More Alphabet Soup That Will Be Tough To Digest - PBGC

Here’s another upcoming problem as the economic world shifts: the Pension Benefit Guaranty Corp (PBGC). PBGC is a federal government entity that pays the pension for companies that have gone bankrupt leaving their employees with little, if anything, from their defined benefit pension plan. Last year it ran a deficit of $23.3 billion, double the deficit of the previous year. And, with this week’s decision by a judge in Virginia allowing US Air to turn over three of its pension plans to the PBGC, it doesn’t look as though things will be getting better soon.

One of the reasons for the difficulty is that many of these pension funds were not fully, or even close to fully, funded. For example, US Air claimed the pension plan for its pilots was 94% funded; the PBGC and the courts found it was only 33% funded. What this means is that you and I and the rest of the US taxpayers wind up paying most of the pilots’ pensions. The pilots lived up to their deal with US Air. Why should we have to pay because US Air did not live up to its side of the bargain? Why was US Air able to get away with claiming the pension was 94% funded? Shouldn’t the CEO and CFO be held accountable?