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Companies Report a Record $353.7 Billion Pension Shortfall in Latest Filings with PBGC

June 07, 2005

WASHINGTON-Companies with underfunded pension plans reported a record shortfall of $353.7 billion in their latest filings with the Pension Benefit Guaranty Corporation (PBGC), Executive Director Bradley Belt told the Senate Finance Committee today. That is up considerably from the $279.0 billion reported a year earlier. The total increase in underfunding is $74.7 billion, or 27 percent.

Summary of Pension Underfunding Filings
Number of Plans 221 747 1058 1051 1108
(Dollars in billions)
$19.91 $110.94 $305.88 $278.99 $353.73
Funded Ratio 82.8% 80.0% 65.1% 69.7% 69.0%

The 2004 reports, filed with the PBGC by April 15, 2005, were submitted for 1,108 pension plans covering about 15 million workers and retirees. The underfunded plans had $786.8 billion in assets to cover more than $1.14 trillion in liabilities, for an average funded ratio of 69 percent. The reports are required only of companies with more than $50 million in unfunded pension liabilities. As of September 30, 2004, the PBGC estimated that the total shortfall in all insured pension plans exceeded $450 billion.

Belt's testimony also contained a detailed analysis of the pension plans of United Airlines (see testimony). Although the plans have an aggregate funding shortfall of almost $10 billion and an average funded ratio of 41 percent, the company was able to go for years without making any cash contributions to the plans, without paying additional premiums to the PBGC, and without sending underfunding notices to plan participants.

"United offers important, albeit painful, lessons that illustrate the flaws in current law and which should guide us in reforming the defined benefit system and pension insurance program," Belt said in his testimony.

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.

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PBGC No. 05-48