.

The Bush administration is seeking changes to strengthen thePension Benefit Guaranty Corporation. This federal agency protectsthe retirement plans of millions of Americans. It takes over pensionplans when employers can no longer guarantee payments. But somerecent failures of pension plans have raised questions about itslong-term financial health.

Congress created the Pension Benefit Guaranty Corporation innineteen seventy-four. The agency protects plans that define theamount that workers will receive each month when they retire from ajob. Such plans are required to have enough money to pay workers whohave already retired and those who will retire in the future.

The agency does not receive government money. Instead, employerspay the agency in the same way that insurance companies collectpayments to protect against financial loss.

Currently, big pensions that are supervised by many employers paytwo dollars and sixty cents per worker per year. This programinsures the pensions of ten million Americans. Plans offered by asingle employer pay nineteen dollars. Almost thirty-five millionpeople have their pensions insured by this program.

When the corporation takes over a plan, it invests the money tomeet future demands. On December thirtieth, for example, the agencyannounced that it was moving to take control of the pension forpilots at United Airlines. This will increase the amount of moneythe agency has, but also the amount it must pay out in the future.

In November the agency reported that its deficit had reachedtwenty-three thousand million dollars. That was up from eleventhousand million dollars a year earlier. The agency said the numberof people owed payments went over one million for the first time.There are limits on how much the agency can pay retirees, even iftheir employer guaranteed a higher amount.

Some experts think the Pension Benefit Guaranty Corporation willrun out of money by two thousand twenty.

The administration says the current system needs reform. It wantsCongress to raise the insurance rates for the first time sincenineteen ninety-one. Under the proposed changes, employers would paythirty dollars per employee instead of nineteen. And financiallytroubled pension plans would pay more into the program than healthyones.

This VOA Special English Economics Report was written by MarioRitter. I'm Phoebe Zimmermann.