From Eric Lipton at the NY Times: Bankruptcies Swell Deficit at Pension Agency to $33.5 Billion
The deficit at the federal agency that guarantees pensions for 44 million Americans more than doubled in the last six months to a record high, reaching $33.5 billion …
The Pension Benefit Guaranty Corporation, as of October, had faced a shortfall of $11 billion. But the combined effect of lower interest rates, losses on its investment portfolio and the increase in the number of companies filing for bankruptcy protection resulted in a deepening of its estimated deficit, officials said Wednesday.
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With the bankruptcy of Chrysler and a possible similar move by General Motors, the agency is facing a record surge in demand. The new deficit estimate takes into account both pensions it has taken over in the last six months, and others it believes it will have to assume control of soon.
Here is the PBGC statement: PBGC Deficit Climbs to $33.5 Billion at Mid-Year, Snowbarger to Tell Senate Panel
The $22.5 billion deficit increase was due primarily to about $11 billion in completed and probable pension plan terminations; about $7 billion resulting from a decrease in the interest factor used to value liabilities; about $3 billion in investment losses; and about $2 billion in actuarial charges.
Snowbarger notes that as of April 30, the PBGC’s investment portfolio consisted of 30 percent equities, 68 percent bonds, and less than 2 percent alternatives, such as private equity and real estate. All the agency’s alternative investments have been inherited from failed pension plans.
Let the PBGC bailout talk commence. (Calculated Risk)
