ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Friday, December 13, 1996 TAG: 9612130053
SECTION: BUSINESS PAGE: B-7 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: Associated Press
The shortfall between promised pension benefits and the money set aside to pay for them more than doubled - to $64 billion - when interest rates sharply declined a year ago.
The Pension Benefit Guaranty Corp. said Thursday the single-employer pension plans it insures had assets of only $415 billion to cover $479 billion in liabilities at the end of 1995.
The resulting gap was more than twice the size of the $31 billion shortfall at the end of 1994.
The federal pension insurance agency attributed the decline to interest rates that fell from 7.15 percent at the end of 1994 to 5.3 percent at the end of 1995, lowest in the agency's 22-year history.
Lower interest rates reduce earnings on plan investments and thus require companies to come up with more cash if their retirement plans are to remain fully funded.
Higher interest rates in 1994 had caused a 56 percent decline in underfunding that year - the first drop in a decade - from $71 billion in 1993.
Despite the increase in underfunding in 1995, the PBGC said about two-thirds of the 55,000 insured plans remain fully funded. The remaining 17,500 plans are sponsored by 13,800 companies and cover about 15 million people. Half are in plans with shortfalls of 10 percent or less.
PBGC Executive Director Martin Slate noted the Retirement Protection Act of 1994 contains provisions designed to improve funding gradually over a 10-to 15-year period.
The law also increases insurance premiums for the worst-funded plans and requires companies to inform workers if their pension plans are less than 90 percent funded.
``Pension underfunding persists, and we are addressing it,'' Slate said.
LENGTH: Short : 43 linesby CNB