Monday, June 13, 2005

PBGC

PBGC stands for the Pension Benefit Guaranty Corporation. It's a government organization that insures private pensions. Employers pay a premium to the PBGC, just like any insurance organization, and in return the pensions covered by those employers are guaranteed.

But all is not sunny in the land of private pensions. The PBGC is having to pay out more than it normally would. Why? Because some employers (notably United Airlines, recently) have been defaulting on their pensions, and the PBGC has had to step in. As such, they're going to have to start charging higher premiums to their member corporations. Many fear that an increase in premiums will make some corporations drop, or at least drastically decrease, their pension plans. Because it wouldn't be profitable, see?

When the phase-out contingent is asking us to place so much of our faith in the private market, what sort of signal is this supposed to send to us? That somehow Social Security is a worse deal than a company pulling your retirement legs out from under you just to better its own bottom line? I don't buy it.

Fargus...