US - Bradley Belt, executive director of the Pension Benefit Guaranty Corporation (PBGC), has called for comprehensive reform of the rules governing defined benefit schemes as a means of restoring stability in the nation's pension system.
In a testimony to the US Senate committee on finance, Belt listed a number of “structural flaws” in the system that he said were contributing to the record number of companies abandoning their pension liabilities and leaving the federal insurer to pick up the pieces.
“Companies that sponsor pension plans have a responsibility to live up to the promises they have made to their workers and retirees,” he said.
“Yet under current law, financially troubled companies have shortchanged their pension promises by nearly $100 billion, putting workers, responsible companies and taxpayers at risk.
“At stake is the viability of one of the principal means of predictable retirement income for millions of Americans. The time to act is now.”
Belt said structural flaws included weaknesses in funding rules and an insurance system that’s design did not discourage risky behaviour which in turn heightens the prospects of claims.
He said that while the PBGC has “sufficient assets” on hand to continue paying benefits for a number of years, the insurer’s US$62bn in liabilities and US$39bn in assets means the single-employer programme lacks the resources to “fully satisfy” its benefit obligations.
US assistant secretary of Labor, Ann Combs, said in her testimony to the committee that the Bush Administration was committed to working with Congress to ensure that the DB pension reforms included in president George W. Bush’s budget – reforming the funding rules, improving disclosure, and reforming premiums – were enacted into law.
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