The US agency that insures corporate pensions has just recorded an annual deficit of $26 billion, their largest deficit ever. This is due to the company's exposure to financially weak companies that are on the rise in the weak economy.
Published: Tuesday, 15 Nov 2011
By: Reuters
CNBC
The U.S. agency that insures corporate pensions reported a record annual deficit of $26 billion on Tuesday with its potential exposure to financially weak companies also on the rise in a tough economy.
The Pension Benefit Guaranty Corp said the shortfall — the difference between assets on hand and obligations it owes retired workers — grew by $3 billion in the fiscal year that ended Sept. 30.
Most of the deficit was in the account for pensions once run by individual corporations — or single-employer plans. Those traditional plans were structured to pay a set annual amount to retirees.
PBGC, which covers 44 million workers and retirees in mainly single-employer plans, said its potential exposure to financially weak companies grew by $57 billion to $227 billion from the year-ago period.
The agency did not identify specific industries or companies.
In 2011, PBGC paid nearly $5.5 billion in benefits to 873,000 retirees and assumed responsibility for 152 underfunded plans.
Lower interest rates used to measure benefit payments was a factor for the higher deficit last year, the agency said.
PBGC has $81 billion in assets on hand to cover obligations, the bulk of which are benefits to be paid over many years.
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