Storm Clouds Hover Over PBGCs Future

<p>The Pension Benefit Guaranty Corp.'s insurance program for pension plans sponsored by a single employer suffered
a net loss of $7.6 billion in 2003. As a result, the program's fiscal year-end deficit worsened to a record $11.2
billion, three times larger than any previous recorded deficit. "The continued erosion of PBGC's financial condition
underscores the need for comprehensive reforms to put pensions on a path to better funding" said outgoing
Executive Director Steven Kandarian. "While the PBGC has sufficient assets to pay benefits to workers and retirees
for a number of years, the growing gap between our assets and liabilities puts at risk the agency's ability to
continue to protect pensions in the future."

</p><p>PBGC's single-employer program insures the pensions of 34.5 million Americans in 29,500 plans. Of the $7.6
billion net loss for 2003, the biggest factors were a $5.4 billion loss from completed and probable pension plan
terminations, and a $4.3 billion loss due to declining interest rates. Overall, the single-employer program had $34
billion in assets to cover $45.3 billion in liabilities.

</p><p>The PBGC took over 152 pension plans last year, covering 206,000 people, up from 144 plans the year before. The
PBGC paid a record $2.5 billion in benefits last year, nearly $1 billion more than in 2002.

</p><p>Additionally, the agency calculates "reasonably possible" exposure of another $85.5 billion, nearly two and a half
times higher than the previous year's estimate of $35.4 billion. Two industries—airlines at $23.4 billion and
primary metals/metal fabricators at $10.2 billion—account for nearly 40 percent of the total exposure.

</p><p>The agency's multi-employer program sustained a net loss of $419 million in 2003, resulting in a year-end deficit
of $261 million. This was the program's first deficit in more than 20 years. The multi-employer program covers 9.7
million participants in more than 1,600 plans. Projected insolvencies, particularly in mature and declining
industries, as well as lower interest rates, are the primary causes for the losses.

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