The causes of the impending pension shortfall crisis

Blogger Bonddad provides us with some numbers that explain the reasons behind, and severity of, the looming pension shortfall crisis which is being ritualistically ignored by those who shuld be most concerned:

In just the last four years, the number of monthly checks the Pension Benefit Guaranty Corporation (PBGC) sends to retired workers has swelled from 344,770 to 683,000, doubling annual payouts from $1.54 billion to $3.69 billion and turning the PBGC's budget from a tidy $10 billion surplus in 2000 into a $23 billion deficit last year.

Why? In 2005, companies sponsoring underfunded pension plans filing under section 4010 of ERISA, reported a record shortfall of $353.7 billion in their latest filings with the PBGC. This represents a 27% increase over the $279 billion in underfunding reported a year earlier. The PBGC is essentially being asked by industry to cover the gap.

The underfunded plans in question had $786.8 billion in assets to cover more than $1.14 trillion in liabilities, for an average funded ratio of 69%. As of September 30, 2005, the PBGC estimated that the total shortfall in all insured pension plans exceeded $450 billion.

So what does all of this mean for the millions of workers who are retiring from these companies?

Imagine a retiree who is expecting and planned his retirement based on an annual income of $60,000. When the PBGC gets that pension, he immediately takes a pay cut of about $12,500. All this for doing nothing but working for a company for his entire life and expecting the company to make good on its promise to provide for the retiree's retirement.

Pathetically, some companies like Exxon Mobil--which has been raking in billions of dollars in profits--and are still refusing to make good on their promise to provide for their employee's retirements.

As BusinessWeek notes:

Exxon Mobil, has left its employee pension plans with the biggest funding deficit. Its assets are $11.2 billion short of projected obligations, according to company figures as of Dec. 31. Exxon could write a check for its underfunding this afternoon. The oil giant has $27 billion in its coffers. It generated free cash of $9 billion last quarter -- almost enough to cover the pension shortfall. And it carries an AAA credit rating.

[. . .]

The fact is, Exxon could be topping off its tank for employees but isn't. It's declining to put more money away for a rainy day while the sun is shining on the oil industry. And it isn't apologizing, either. "We basically chose not to," says Gardner. "That's not an investment we want to put more into at this point. Our financial strength provides excellent security for any pension.

So according to Exxon Mobil, it was a priority to provide retiring Chairman and CEO Lee Raymond with a $400 million retirement package, yet when it comes to the company's workers, management is perfectly willing to take their chances and let American taxpayers foot the bill for their underfunded pension plans.