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Pension Plans and Your Retirement

Colleen Mulder-Seward, MBA
Retirement Calculator, Inc.
Pension Plans and Your Retirement
The sad fact is that no pension plan is completely secure.  United Airlines just joined US Airways, in that it has stopped funding its pensions and deferred it to the Pension Benefit Guaranty Corporation (PBGC).  The PBGC is a federal corporation created under the Employee Retirement Income Security Act.  Basic pension benefits earned by 44 million American workers and retirees participating in over 31,000 private-sector defined benefit pension plans are guaranteed by the PBGC.  The PBGC web site is

The Executive Director of the PBGC, Bradley D. Belt, testified on June 7, 2005, before the Committee on Finance of the United States Senate, regarding the urgent need for comprehensive pension reform.  Mr. Belt testified "...the amount of underfunding reported by the 4010 filers grew by 27 percent as compared to a year ago ...for an average funded ratio of 69 percent."  4010 filers represent only a portion of the pension plans covered by the PBGC.  Only companies with pension plans underfunded by more than $50 million are required to file 4010 reports.  The table below shows a summary of these pension underfunding filings.

Summary of Pension Underfunding Filings







Number of Plans






Underfunding (Dollars in billions)






Funded Ratio






Underfunding of pension plans is not confined to the airlines industry. The steel industry has taken its turn and the automotive sector has the potential to strain the pension insurance program to the breaking point.  In continued testimony, Mr. Belt stated "Credit rating agencies in May downgraded the debt of General Motors and Ford to below investment-grade status. While the manufacturers have substantial liquidity, their financial problems may cascade down to other companies in the automotive industry. For example, some auto supply firms have had their credit lines restricted because of the downgrades in the debt ratings of General Motors and Ford. At least a dozen auto suppliers' credit ratings have been downgraded to below investment-grade status. More significantly, half a dozen automotive parts suppliers have filed for bankruptcy in recent months - three of them since the last Committee hearing. These bankrupt companies sponsor defined benefit plans with more than $800 million in unfunded pension obligations..."

To see if your company's pension plan is, or has the potential to be underfunded takes some digging.  Some warning signs are, the company:

  1. has filed a 4010 report recently.
  2. puts little, if any, CASH into its plan (instead it relies on company stock appreciation or prior year credit balances to offset any shortfall).
  3. is not required to make deficit reduction contributions.
  4. is not obligated to send underfunding notices to its participants.

You can obtain this information through your plans administrator.  If you do not receive the information you need, contact the Employee Benefits Security Administration (EBSA). The EBSA provides direct assistance to plan participants and beneficiaries to ensure that they have access to available plan documents filed with the Department of Labor.   The EBSA can help you to understand and exercise your rights under the law and, when possible, to recover any benefits to which you are entitled.  The EBSA's web site is

The bottom line - do not rely on a company to provide for your retirement - you must take an active role in securing your own retirement.

How do I keep up-to-date on the latest news impacting my retirement?

To keep informed about retirement topics, try a FREE membership to Retirement Intelligence Information Services. At no cost to join, you will receive a bi-monthly newsletter full of financial information to inform and empower you to have a successful retirement. As an added bonus, will include the Retirement Calculator Software Version 2.0 (a $24.95 value seen live on CBS TV) for FREE. 

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