WHEN PENSIONS PLUNGE

San Francisco Chronicle: For millions of American workers, a company pension is a retirement mainstay. Social Security may be iffy in the future, some folks figure, and 401(k) savings are being rocked by the plunging stock market. But surely that monthly pension check will always be there.
It's not a sure thing any more. Low interest rates and sagging stock prices have produced a little-noticed double whammy on pension funds. Reserves that pay out benefits have dipped to the lowest point on record.
A federal corporation charged with guaranteeing pensions for 44 million Americans turned in alarming numbers last week. Unfunded pension liabilities, meaning the difference between assets and promised benefits, totaled $111 billion at the end of 2001, four times the previous year. Considering that stocks and interest rates have continued sinking, this figure is surely larger now.
It's tempting to shrug off the problem as an aberration. If the market recovers, the problem may lessen. Also, it's unlikely that a wave of major companies will go bankrupt at once, leaving federal insurers on the hook for huge numbers of pensioners.
Room for worry
But there is room for worry. Automakers led by General Motors have served notice that pension obligations are outrunning assets. In arguing for recent tariffs, steelmakers claimed retiree benefits were eating up their balance sheet.
Beyond rust-belt industries, there are more general worries. The pension story points up another troubling side of corporate accounting: a glaring lack of clear standards with the potential to harm millions of retirees.
Under the current system of reporting pension numbers, firms can use their own rosy estimates on future growth. Companies may want to use past double- digit rates of return on pension investments to lessen the requirement for management contributions. The problem of sagging pension balances can be hidden, and the duty to fix it can be dodged.
Rep. George Miller, D-Calif., wants the pension liability issue fully aired. He has asked the Bush administration to explore the issue and wants the Securities and Exchange Commission to play cop in laying down disclosure rules.
But he admits there will be a fight. Republicans ended up supporting a Democratic measure that toughened business fraud penalties after Wall Street signaled it wanted such changes.
But reforming pension rules in ways that require companies to kick in more money won't meet with the same bipartisan support. Businesses likely will oppose changes that oblige them to pay more into pension funds.
But the alternatives are bleak. If pension funds can't cover obligations, it will be up to Congress to pay the bill.