WASHINGTON -- Lax reporting rules and corporate America's eagerness to take advantage of them have triggered a spike in underfunded pension plans largely unknown to millions of workers and retirees, the Senate Finance Committee was told yesterday.
United Airlines may have set an unsavory example for others in the airline industry, committee members were told. After declaring bankruptcy in 2002, the airline won court approval last month to shed $9 billion in pension obligations, shifting responsibility to the federal Pension Benefit Guaranty Corp.
That has contributed to a $23.3 billion deficit at the government-created corporation, which insures private pension plans, and triggered fears of another massive taxpayer bailout similar to what happened in the 1980s savings and loan crisis. The number of pension plans that are more than $50 million short of promised benefit levels rose from 221 in 2000 to 1,108 in 2004. Those funds have an average of just 69 percent of promised benefits on hand.
''The law represents the floor of acceptable behavior, not the desired state," David Walker, head of the nonpartisan Government Accountability Office, told the committee. ''Unfortunately, when it comes to pension funding, too many high-risk companies do what is legally permissible -- rather than what is right -- when deciding how much money to put into their pension plans."
The statistics and comments prompted calls for swift legislative action to adopt bills pushed by President Bush, Senator Jay Rockefeller, Democrat of West Virginia, or Representative John Boehner, Republican of Ohio. In general, the bills call for schedules to eliminate the funding shortfalls and changes in rules that allow companies to mask underfunding. They also call for information about the funds now available only to the PBGC to be shared with the public.
''The facts are alarming. The time to act is now. Tinkering with the current rules won't do," said Senator Charles Grassley, an Iowa Republican.