* US PBGC risk of future losses more than triples
* PBGC deficit doubles to $22 bln, from $11.2 bln
* Auto, airlines, retail, service sector weakness cited
* PBGC rebalancing investment portfolio
WASHINGTON, Nov 13 (Reuters) - Weakness in the auto and
airline industries, as well as retail and service sectors, has
more than tripled the potential risk to the U.S. pension
insurance system.
The Pension Benefit Guaranty Corporation (PBGC) on Friday
said its potential exposure to future pension losses from
financially weak companies had increased to about $168 billion
in fiscal 2009 from $47 billion a year earlier.
It also reported a doubling of its deficit in the year that
ended Sept. 30, and said future shortfalls from retirement
account defaults could be worse than forecast.
"Exposure to possible future terminations means that we
could face much higher deficits in the future," Vincent
Snowbarger, the agency's acting director, said in a statement.
The agency, which insures pensions covering 44 million
workers and retirees, said its annual deficit grew from $11.2
billion in fiscal 2008 to $22 billion in fiscal 2009.
The deficit figure was an improvement over mid-year
projections as the agency's balance sheet benefited from an
improved economy and rebounding investments.
In addition, the government arranged for General Motors and
Chrysler to maintain their major pension plans in bankruptcy.
The agency's deficit is the difference between assets under
its control and payout obligations. PBGC assets reflect the
value of terminated plans.
"We won't fail to meet our obligations to retirees, but
ultimately we will need a long-term solution to stabilize the
pension insurance program," Snowbarger said.
Companies with junk credit ratings are put on watch for
pension plan troubles.
Automakers and their parts suppliers as well as airlines
account for most of the risk. Service sector and retail
companies are also a concern.
The PBGC this year has assumed responsibility for pension
plans at auto parts supplier Delphi Corp, retailer Circuit City
Stores (CCTYQ.PK), IndyMac Bank, Lehman Brothers Holdings Inc
(LEHMQ.PK) and textile maker Dan River Inc, among others.
The financial health of the company-funded agency has been
a hot button topic in recent years as faltering companies,
particularly airlines, shed pension obligations in bankruptcy.
The PBGC and pension experts say the agency has plenty of
cash to make payments for the next decade or more. Assumption
of fully funded plans will not increase the PBGC deficit. But
the recent trend has been for bankrupt companies to turn over
underfunded accounts.
"These are all companies who do represent some serious
risk, and historically those who do go under get significantly
worse deficits before they actually go," said Douglas Elliott,
a former investment banker and an expert on financial
institutions and the economy at the Brookings Institution.
The PBGC is reviewing the investment strategy for its
assets, having put aside a proposal to become more heavily
exposed to equities. The agency has been directed by the Obama
administration to "prudently rebalance" its portfolio.
"We will announce any new investment policy when it is
adopted by the board," PBGC spokesman Jeffrey Speicher said.
(Reporting by Kim Dixon and John Crawley; Editing by Tim
Dobbyn)
