August 8, 2012

Robert C. Pozen [“The high cost of pension savings,” Washington Forum, Aug. 3] claimed that Congress is “kicking the can down the road” with recent bipartisan legislation allowing companies to use 25-year historic interest rates (rather than only the extremely low interest rates of the past two years) to calculate pension liabilities. The resulting lower immediate contributions to corporate plans, he said, jeopardize the federal Pension Benefit Guaranty Corp. (PBGC), which pays benefits when pensions fail.

These assertions misrepresent the state of private pension funding and the government’s risk.

PBGC is not like the Federal Deposit Insurance Corp., which guarantees bank deposits. When a bank fails, depositors can demand their money immediately. When PBGC takes over a terminated pension, benefits will be paid to current and future retirees for decades across multiple economic cycles. The point-in-time snapshot that Mr. Pozen appeared to favor provides a skewed perspective of a long-term obligation such as a pension. PBGC’s alleged $26 billion deficit (largely the result of historically low interest rates and a soft stock market) is no more accurate than its supposed $11 billion surplus was several years ago, when the stock market was booming and interest rates were high.

James A. Klein, Washington

The writer is president of the American Benefits Council.