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Reply #35: Pensions may need a taxpayer bailout [View All]

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54anickel Donating Member (1000+ posts) Send PM | Profile | Ignore Wed Aug-25-04 10:50 AM
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35. Pensions may need a taxpayer bailout
http://www.freep.com/money/business/pensions25e_2004082...

A $350-billion pension shortfall among U.S. companies may force the federal agency that insures retirement plans to seek a taxpayer bailout similar to the one during the savings and loan crisis, according to the Cato Institute, a Washington-based policy research group.

The Pension Benefit Guaranty Corp. had a record deficit of $11.2 billion last year after taking over plans for 152 companies such as Bethlehem Steel Corp. and US Airways Group Inc. Without changes to funding and premium rules, the PBGC's deficit is likely to swell to $18 billion in the next 10 years and may reach more than $50 billion, said Richard Ippolito, who wrote the Cato study and is a former PBGC chief economist.

"If exposures create claims that reach catastrophic levels, taxpayers will be called upon to provide a bailout," Ippolito said in the study released Tuesday.

Stock price declines and low interest rates have eroded the value of pension plans. Groups such as the Pension Rights Center, a Washington-based workers' advocacy group, have dismissed the likelihood of a bailout, saying the PBGC is well funded over the long term.

The collapse of savings and loans in the 1980s and early 1990s cost taxpayers about $124 billion and the thrift industry another $29 billion, according to the Federal Deposit Insurance Corp.

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