NEW YORK (CNN/Money) -
The federal agency insuring private-sector pension plans that have promised benefits to about 44 million employees and retirees could see its own shortfall more than triple in the next decade, a congressional agency said Thursday.
Douglas Holtz-Eakin, the director of the Congressional Budget Office (CBO) testified before a House committee Thursday that the Pension Benefit Guaranty Corp. could face a $71 billion gap in the next decade between its assets and promised benefit payments by plans taken over by the agency. With the PBGC recently agreeing to take on the pension plans of bankrupt United Airlines, its largest pension plan takeover, the agency now faces a $23.3 billion gap.
The PBGC does not currently receive tax revenue to cover payment. Instead it depends on premiums paid by companies operating 31,000 "defined benefit" plans that promise employees a set retirement benefit.
In his remarks to lawmakers, Holtz-Eakin said that it would require a fivefold increase in premiums paid by companies in order to wipe out the expected gap at the PBGC.
Such an increase is seen as politically unfeasible. So the Bush administration has proposed a series of reforms it says will improve the funding of pension plans before they end up the responsibility of the PBGC, as well as more modest premium increases to close the gap.
The Wall Street Journal and New York Times reported Thursday that some House Republicans are set to introduce a version of that reform proposal Thursday. The Times reported that it includes many of the administration proposals, but not all of them.
The administration proposal has been criticized by some businesses and pension experts, who say it is too tough on companies that have essentially healthy plans, and that it could drive some to end that benefit for employees.
The Times said the House legislation does not go as far as the White House had hoped to eliminate the practice of "smoothing," an accounting technique that can mask a shortfall in a pension fund assets. Smoothing would still be allowed, but for shorter periods, the Times reported.
Ohio Republican John Boehner and Texas Republican Sam Johnson will be the primary sponsors of the bill due to be introduced Thursday, according to the Times. Bill Thomas, the California Republican who chairs the powerful House Ways and Means Committee, will be a co-sponsor, according to the Times.
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