The Pension Benefit Guaranty Corp. took another step down the slippery slope last week, according to an Associated Press story.
The federal agency announced it has assumed the pension assets and claims of Falcon Products Inc., a manufacturer of commercial furniture. The two plans taken over by the agency cover about 2,300 current or retired employees of Falcon and its subsidiary, Shelby Williams Industries Inc. Falcon filed for bankruptcy earlier this year, shifting its pension liability to the PBGC as part of its reorganization.
Between them, the plans have about $26 million in assets and obligations of nearly $59 million. The federal agency will assume liability for about $31 million of the shortfall. This just adds to the $22.8 billion shortfall the agency is currently running.
Although the PBGC is supported by fees it charges employers that have pension plans, it’s possible taxpayers could be on the hook for the shortfall sometime in the future. Congress is currently working on plans to avoid that possibility, but large pension benefits promised to many workers in the steel and airline industries threaten the agency’s solvency. The current shaky fiscal health of those industries — and the possibility of the agency having to shoulder at least part of the auto industry’s pension promises — point to a precarious road ahead for the PBGC.
Unfortunately, lawmakers aren’t likely to consider the best scenario for taxpayers: privatization.
Under current law, tax revenues don’t support the PBGC, but with rising bankruptcies in several major industries, that could change. We’d prefer to see the agency become a private concern and allow other insurance companies to bid on policies. They would assess premiums based on relative risk of the industries involved.
Such a move would put premiums at the lowest price necessary while encouraging covered industries to be more proactive in protecting their employees’ retirement benefits, because to do otherwise would cost them, rather than some far-off federal agency.
True, this would likely increase the cost of doing business and providing pension benefits, but it would put the costs where they properly belong — on the companies and the employees.
This approach would best serve covered employees and taxpayers and get government out of what should be private business matters. Otherwise it’s just a matter of time before taxpayers will be paying private industry’s pension benefits.