Pension Funding: A False Sense Of Crisis?

Your article "Pension funding under the gun" (In Business This Week, Jan. 17) rightly points out that the 39% increase in underfunding of company pension plans, to $53 billion, was caused mostly by falling interest rates. A 1% increase in interest rates would eliminate 30% to 50% of it.

The Pension Benefit Guaranty Corp. publicizes the underfunding as a portent of long-term problems for itself

in guaranteeing benefits, which it

is not.

The PBGC's net cash flow in the period 1985-92 jumped nearly 500%, to more than $600 million per year. Also, the ratio of assets to the sum of benefits and expenses rose from $5.69 per $1 of payout in 1985 to $8.59 in 1992. Administration proposals for tougher pension rules include a ratio of $3 of assets to $1 of payout; thus, the PBGC ratio is nearly triple that amount.

There is merit in proposals aimed at minimizing additional large claims, which should be carefully formulated.

David Langer, Chairman

Employee Benefits Committee

Actuarial Society of

Greater New York

New York

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