Pension agency shows smaller shortfall than last year

WASHINGTON — The federal agency that insures private pension plans for millions of Americans logged a deficit of $18.1 billion this year, a big improvement from last year thanks to a new pension law.

The narrower deficit for the 2006 fiscal year reported by the Pension Benefit Guaranty Corp. on Wednesday was down from a shortfall of $22.8 billion recorded in 2005 and a record $23.3 billion posted in 2004.

“The PBGC’s financial condition appears to have stabilized for the time being,” said Vince Snowbarger, interim director of the agency, which insures pensions for 44 million workers and retirees.

The agency disclosed in its annual financial report that as of Sept. 30 it had assets of $60 billion to cover liabilities of $78.1 billion.

PBGC attributed the shrinking deficit largely to a provision in the new pension law that carves out special treatment for the airline industry, giving airlines that are in bankruptcy court and have frozen their pension plans extra time for their pension plans to become financially whole.

The agency said this led to a sharp reduction in the amount of probable liabilities reflected on PBGC’s balance sheet.

Still, the report comes as Americans are feeling anxious about their retirement security. In recent years, an explosion of ailing companies have jettisoned their pension liabilities to the PBGC. The problem has been especially pronounced in industries such as steel and the airlines, which are heavily unionized.

Organized labor wants the new Democrat-controlled Congress, which will convene in January, to provide for more pension protections, including for defined benefit plans, which are increasingly being replaced by 401(k) plans.

The PBGC was created in 1974 as a government insurance program for traditional, defined benefit pension plans. Those plans give retirees a fixed monthly amount based on salary and years of employment. Companies that sponsor these traditional pension plans pay insurance premiums to the agency. If a company cannot support its pension obligations, the agency takes over the plan and pays promised benefits up to certain limits.

The maximum annual benefit for plans taken over in 2006 is $47,659 for workers who wait until 65 to retire. Workers who retire before 65 get smaller benefits.