Senate Holds Hearing On Future Of PBGC
June 17, 2005
Washington, D.C. - The United States Senate Budget Committee held a hearing Wednesday regarding the solvency of the Pension Benefit Guaranty Corporation (PBGC). The Committee heard statements from Bradley Belt, Executive Director of the PBGC and Douglas Holtz-Eakin, Director of the Congressional Budget Office (CBO).
"By enacting comprehensive pension reform this year, Congress can significantly lower the risk of long term insolvency of today's underfunded defined benefit pension plans, and limit the need for future premium increases, while securing the retirement of tens of millions of American workers," said Chairman Judd Gregg (R-NH).
"It's about time that this issue is taken seriously by Congress. This should have been addressed many years ago," said Patricia Friend, AFA-CWA International President. "When US Airways employees lost their pensions, Congress did nothing. Now, United Airlines employees are losing theirs and still we have no reform. I sincerely hope that this year Congress will ensure that hard-working Americans receive the pensions that they had been promised."
According to Belt's statement, the PBGC will be unable to meet its long-term commitments without additional revenues beyond those mandated by current law when their liability reaches $60 billion. It will be then that Congress will have to address whether to terminate participants benefit checks, or ask the taxpayers to carry the burden of restoring the program to solvency.
Holtz-Eakin discussed potential options under consideration by the CBO that would help ensure PBGC solvency. One such proposal is altering the premium structure. Premium rates for single-employer plans have not changed in more than a decade. The underpricing of the PBGC's insurance under the current premium structure is a key factor in their present financial situation. The agency's current liability is at $23 billion and is estimated to increase to over $91 billion in 20 years.
"This is an incredibly serious matter for all those who are in danger of having their pension benefits reduced from what they thought was assured," said Committee member Kent Conrad (D-ND). "Termination should be an extraordinary step for a plan sponsor, not merely another financial option. Employees and retirees are relying on these promises and we should not let them down."
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