Created in 1974 by Congress, the Pension Benefit Guaranty Corportion (PBGC) is a government agency that protects private sector pensions for workers in financially failing companies. According to The Center for Public Integrity,the PBGC is itself in need of rescue. In addition to having insufficient money to bail out private pensions, the Office of Inspector General gives the PBGC an “F” in an audit of its internal financial controls.
The agency cannot confirm investment revenue figures reported by the independent contractors hired to lend securities on its behalf. The result is the PBGC often gives erroneous information to Congress. Though the agency is self-financing through insurance premiums paid by the companies that operate defined benefit plans, the PBGC is in deficit for $21.9 billion. At the same time the PBGC’s potential obligations to cover pensions in faltering companies tripled last year to $168 billion. It’s an ongoing problem. In 2006 the agency had a deficit of $23 billion. As GMU finance professor Anthony Sanders notes, the PBGC is a model that cannot be sustained. Another reminder that the ultimate guarantor of government guarantees is the taxpayer.