Seniors Worry About Pension Insurance, Retirement Money After PBGC Announcement

The U.S. Pension Benefit Guaranty Corp. (PBGC) reported today that it lost at least $3 billion in investments during its fiscal year which ended in August.  The announcement was made by U.S. Rep. George Miller announced at a hearing in San Francisco. A California Democrat, Rep. Miller heads the congressional committee that oversees PBGC, the U.S. government agency that insures private-sector pension plans.

U.S. News & World Report added that the government agency has been suffering from the stock market downturn just like the pension funds it is supposed to guarantee:

According to a document containing preliminary, unaudited figures, the losses were caused by the agency’s stock holdings. Miller says PBGC invested a significant portion of its funds in mortgage-backed securities.

PBGC funds come from insurance premiums paid by employers that sponsor insured pension plans. It does not receive any funds from tax revenues but does earn money from investments and pension plans it takes over.

For example, PBGC announced today it has assumed responsibility for the underfunded pensions of 1,370 workers and retirees at Pope & Talbot Inc., a pulp and lumber company based in Portland, Ore. The Pope & Talbot pension plan is only 92 percent funded, with $57.5 million in assets to cover $62.3 million in benefit liabilities, according to PBGC estimates. PBGC will take over the assets and use insurance funds to pay guaranteed benefits earned under the plan. The agency expects to be responsible for $3.7 million of the $4.8 million shortfall.

The maximum guaranteed pension PBGC will pay out is $51,750 per year in 2008 for workers at age 65, a level set by federal pension law. The maximum guaranteed amount is lower for those who retire earlier or elect survivor benefits.

PBGC currently pays monthly retirement benefits to more than 631,000 retirees in 3,793 pension plans that have ended.