CHAIRMAN'S MESSAGE

The recent past has been a period of great change and challenge for the federal pen-sion insurance program. While PBGC has instituted numerous changes to better serve its current customer base, external factors and ineffective statutory provisions have resulted in a worsening long-term financial position. With its deficit more than doubling over the last year, the time has come for comprehensive reform.

The Pension Benefit Guaranty Corporation is committed to protecting the pension benefits American workers have earned and meeting its statutory responsibilities. The Corporation has undertaken strong initiatives to monitor the risks posed to the insurance program, strengthen the Corporation’s financial and operational controls, and deliver even more value to its customers.

It is important to stress that, despite the financial pressures facing PBGC, the Corporation’s more than $39 billion in assets enable it to continue paying participants their guaranteed benefits for a number of years. However, with more than $62 billion in liabilities, it is clear that the Corporation does not have sufficient resources to meet all of its long-term obligations. This affects not only the more than 1 million Americans who are now directly dependent on PBGC for their pension income, but the 44 million Americans whose pensions PBGC insures.

In July 2003, the Administration introduced an initial set of reforms to strengthen the financial health of the private defined benefit pension system. These reforms included a new discount rate to more accurately measure pension liabilities, better disclosure of pension information to participants and the public, and stronger safeguards against pension underfunding. The Administration has now put forward a more comprehensive pension reform proposal with the twin goals of reforming the pension system to protect workers and retirees and ensuring that PBGC can continue to fulfill its vital mission of protecting pension benefits while avoiding a taxpayer bailout.

PBGC is a critical component of ensuring workers’ retirement security. If we act promptly, we can strengthen the defined benefit pension system and the insurance program that stands behind it. The Administration looks forward to working with Congress to ensure that prom-ises made to America’s workers are promises kept.

Elaine L. Chao
Secretary of Labor
Chairman of the Board

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