The "Other" Pension Crisis
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In recent months, there has appropriately been substantial and growing attention to underfunding in state and local government pension plans. At the same time, there exists a similar (though smaller) set of financing risks in pension plans covered by the Pension Benefit Guaranty Corporation (PBGC), the federally chartered corporation established to insure employer-provided pension benefits. Several factors have contributed to underfunding in employer-provided pensions, including the recent recession, the opacity of asset/liability measurements, and the inadequacy of insurance premium assessments and funding rules, as well as the broader moral hazard and political economy factors that underlie these phenomena. Sound public policy is needed to help ameliorate employer-provided pension underfunding and to contain the risk of a potential taxpayer bailout of the PBGC insurance system.
