The PBGC: A Broke Insurance Company Sponsored by Your Government

Real Clear Markets reports:

Imagine an insurance company with assets of $88 billion, but liabilities of $164 billion. It has a huge deficit: a net worth of a negative $76 billion, and a capital-to-obligations ratio of minus 46%.

Would any insurance commissioner allow it to remain open and to keep taking premiums from the public to "insure" losses it manifestly cannot pay? Of course not. Would any rational customer buy an insurance policy from it, when the company cannot hope to honor its commitments? Nope.

But! There is such an insurance company, open and in business, and taking in new premiums for obligations it will not be able to pay. Needless to say, it is a government insurance company, since no private entity could continue in business in such pathetic financial shape. It is the Pension Benefit Guaranty Corporation (PBGC), a corporation wholly owned by the U.S. government, operating on an obviously failed model. Its board of directors comprises the Secretary of Labor, the Secretary of the Treasury, and the Secretary of Commerce: quite a distinguished board for such egregious results.

There are two financially separate parts of the PBGC: the "Single-Employer Program," which insures the defined benefit pension plans of individual companies; and the "Multiemployer Program" which insures union-sponsored plans with multiple companies making pension contributions. The Single-Employer program has a large deficit, with assets of $86 billion, liabilities of $110 billion, and a net worth of negative $24 billion. That is bad enough.

What better proof than this that pensions can never be "guaranteed"?