Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, December 6, 1994 TAG: 9412060074
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
``Millions of Americans still are in danger of not getting their pensions,'' Labor Secretary Robert Reich said Monday. ``Underfunding has gone up to $71 billion from $53 billion in 1992 and $27 billion in 1987.''
The Pension Benefit Guaranty Corp. said underfunded single-employer pension plans at the end of 1993 had assets of just $316 billion to pay $387 billion in benefits.
The announcement came just four days after Congress approved legislation requiring companies with pension deficits to reduce their underfunding by more than two-thirds within 15 years. Reich said President Clinton will sign the bill Thursday.
``This is not yet a crisis,'' Reich said of the gap. ``But if it had not been addressed, somewhere down the line ... it would have been another savings and loan crisis.''
``With congressional passage of the administration's pension reforms, we can now begin to reverse the trend that posed a risk to workers and retirees, the pension insurance program and, ultimately, American taxpayers,'' he said.
Officials emphasized that the vast majority of PBGC-covered plans are fully funded, with assets of $603 billion to cover $518 billion in benefits.
But Reich, who is chairman of the PBGC board of directors, said underfunding is a serious problem affecting nearly 8 million workers and retirees, primarily in the steel, auto, tire and airline industries.
About 75 percent of the underfunded plans are sponsored by financially healthy companies, the PBGC said. But about $18 billion of the underfunding is in plans covering about 1.2 million people that are sponsored by businesses with below investment-grade bond ratings.
People in underfunded plans are at risk because the PBGC coverage is limited to just $30,681.84 this year, often less than the benefit promised. The annually adjusted payment will be $30,886.32 next year.
The agency said most of the increase in underfunding in 1993 was caused by low interest rates, which reduced pension plan earnings. But it added that even if rates had not fallen, underfunding, which has grown over the past decade, would not have improved significantly.
``Pension underfunding has been chronic and persistent and will not go away by itself,'' said Martin Slate, the agency's executive director.
The PBGC guarantees basic pension benefits of 41 million American workers and retirees participating in about 66,000 plans.
by CNB