Weakness in the auto and airline industries, as well as retail and service sectors, has more than tripled the potential risk to the U.S. pension insurance system.
The Pension Benefit Guaranty Corporation (PBGC) on Friday said its potential exposure to future pension losses from financially weak companies had increased to about $168 billion in fiscal 2009 from $47 billion a year earlier.
It also reported a doubling of its deficit in the year that ended September 30, and said future shortfalls from retirement account defaults could be worse than forecast.
"Exposure to possible future terminations means that we could face much higher deficits in the future," Vincent Snowbarger, the agency's acting director, said in a statement.
The agency, which insures pensions covering 44 million workers and retirees, said its annual deficit grew from $11.2 billion in fiscal 2008 to $22 billion in fiscal 2009.
The deficit figure was an improvement over mid-year projections as the agency's balance sheet benefited from an improved economy and rebounding investments.
In addition, the government arranged for General Motors and Chrysler to maintain their major pension plans in bankruptcy.
The agency's deficit is the difference between assets under its control and payout obligations. PBGC assets reflect the value of terminated plans.
"We won't fail to meet our obligations to retirees, but ultimately we will need a long-term solution to stabilize the pension insurance program," Snowbarger said.
Companies with junk credit ratings are put on watch for pension plan troubles.
Automakers and their parts suppliers as well as airlines account for most of the risk. Service sector and retail companies are also a concern.
The PBGC this year has assumed responsibility for pension plans at auto parts supplier Delphi Corp, retailer Circuit City Stores (CCTYQ.PK), IndyMac Bank, Lehman Brothers Holdings Inc (LEHMQ.PK) and textile maker Dan River Inc, among others.
The financial health of the company-funded agency has been a hot button topic in recent years as faltering companies, particularly airlines, shed pension obligations in bankruptcy.
The PBGC and pension experts say the agency has plenty of cash to make payments for the next decade or more. Assumption of fully funded plans will not increase the PBGC deficit. But the recent trend has been for bankrupt companies to turn over underfunded accounts.
"These are all companies who do represent some serious risk, and historically those who do go under get significantly worse deficits before they actually go," said Douglas Elliott, a former investment banker and an expert on financial institutions and the economy at the Brookings Institution.
The PBGC is reviewing the investment strategy for its assets, having put aside a proposal to become more heavily exposed to equities. The agency has been directed by the Obama administration to "prudently rebalance" its portfolio.
"We will announce any new investment policy when it is adopted by the board," PBGC spokesman Jeffrey Speicher said.
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