Newspaper article THE JOURNAL RECORD

Pension Agency Red Ink May Bring Stricter Treatment of Bankrupt Firms

Newspaper article THE JOURNAL RECORD

Pension Agency Red Ink May Bring Stricter Treatment of Bankrupt Firms

Article excerpt

WASHINGTON - Looming red ink at the government agency that insures the pensions of nearly a third of the nation's workers is likely to lead to much stricter treatment of companies that go bankrupt, according to administration officials.

Because of bankruptcies in the steel industry, officers of the 12-year old Pension Benefit Guaranty Corp. say that for the first time next year, they will be disbursing more in pension payments than they will be receiving in income.

Next year, officials said, the administration will ask Congress for major changes in the agency's operations that include tougher treatment of companies that transfer their pension obligations to the government to reduce their cost of doing business.

In abandoning its pension plans, one major steel company, Wheeling-Pittsburgh, has transferred its pension-payment burdens to the agency and indirectly to other stronger companies in all industries, and another steel company, the LTV Corp., is in the process of doing so.

The agency said that benefits of 93,000 retired private industry workers, which it is now paying, are not in jeopardy, and that future retirees are also protected. But it said that to overcome the difficulties of assuming the pensions of such large companies as LTV, it could require federal aid, undermining the government's efforts to reduce the budget deficits.

``I could see this coming, and now it's hitting,'' said Sen. Don Nickles, R.-Okla., and chairman of the Senate Labor Committee's subcommittee on labor. ``We definitely have a very serious problem that was initiated by Wheeling-Pittsburgh. I think the system's being abused.''

``What's happening,'' said Labor Secretary Bill Brock, who oversees the agency, ``is that firms are declaring bankruptcy, unloading their pension liabilities on the federal government, and then, are operating under Chapter 11 reorganization.''

The Pension Benefit Guaranty Corp. was established under the Employee Retirement Income Security Act of 1974 to protect workers from the loss of their pensions when their current or former employers went out of business. It collects premiums from private companies and labor unions to meet the obligations of sponsors that have abandoned their pension obligations.

The agency estimates that close to 40 million private-industry workers are protected in this way under 112,000 pension plans.

As of last January, Congress allowed the Pension Benefit Guaranty Corp. to more than triple its principal source of income - the annual insurance premiums that it charges more than 100,000 private companies - from $2.60 a worker, to $8.50. But even that has not been enough to prevent the erosion of the agency's finances.

``If things had gone as projected two years ago, we might have eked through,'' said Kathleen P. …

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