Pension guarantor: unprecedented deficit

Pension Benefit Guaranty Corp. faces $33.5 billion deficit. Congressional Committee for Aging investigates causes, including former director's relationship with big banks.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Aaron Smith, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- The Pension Benefit Guaranty Corp., which guarantees private pension payments for 44 million Americans, said on Wednesday that it faces a massive, unprecedented deficit.

The PBGC reported a $33.5 billion deficit for the first half of fiscal year 2009, a period that ended on March 31. This means the agency could have problems paying back pensioners in the event that their private plans fail.

The agency said the first half of the fiscal year added $22.5 billion to its prior deficit of $11 billion. The PBGC said it now faces the largest deficit since it was founded it 1974.

The issue will be taken up on Wednesday by the Senate's Special Committee on Aging. The hearing, beginning at 2 p.m. ET, will feature subpoenaed testimony from the former PBGC director Charles Millard, according to the agency.

The PBGC is investigating Millard's relationships with the three of its investment partners: Goldman Sachs (GS, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and BlackRock (BLK, Fortune 500).

In a written statement, PBGC acting director Vince Snowbarger blamed the deficit on "a drop in interest rates and by plan terminations, not by investment losses."

Snowbarger added that the agency has enough cash to pay out claims for "many years," but the deficit must be addressed "over the long term."

The agency said that as of April 30 its investment portfolio was comprised of about 30% equities, 68% bonds and 2% other investments, including private equity and real estate.

The greatest threat to the agency's financial security are pension plans paid into by the auto industry. PBCG noted that these pensions are underfunded by $77 billion, but said it could back $42 billion of that amount in the event of plan failures.  To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
Coolest innovations around the world From flying cars to floating schools, these innovations are improving the lives of people around the world. More
6 luxury getaways to escape your digital life Step away from your smartphone. No Facebook or Twitter here. These are six places where luxury travel agents send clients looking to unplug and experience the ultimate digital-detox getaway. More
Most reliable cars - Consumer Reports These cars, trucks and SUVs scored best in the magazine's latest survey of vehicle owners. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.