Reply #40: Companies' pension problems could hit taxpayers

[AnneD]

The fortunes of the PBGC rise and fall in concert with the broader economy: When it hits a rough spot and company bankruptcies increase, the pension agency is forced to take over more retirement plans. And as companies start failing, their pension plans usually worsen.

Companies' pension-fund deficits "get worse, sometimes dramatically worse, in the last year or two before they go bankrupt," Elliott said. Companies may stop paying into the plan, shift assets into riskier investments, or, as in the case of United Airlines, promise larger pension benefits to some workers in exchange for pay freezes.

By the time the PBGC steps in, the promised benefits of a plan usually far exceed its funds. Of course, the PBGC doesn't always pay what the company has promised.

The maximum PBGC benefit payout for a 65-year-old is $54,000 in 2009 (the maximum generally changes annually). That should be of particular concern to auto workers. PBGC estimates that it guarantees just $42 billion of the $77 billion in unfunded pension liabilities at auto-industry companies.

"Participants in auto-sector pension plans and the other stakeholders of the pension insurance program are at substantial risk of loss if these plans are terminated," said Vincent Snowbarger, the PBGC's acting director, in testimony to lawmakers in May. See related story on what to expect if PBGC takes over your pension.

www.marketwatch.com/story/pension-crisis-likely-to-hit-taxpayers-eventually-2009-09-03?pagenumber=2

That pay out should just about cover the cost of Kentucky Jelly.