Pension Benefit Guaranty Corporation (PBGC): Broke
Economist (01/31/03) Vol. 366, No. 8308 p.68; Rosato, Donna

While companies struggle to infuse cash into their underfunded pension plans, the Pension Benefit Guaranty Corporation (PBGC), a quasi-government agency charged with providing workers with retirement funds when their employers cannot, may be on the verge of insolvency itself. The agency's liabilities far outweigh its assets, but insurance premiums, assets from company acquisitions, and investment income from its own portfolio should help the agency meet its obligations. Some critics are concerned that the system is faulty because its guarantees are not backed adequately by premiums charged to companies, but since Congress determines premiums, PBGC is at the mercy of union lobbyists. Morgan Stanley suggests that changes be made in the pension fund industry, restricting how much can be allocated in various sectors, such as the equity market.


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