Pension Law Bars Disclosure to Those Who Need It Most

By Allan Sloan
Tuesday, May 24, 2005

If the company you work for has a pension plan that's underfunded, it's important for you to know how deep the hole will be if the federal government has to terminate the plan and take it over. If you're a shareholder or creditor, you want to know this, too, because it helps determine what (if anything) might be left for you should the company and the pension fund both fail.

The good news is that companies with underfunded plans file this impossible-for-an-outsider-to-calculate information with the Pension Benefit Guaranty Corp., the federal agency that insures pensions. The bad news is that the PBGC isn't allowed to share this information with you.

Why? Because the same 1994 law that requires companies to tell the PBGC what's going on forbids the PBGC from telling anyone else what's going on -- unless there's a court case or a request from Congress.

It seems positively perverse to deny people that information, given that we're supposed to be taking responsibility for our own retirements. But hey, this is Washington. Logic doesn't necessarily apply.

"This information should be publicly available so that stakeholders, investors and regulators can make more informed judgments," said Bradley D. Belt, the pension agency's executive director. "Workers and investors should have the right to learn the true situation of these pension plans." But, he said, his hands are tied.

Why does this particular number matter? Don't companies file terabytes of pension data with the Securities and Exchange Commission and the Labor Department? Yep. But if a company's underfunded pension plans are taken over by the PBGC, the SEC and Labor Department numbers are of little use. Witness our discussion last week about the way that United Airlines (perfectly legally) told the SEC in March that its pension funds were $6 billion underwater, but the PBGC put the number at $9.8 billion when it took over the plans in May.

If the pension agency terminates a company's pension plan and takes over responsibility for making payments, PBGC math, not SEC or Labor math, determines how big a haircut pensioners may have to take. And PBGC math determines how much the pension agency will claim in bankruptcy proceedings.

The workers for whom this matters most are those with pensions above the PBGC maximum, many of whom have taken early retirement and don't realize they're not fully covered. If you retired at 65, the pension agency covers your pension up to $45,614 a year. But if you retired at 50 -- a typical 30-years-and-out age for an industrial worker -- your coverage is only $15,965. If you got enhanced benefits for retiring early, as many steelworkers did, the enhancements vanish if the PBGC takes over your pension plan.

You may not be able to do much even if you get plenty of advance notice of a looming pension disaster. But at least you'll know. And you may be able to act. You certainly can't do anything if you don't know what's coming.

Why would Congress pass a law requiring companies with more than $50 million in pension underfunding to file information with the PBGC, but forbid the PBGC to make it public?

Answer: Companies didn't want that information known. The PBGC numbers are worst-case, often scary. Companies talk about not wanting to get their workers upset over theoretical shortfalls that won't matter if the pension funds never terminate. More to the point, I suspect, companies didn't want to freak out shareholders and creditors by showing how big pension liabilities could be.

Companies filing with the PBGC are required to notify workers, too. However, there are so many loopholes in this requirement that employees can be kept in the dark for years. The PBGC's favorite example is Bethlehem Steel, which didn't send out any worker notifications after 1996 even though it and its plans were in extremis for years. The PBGC terminated Bessie's plans in 2002, with a then-record $4 billion shortfall.

Unlike most things in Washington, the problem of the government knowing but not telling might actually get fixed. "It's outrageous that employees can be kept in the dark about the true financial condition of their company's pension plans," said Charles E. Grassley (R-Iowa), chairman of the Senate Finance Committee, when I asked for comment. He said he would "fight until employees get the information they need and deserve" when Congress deals with pending pension legislation. Good for him.

Pension legislation tends to get messy and complicated -- not unlike pension accounting. But this one issue seems pretty simple. Are you for giving people vital information that the government already has? Or for keeping them in the dark? It doesn't seem like a tough choice to me.

Sloan is Newsweek's Wall Street editor. His e-mail address

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