The annual list of the 50 companies with the most underfunded pension plans is out and the companies, as usual, are complaining about being singled out for what they consider an unfair rebuke.
The list, says the National Association of Manufacturers, is "sensational and ineffective," aimed mainly at promoting proposals by the Clinton administration to force recalcitrant companies to put more money into their pension plans.As in past years, the company with the largest shortfall is General Motors Corp., with an underfunded pension liability of more than $17 billion. This doesn't mean the GM pension plan is about to collapse. It simply means that GM hasn't been saving enough for retirees.
To reduce the shortfall, GM is planning to put $5.7 billion in company stock into the pension plan if it can get government approval.
Why is the government involved? Because a federal agency called the Pension Benefit Guarantee Corp. insures private pension funds, with premiums collected from the companies. If a pension fund goes broke, the PBGC steps in, paying up to $29,250 a year to eligible retirees.
The guarantee corporation has more than enough money to cover current obligations, but the underfunding trend is in the wrong direction. Only 76 percent of major companies have sufficient pension plan assets, down from 95 percent in 1988, according to a survey by Buck Consultants, an employee benefit consulting firm.
It should be noted that GM's pension plan is 70 percent funded, a much better ratio than pension funding by some other offenders on the list put out by the PBGC. Ravenswood Aluminum Corp., for example, has funded only 11 percent of its pension obligations.
Nor is there any danger - yet - that underfunded pension plans could turn out to be another savings and loan fiasco, with taxpayers jumping in to bail out bankrupt pension plans.
Most of the companies on the list are strong enough to pay pension benefits. One reason pension plans are underfunded, they argue, is that earnings on pension investments have been hurt by low interest rates.
Another reason is that companies have promised more than they can deliver. It's easy in a labor negotiation to make commitments that can't be kept, to sweeten pension benefits while holding down wages.
In a sense, that's what we have in the federal pension system for retired civilian and military employees. The system is super-generous, with early retirement options and full cost-of-living adjustments each year to protect federal retirees against inflation.
The fact that the federal pension system is more than $1 trillion underfunded seems not to bother lawmakers.