The Government Pension Insurer Is Broke

The Pension Benefit Guaranty Corporation (or PBGC) is an independent agency of the United States government that was created by the Employee Retirement Income Security Act of 1974 (ERISA) to insured pension plans, provide timely and uninterrupted payment of pension benefits, and keep pension insurance premiums at the lowest level necessary to carry out its operations. Subject to other statutory limitations, the PBGC insurance program pays pension benefits up to the maximum guaranteed benefit set by law to participants who retire at age 65 ($54,000 a year as of 2009) 8

Where Does Their Money Come From?

Their money comes from Insurance premiums paid by sponsors of defined benefit pension plans, assets held by the pension plans it takes over; recoveries of unfunded pension liabilities from plan sponsors' bankruptcy estates; and Investment income. 

What Is The Scam?

Leonard Golden, who owns Goldie's Donuts, tells his employees they will get 80% of their salaries upon retirement, and they are happy. But, the rub is that Leonard never puts any money in the bank (It's called an unfunded plan). Leonard has liabilities of $25 million and he has $1 million in the account.

Goldie's Donuts Goes Bankrupt

For years Lenord's employees took low wages because they had the dream retirement plan, but now they have nothing.

Now The Government Insurer Is Broke

Just today it has $75 billion in liabilities. One small 10,000 layoff of GM workers doubles their annual deficit of a $11 billion.  The PBGC quietly operates in a brick office building a few blocks from the White House. Its fate is important to the workers covered by the more than 29,000 employer-sponsored benefit pension plans it insures, and to all taxpayers who could be asked to foot the bill if its financial picture worsens down the road. 8