Stock market losses puts corportate pensions in danger

Washington Post

It’s probably safe to say that the more than 40 million Americans who still have pensions are at least a little bit worried right now.

According to Mercer, a consulting firm, the stock market turmoil of the past year has left corporate pension plans at the largest companies underfunded by $409 billion. At the end of 2007, plans had a $60 billion surplus.

Auto pensions perhaps are some of the most problematic. U.S. automakers have four retirees for every active worker.

Jeffrey Speicher, a spokesman for the Pension Benefit Guaranty Corp., said Detroit’s Big Three face a $41 billion shortfall. If the PBGC had to take over the pensions of all three, it would end up paying about $13 billion of that amount because of limits set by Congress.

Those who would lose out would probably be new retirees, those who took early retirement, and those who earn the highest pensions.

He pointed out that the agency doesn’t automatically take over pensions when a company goes bankrupt. “First, the company needs to decide if it wants to terminate the plan,” he said. “If it does, it has to demonstrate it cannot afford the plan.” If the bankruptcy court agrees it cannot, the PBGC will then guarantee individual pensions up to a limit, which in 2009 is $54,000 of annual pension benefits for workers who retired at age 65. Those who retired at an earlier age would get less. Those at a later age would get more.

But Speicher said most workers need not worry too much. Most receive annual pension payments below the $54,000 maximum. On top of that, he said that it was unlikely that all three automakers would require the PBGC to step in.