The federal agency that insures private pension plans for millions of American workers can no longer get first claim on the assets of a bankrupt company to help pay retirement benefits, a federal bankruptcy court has ruled.

The ruling by U.S. Bankruptcy Judge Burton R. Lifland in New York, in a case involving LTV Corp., is a major blow to the Pension Benefit Guaranty Corp. (PBGC), which could be forced to turn to taxpayers to underwrite the cost of insuring pension plans.

The federal pension agency steps in to pay individual pensions when a company finds itself unable to meet pension promises it has made to its employees.

Companies pay premiums to the insurance fund in much the same way that an individual pays insurance premiums, but questions have been raised recently about the financial soundness of the federal program.

PBGC Executive Director James B. Lockhart said yesterday that the ruling could add $1 billion in losses to the PBGC insurance fund. The fund currently has $3.2 billion in assets and $4.2 billion in liabilities.

Lockhart said the ruling, if allowed to stand, "will severely undercut our ability to reduce and prevent losses to the pension insurance program." Lockhart called Lifland's ruling "ill-founded," and the PBGC said it would appeal the decision.

"If that ruling holds, we're in big trouble," a PBGC source said. "Our recoveries in bankruptcies will be drastically reduced and our ability to negotiate good settlements as well."

Lifland's ruling was a recommendation to the U.S. District Court. The PBGC appeal will be to the district court.

Before drawing on the resources of the federal insurance fund, the PBGC has traditionally sought to use any resources of a bankrupt company it could to meet the pension promises to the company's employees.

Prior to Lifland's ruling, the federal agency claimed that it, along with the Internal Revenue Service, had first claim on the assets of a bankrupt company.

If Lifland's ruling is upheld, it will mean that the pension insurance agency will have to get in line with all the other unsecured creditors making a claim to the assets of a bankrupt firm.

In addition to striking down any priority the PBGC thought it might have had, Lifland said the bankruptcy court and the pension agency determine just how much is owed the insurance agency.

Bankruptcy court officials yesterday predicted Lifland's ruling also would weaken the PBGC's position in negotiations to recover pension assets from Eastern Air Lines. PBGC is currently negotiating with Eastern's parent, Texas Air Corp., over nearly $1 billion in pension liabilities.

LTV's bankruptcy in 1986 left the PBGC with pension liabilities that exceeded the assets of the federal insurance fund by $2.3 billion and has spawned extensive litigation.

PBGC originally terminated the giant steel and defense conglomerate's pension plans after the company was unable to make required payments.

Subsequently, LTV's fortunes improved, and the agency attempted to restore the plans -- and their liabilities -- to the company. The company resisted and prevailed on the issue in the lower courts. That case is now pending before the Supreme Court.

Meanwhile, LTV and its creditors have continued to attempt to work out a settlement of the company's other debts in bankruptcy.

An LTV spokesman said, "We think the judge's decision {on the pension claims} will mean a fairer deal for the {other} creditors."

Lifland, in his ruling late Thursday, said, "The PBGC has no legal basis for arguing that its claims should have a priority status."

He said the agency was unable to show where either the existing pension law or the intent of Congress gives any special status to its claims.

"PBGC is basically advocating that it is entitled to promulgate and enforce, even in a bankruptcy case, regulations which violate fundamental bankruptcy provisions and principles," Lifland said.

A bankruptcy lawyer familiar with both the LTV case and Lifland said he was not surprised by the ruling. "A lot of {the PBGC's} theories have been questioned" by bankruptcy lawyers, he said.