EXECUTIVE DIRECTOR'S MESSAGE

The opening years of the 21st century may be the most challenging in the history of the Pension Benefit Guaranty Corporation. In my first annual message in the 2001 Annual Report, I characterized the Corporation’s 2001 fiscal year as “remarkable.” Perhaps I should have saved that distinction for 2002.

We coped with an unprecedented flood of terminating plans and with 187,000 additional people requiring our pension protection. In the process we handled our largest termination ever with the LTV pension plans, with underfunding of nearly $2 billion and more than 80,000 participants. In any other year this one group of plans would have constituted a full year’s workload. And yet, I am proud to say that our record of premier customer service continued and we met or exceeded our performance goals while protecting benefits for more than twice as many new participants than in any year in our history.

With the plan terminations came record losses, which produced the largest one-year loss in PBGC’s history (more than four times the previous record) and forced the Corporation into a deficit for the first time in seven years. On the bright side, even though our single-employer deficit totaled about $3.6 billion at fiscal year-end, we recorded a small investment gain and we still have on hand more than $25.4 billion of assets with which to meet our benefit obligations. We also remain vigilant in our efforts to preserve the solvency of the insurance program, and we are taking swift action to prevent unnecessary losses.

Our hope is that PBGC’s financial position will improve over time as the economy gains strength, but we remain exposed to further losses from additional large plan terminations. It may be that PBGC’s current challenges require a policy response to restore the financial strength of the pension insurance system. Accordingly, we are reviewing every option available to ensure that PBGC remains on a fiscally sustainable path.

PBGC’s employees have responded to the events of the past two years with professionalism and diligence. I am confident that, as we weather the current storm, our commitment to fiscal soundness, customer service and operational efficiency will not waver.

Steven A. Kandarian
Executive Director

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