published Monday, December 19th, 2011

Pension bailout in the works in Washington?

You may not know it, but a federal agency insures the pension plans provided by some private companies to their employees. The companies pay premiums to the agency, known as the Pension Benefit Guaranty Corp., which in turn picks up pension payments to employees of the companies if the businesses fail.

But like the federal government as a whole, the Pension Benefit Guaranty Corp. is operating in the red. It currently has a $26 billion deficit -- the biggest deficit it has faced in nearly four decades of existence. In fact, in just the past fiscal year, nearly 60,000 employees have been added to the rolls of those whose pensions must be paid by the agency.

And that ugly situation soon may get worse. With American Airlines recently having declared bankruptcy, the federal agency could be forced to pick up an additional $9 billion in pension liabilities for tens of thousands of American's employees.

Technically, the federal Pension Benefit Guaranty Corp. isn't supposed to get tax dollars. Premiums from participating companies are supposed to cover the pension payments. But premiums have failed to keep up with pay-outs. So once again, the American taxpayer may be put on the hook for a bailout.

It is not certain that American Airlines' bankruptcy means it will end its pension plan and move that cost onto the federal agency. But if it does so, agency officials acknowledge they may be forced to seek a multibillion-dollar bailout from taxpayers.

Haven't taxpayers already been required far too often to pony up for bailouts of badly performing private companies -- to say nothing of the huge bailouts of government-run mortgage giants Fannie Mae and Freddie Mac?

Where does it all end?

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nucanuck said...

"Where does it all end?"

Pension programs can't succeed within an ultra low interest rate environment. This is all part of the end of a massive debt cycle that will take years to unwind and force us to closely examine our governmental and financial structures.

In a depression, all pension plans, public and private, will be at risk. Economic independence in old age will become a memory for many of us. Even those whose plans hold together will be threatened by the ravages of a dying US dollar.

It wasn't supposed to be like this.

December 19, 2011 at 1:34 a.m.
EaTn said...

So what's the issue? The feds can rob the Social Security kitty to fund the shortfall in private pension funds and have another excuse to shaft the seniors primary pension program.

December 19, 2011 at 6:14 a.m.
conservative said...

"Where does it all end?"

It ends where it is now, BANKRUPTCY! We owe more than we can ever repay. I'm so glad my God is not government. My God will supply ALL my NEEDS! Government god will supply failure then misery.

December 19, 2011 at 9:27 a.m.
nucanuck said...

con-man, we will miss you after the rapture, but I think we will have a better shot at repairing that which ails the planet.

December 19, 2011 at 2:45 p.m.
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