Pension Crisis: Looming Taxpayer Bailout?
By Yaser Anwar of Equity Investment Ideas
Is the bankrupt Pension Benefit Guaranty Corporation going to hoist its obligations onto taxpayers?
The quasi-government agency has been taking on failed companies’ pension payments since it’s creation in 1974. But could there come a day when the PBGC requires a bailout from taxpayers?A Wall Street Journal editorial says so.
The PBGC reported a $23 billion deficit for 2005. That’s a long fall from the $10 billion surplus the agency had in 2000. The reason? Companies aren’t paying into the coffers of the PBGC like they once were, and more are calling on its assistance.
According to a study by Watson Wyatt Worldwide, 113 of the Fortune 1,000 companies have ended their pensions. That’s compared to 71 in 2004, says the consulting firm.
Delta Airlines just became the latest in a string of companies looking to the PBGC to handle its pension payouts. The airline wants to end its pension plan for pilots. United Airlines and US Airways have already stuck PBGC with its pensions, PBGC assumed $6.6 billion of United’s pension liabilities and $3 billion of US Airways’, says The Seattle Times.
The growing number of companies looking to the PBGC for assistance is worsened by the fact that companies are underfunding their pension programs. The Labor Department estimates that pensions are underfunded by more than $450 billion last year.
That means companies are making promises that they can’t deliver, and the PBGC is left to pick up the pieces. As the insurer of last resort for these pensions, the PBGC is obligated to take on the liabilities of failed companies.
But what if, asks the Journal, the PBGC doesn’t have the cash to pay its obligations? Taxpayers beware.
Source: Money News
http://equityinvestmentideas.blogspot.com/
Is the bankrupt Pension Benefit Guaranty Corporation going to hoist its obligations onto taxpayers?
The quasi-government agency has been taking on failed companies’ pension payments since it’s creation in 1974. But could there come a day when the PBGC requires a bailout from taxpayers?A Wall Street Journal editorial says so.
The PBGC reported a $23 billion deficit for 2005. That’s a long fall from the $10 billion surplus the agency had in 2000. The reason? Companies aren’t paying into the coffers of the PBGC like they once were, and more are calling on its assistance.
According to a study by Watson Wyatt Worldwide, 113 of the Fortune 1,000 companies have ended their pensions. That’s compared to 71 in 2004, says the consulting firm.
Delta Airlines just became the latest in a string of companies looking to the PBGC to handle its pension payouts. The airline wants to end its pension plan for pilots. United Airlines and US Airways have already stuck PBGC with its pensions, PBGC assumed $6.6 billion of United’s pension liabilities and $3 billion of US Airways’, says The Seattle Times.
The growing number of companies looking to the PBGC for assistance is worsened by the fact that companies are underfunding their pension programs. The Labor Department estimates that pensions are underfunded by more than $450 billion last year.
That means companies are making promises that they can’t deliver, and the PBGC is left to pick up the pieces. As the insurer of last resort for these pensions, the PBGC is obligated to take on the liabilities of failed companies.
But what if, asks the Journal, the PBGC doesn’t have the cash to pay its obligations? Taxpayers beware.
Source: Money News
http://equityinvestmentideas.blogspot.com/
posted by douglas mcintyre at 5:07 PM
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