NU Online News Service, July 23, 2003, 5:35 p.m. EDT – The Pension Benefit Guaranty Corp. needs urgent attention from Congress because it already has a deficit of $5.4 billion and it is responsible for backing weak defined-benefit pension plans that have promised more than $35 billion in unfunded benefits, according to officials at the U.S. General Accounting Office.

The GAO says it is adding the PBGC to its list of “high risk” government agencies and programs.

The PBGC insures the pension benefits of 34 million workers and retirees who participate in 30,000 private defined-benefit pension plans.

The PBGC keeps up pension payments when employers go out of business and “terminate” their pension plans.

The PBGC had a $9.7 billion surplus in 2000, thanks to the booming stock market. Since then, many employers have shut their doors and terminated their plans, and weak stock prices and bond rates have hit plan assets hard.

The GAO notes that it has been trying to point out the shortcomings of the minimum funding rules for defined-benefit plans since 1990.

“We stated that the minimum funding rules still did not ensure that plan sponsors would contribute enough for terminating plans to have sufficient assets to cover all promised benefits,” the GAO says in a discussion of its decision to place the PBGC on the high-risk list.

Congress made some improvements in pension and PBGC rules in 1994, but now the PBGC deficit and the risk of termination of more large plans emphasizes the need for action, the GAO says.

The GAO has posted its discussion of the PBGC’s problems at http://www.gao.gov/new.items/d031050sp.pdf