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News & Policy

Companies Report $278.6 Billion Pension Shortfall in Latest Filings with PBGC

FOR IMMEDIATE RELEASE
June 17, 2004

WASHINGTON-Companies with underfunded pension plans reported a total pension shortfall of $278.6 billion in the latest round of filings with the Pension Benefit Guaranty Corporation (PBGC), the agency reported today. That is down slightly from the $305.9 billion reported last year, but up dramatically from the $18.4 billion reported in 1999 (see chart).

The 2003 reports, required to be filed with the PBGC by April 15, 2004, were submitted for 1,050 pension plans covering millions of workers and retirees. The underfunded plans had $641.8 billion in assets to cover $920.3 billion in liabilities, for an average funded ratio of less than 70 percent.

The reports are required only of companies with more than $50 million in unfunded pension liabilities, as measured on the less stringent basis used to calculate PBGC premiums. If underfunding in all insured pension plans is included, PBGC estimates the total shortfall in the defined benefit pension system is significantly higher than $278.6 billion.

Although individual company reports are nonpublic by law, information can be disclosed on an aggregate basis. This is the first time PBGC has released the pension underfunding data shortly after its receipt by the agency. The decision is part of a broader effort by the agency to improve the transparency of the defined benefit pension system. Other recent initiatives include PBGC's first-ever release of its mid-year financial position and the agency's proposed regulation strengthening penalties against companies that fail to inform workers of pension underfunding.

Disclosure of data about underfunded pension plans was part of the Administration's call last year for greater transparency in the defined benefit system. "Workers and investors have a right to know the financial status of pension plans," PBGC Executive Director Brad Belt said today. "As part of any pension reform package, the information provided to PBGC should be publicly available."

The reports show that a significant amount of pension underfunding continues to exist in the airline and steel industries. In the airline sector, 11 companies reported a total of $31 billion in pension underfunding in plans covering 444,000 participants. In the steel industry, seven companies reported a total of $6 billion in pension underfunding in plans covering 213,000 participants. Since PBGC's inception in 1974, these two sectors have accounted for more than 70 percent of the claims against the pension insurance program while representing less than 5 percent of insured participants.

PBGC is a federal corporation created under the Employee Retirement Income Security Act. It currently guarantees payment of basic pension benefits earned by 44 million American workers and retirees participating in over 31,000 private-sector defined benefit pension plans. The agency receives no funds from general tax revenues. Operations are financed largely by insurance premiums paid by companies that sponsor pension plans and investment returns.

Summary of Pension Underfunding Filings

Year

1999

2000

2001

2002

2003

Number of Plans

166

221

747

1058

1050

Underfunding($ billions)

$18.36

$19.91

$110.94

$305.88

$278.57

Average Funded Ratio

77.7%

82.8%

80.0%

65.1%

69.7%

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PBGC No. 04-53