Pension System Faces Variety of Challenges

• Significant coverage gaps and pre-retirement leakage

• Long term decline in the number of DB plans and active participants and change in the nature of DB plans

• Recent DB freezes and retiree health plan limitations are likely to accelerate due to prospective changes in current accounting for pension and post-employment benefits

• Recent and prospective large plan terminations by bankrupt sponsors have placed Pension Benefit Guaranty Corporation (PBGC), the federal agency insuring benefits, in financial jeopardy

  • Stock market, interest rate declines this decade have worsened overall plan funding
  • Demographics, global competition (steel, auto), industry deregulation restructuring (airlines) have contributed to both plan and corporate weakness

• Plan funding rules have proven to be inadequate

• Certain PBGC premium insurance issues need to be reviewed

• Selected other issues also require attention (e.g., lump sums, bankruptcy laws)