It was the widest deficit in the 40-year history of the Pension Benefit Guaranty Corp., which has now run shortfalls for 12 straight years. The gap grew wider in recent years because the weak economy triggered more corporate bankruptcies and failed pension plans. If the trend continues, the agency could need an infusion of taxpayer funds to pay retirees, who are guaranteed their pensions by law.
The PBGC said Monday that the increased deficit was due to worsening finances of some multi-employer pension plans, which are pension agreements between labour unions and a group of companies, usually in the same industry. The $62 billion deficit reported for the year ended Sept. 30 compared with $36 billion in the previous fiscal year.
Labour Secretary Thomas Perez said fixing the problem is vital to the retirement security of the nation's middle-class. Agency officials called for Congress to enact legislation submitted by President Barack Obama designed to shore up the program's finances.
The PBGC was created in 1974 as a government insurance program for traditional employer-paid pension plans, which have become much less common in recent decades as most employers turn to retirement accounts such as 401(k)s. The traditional plans are most prevalent in industries such as auto manufacturing, steel and airlines.
If an employer can no longer support its pension plan, the PBGC takes over the assets and liabilities, and pays promised benefits to retirees up to certain limits.
The agency didn't name the multi-employer plans that it expects to run out of money or how many are involved. It said they represent a minority of the total 1,400 or so multi-employer pension plans, which cover about 10 million workers.
"Plans covering over 1 million participants are substantially underfunded, and without legislative changes, many of these plans are likely to fail," PBGC Acting Director Alice Maroni said in a statement. The agency said in its annual report that it has "sufficient liquidity to meet its obligations for a number of years."
The agency said the deficit in its multi-employer insurance program jumped to $42.4 billion in the budget year that ended on Sept. 30, from $8.3 billion in 2013. By contrast, the deficit in the single-employer program shrank to $19.3 billion from $27.4 billion as the economy strengthened.
The PBGC reported that its pension obligations grew by $30.9 billion in fiscal 2014, to $151.5 billion. Assets used to cover those obligations increased by only $4.9 billion, to $89.8 billion.
Rep. John Kline, R-Minn., chairman of the House Education and Workforce Committee, called the multi-employer insurance program "a ticking time bomb that will inflict a lot of pain on workers, employers, taxpayers and retirees if Congress fails to act."
He said congressional leaders have been trying to reach consensus on a package for months so far to no avail.
James Klein, president of the employers' group American Benefits Council, said the announcement "should be a wake-up call for lawmakers to take action to shore up the multi-employer system."
The Obama administration has proposed raising the insurance premiums, which are set by Congress, and tailoring them to the size of companies and their level of financial risk.
The PBGC has been in the red for 33 of its 40 years of operation. It did have surpluses in some years in the late 1990s and early 2000s, when fewer companies failed.
Obama hasn't yet named a director of the agency to replace Joshua Gotbaum, who left this summer.
Associated Press writer Tom Raum contributed to this report.Suggest a correction