The $3.6 billion actuarial deficit reported by the Pension Benefit Guaranty Corporation (PBGC) for its corporate pension insurance program, the agency’s first since 1995, is yet another consequence of the faltering economy, three straight years of big stock market declines, and historically low interest rates. It is not an indication of the viability of defined benefit pension plans. While the financial condition of the PBGC bears watching, its protections for workers and retirees remain rock solid.

PBGC’s report makes clear that the agency continues to play a vital role in providing retirement security to tens of millions of Americans. In stark contrast to the thousands of workers who lost much of their life’s retirement savings in the Enron and WorldCom 401(k) plans, the 187,000 workers and retirees whose plans were taken over by the PBGC in 2002 will receive substantial benefit guarantees.

The PBGC’s financial health will improve when the economy strengthens. In the meantime, its $25 billion in assets are more than adequate to meet its annual benefit payments—about $1.5 billion in 2002—for many years to come, and the PBGC ultimately is backed up by the U.S. government even though it does not currently depend on any government financing. Furthermore, the PBGC insurance program that protects multiemployer pensions, which are run jointly by union and business representatives, continues to report a surplus.

The labor movement believes that guaranteed income is critical for workers and retirees to plan for their futures. While a strong Social Security system is the foundation of a secure retirement, Social Security alone is not enough income to provide a decent retirement. Unlike unreliable 401(k) accounts that are tied to the stock market, defined benefit pension plans provide crucial guaranteed income that is necessary for a secure retirement.

Contact: Kathy Roeder (202) 637-5018