U.S. pension peril grows with bankruptcies

SAN FRANCISCO (MarketWatch) -- In 2002, a bankrupt Bethlehem Steel stunned 100,000 workers with the news it would no longer back their pensions.

It was the biggest default in a brutal year during which companies dropped responsibility for 157 pension plans onto the Pension Benefit Guaranty Corporation, the little-known federal agency that insures private retirement packages.

The trend has since accelerated. Another 467 companies, including giant employers like United Airlines, have joined those who can't -- or won't -- honor pledges to retirees.

In just four years, the number of monthly checks PBGC sends to retired workers has swelled from 344,770 to 683,000, doubling annual payouts from $1.54 billion to $3.69 billion and turning the PBGC's budget from a tidy $10 billion surplus in 2000 to a $23 billion deficit last year.

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The PBGC, created in 1974 by the Employee Retirement Income Security Act, gets most of its money from premiums paid by companies supporting pension plans. But there are no accounting rules requiring those plans be fully funded. That, combined with falling stocks, low interest rates over the past few years and the growing scope of pension plan defaults, has drained the PBGC.