CHAIRMAN'S MESSAGE

Defined benefit pension plans remain the cornerstone of retirement security for millions of American workers and retirees. Unfortunately, the defined benefit system is now confronted with the most significant challenges it has faced in over a decade. As of the end of fiscal year 2003, total underfunding in America’s private pension plans exceeded $350 billion, by far the largest fiscal year-end number ever recorded. At the Pension Benefit Guaranty Corporation, not only did the single-employer insurance program show a record $11.2 billion deficit, but the multiemployer insurance program fell into deficit for the first time in over 20 years.

While PBGC is not in crisis—the agency has sufficient assets to meet its obligations for a number of years into the future—it is clear that the financial integrity of the federal pension insurance system is at risk. It is equally clear that comprehensive reform of the nation’s pension funding rules must be enacted to strengthen the financial health of the defined benefit pension system.

This Administration has already proposed several initiatives as a first step toward responsible reform of the pension funding rules, including a more accurate measure of pension liabilities, improved disclosure of pension information, and new safeguards against underfunding. However, more is needed. The Administration will be working closely with Congress to develop a broad package of reforms to put PBGC and the defined benefit system on a sustainable path for the long term.

Despite its growing financial concerns, PBGC is responding to its work with professionalism and a commitment to providing outstanding service to its customers. PBGC is enhancing its productivity and efficiency, and its employees continue to explore ways to improve service through better use of technology and other means.

More than 900,000 workers and retirees now rely on PBGC to pay their pensions. But the existing regime cannot protect all the benefits currently at risk in the private defined benefit pension system. For that, we need new funding rules to ensure that pension promises made are pension promises kept.

Elaine L. Chao
Secretary of Labor
Chairman of the Board

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