The Subcommittee on Health, Employment, Labor, and Pensions, chaired by Rep. Phil Roe (R-TN), today held a hearing entitled, "Examining the Challenges Facing PBGC and Defined Benefit Pension Plans." The hearing explored the financial and management challenges at the Pension Benefit Guaranty Corporation (PBGC), as well policy proposals intended to strengthen the financial standing of the corporation.
In fiscal year 2011, PBGC paid retirement benefits to more than 819,000 individuals at a cost of $5.3 billion. According to its own estimates, PBGC faces a deficit of $26 billion. The corporation obtains some of its revenue through premiums paid annually by plan sponsors, such as employers.
"We all want to see the finances at PBGC strengthened," said Chairman Roe. "However, we must closely examine and fully understand the unintended consequences of our policy decisions. Excessive increases in premiums and unpredictable costs of defined benefits plans will have a direct impact on employers and job creation. At the same time, if we do not act appropriately we will undermine the financial standing of PBGC and its ability to serve retirees."
PBGC Director Joshua Gotbaum stated during his testimony, "No matter how PBGC's deficit is calculated, the agency's liabilities exceed its assets." Director Gotbaum continued, "If PBGC's finances aren't reformed, the agency will eventually run out of money to pay benefits. We cannot ignore our own future financial condition any more than we would of the pension plans we insure."
Improving PBGC's financial situation remains a difficult task for policymakers. As Gretchen R. Haggerty, Chief Financial Officer for United States Steel Corporation, said, "This committee has the responsibility of balancing many competing objectives through your efforts to encourage employers to offer pension benefits, to safeguard those benefits for all beneficiaries, and to ensure that American workers have sufficient financial resources from their private pensions and savings to carry them through retirement." Those sentiments were echoed by committee members on both sides of the political aisle.
"As we move forward, our task is a difficult one," concluded Chairman Roe. "Find a solution that can strengthen PBGC without harming job creation or discouraging participation in our voluntary pension system. There will be no easy answers. However, I am confident that by working together, we can find a responsible solution that protects the interests of employers, workers, retirees, and taxpayers."