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Contrary to the assertions of company executives, PBGC officials and members of Congress, one company after another on the 1990 Top 50 disappeared. To be sure, many are still around. Like General Motors. That year, the PBGC reported a $1.9 billion deficit in GM's pension plans. Today, by GM's reckoning, the deficit is $10 billion. The PBGC estimates it at $31 billion. As for the pension-fund deficit, if GM or any other company can't come up with the money, the PBGC will cover retirement checks up to a fixed amount--$45,600 this year--or until the agency runs out of money. That's projected to occur around 2013. At that point, Congress will be forced to decide whether to bail out the agency at a cost of $100 billion or more. When judgment day comes, other economic forces will influence the decision. Medicare, which is in far worse shape than Social Security, already is in the red on a cash basis. In what promises to play out as a mean-spirited competition, Congress has laid the groundwork to pit individual citizens against one another, to fight over the budget scraps available for those and all other programs.
WHO'S LEFT HOLDING THE BAG?
In the meantime, pension plans that companies are dumping are so short of assets that the PBGC's financial position is rapidly deteriorating. In 2000, the agency operated with a $10 billion surplus. By 2004, the surplus had turned into a $23 billion deficit. By the end of this year, the shortfall may top $30 billion. As the Government Accountability Office put it earlier this year: "PBGC's accumulated deficit is too big, and plans simply do not have enough money in the system to back up the long-term promises many employers have made to their workers." To add to its woes, the agency has a record 350 active bankruptcy cases, according to Bradley D. Belt, executive director. Of those, Belt told Congress, "37 have underfunding claims of $100 million or more, including six in excess of $500 million."
Congress idly watched United Airlines and USAirways unload their pension obligations on the PBGC. Now Delta and Northwest are positioned to do the same. That increases the likelihood that other old-line carriers like American and Continental will be forced to do likewise. Northwest's CEO, Douglas Steenland, bluntly told the Senate Finance Committee last June, "Northwest has concluded that defined-benefit plans simply do not work for an industry that is as competitive and vulnerable from forces ranging from terrorism to international oil prices that are largely beyond its control, as is the airline industry." In that, he merely echoed Robert Crandall, former chief of American Airlines, who told another Senate committee in October 2004: "All the [older] legacy carriers must get rid of their defined-benefit pension plans." In all, the pension funds of those airlines are short $22 billion.