PENSIONS IN TROUBLE

Worker pension system showing signs of collapse
By Alexandra Marks
THE CHRISTIAN SCIENCE MONITOR
http://www.dailystar.com/dailystar/news/75295.php

The nation's private pension system is fraying and at risk of unraveling altogether.
The reason: More than three-quarters of the nation's traditional private pension plans don't have enough assets to cover benefits already promised to their past and current workers.
And the Pension Benefit Guaranty Corp., the government insurer that guarantees workers some protections if companies go under, is facing a deficit of almost $30 billion.
Add to that the threat of more bankruptcies in old-line industries, from manufacturers to the so-called legacy carriers like United Airlines - which last week won approval to default on its pension obligations to 120,000 workers - and experts predict millions more retirees may find themselves with less than they were promised.
"The broader issue of retirement security hasn't gotten enough attention heretofore," says Bradley Belt, executive director of the Pension Benefit Guaranty Corp. "The retirement security fabric of this nation is increasingly tattered."
Currently, about half of Americans work for companies that offer some kind of retirement plan, whether it's a traditional defined-benefit pension; a 401(k)-type plan, known as a defined-contribution plan; or a mix of the two.
Only 20 percent have the traditional, defined-benefit plans. That's down 50 percent from just 20 years ago.
And of those remaining plans, more than 75 percent are underfunded. Some experts say time and a healthy economy will remedy most of that problem.
But others are less sanguine. They argue that many more companies are facing dire shortfalls than it appears on paper.

For instance, before its default in 2002, Bethlehem Steel said its pension plan was 84 percent funded. Once the Pension Benefit Guaranty Corp. took it over, it turned out to be only 45 percent funded, said George Benston, a finance professor at Emory University's Goizueta Business School in Atlanta.

"There are all kinds of loopholes that make it possible for companies to be underfunded and not penalized for it," he says.
The Bush administration has proposed changes that would tighten accounting rules and require some companies to contribute more to their current pension plans to prevent underfunding. Among other things, the administration proposes to increase the premiums businesses pay to bolster the financial health of the Pension Benefit Guaranty Corp. Currently, companies pay $19 per employee per year. The administration hopes to raise that to $30 a month.