Letter to the Editor ¦ May 9, 1994
Careful review of PBGC reform plans sought

By David Langer

To the editor: In his April 11 letter, Martin Slate, executive director of the Pension Benefit Guaranty Corp., says surprisingly little about the detailed financial analysis of the agency's financial condition that I presented in an earlier letter (BI, Jan. 17).

I asserted that the size and the trend of the PBGC's deficit do not support Labor Secretary Robert Reich's comments that the deficit poses a threat to the PBGC.

I noted, too, the declared $ 45 billion of underfunding in ongoing plans is not a shadowy menace and that the PBGC does not have the ability to project deficits meaningfully. Given Mr. Slate's access to a panel of experts whose "unanimous opinion" he says I differ with, it should be a simple matter to have them point out where our differences lie.

With regard to the validity of the PBGC's practice of adding "probable net claims" to its deficit, I could not find in the General Accounting Office's report of its audit of the PBGC any confirmation of this practice that Mr. Slate claims.

I understand the addition of such claims is not the practice of life/health insurers and is questionable in the property/casualty field, particularly where there is substantial investment income derived from assets, as is the case with the PBGC.

Mr. Slate agrees there is no need for haste in reforming the PBGC, so valuable opportunity exists to screen proposals thoroughly to ensure that those adopted will -- in accordance with the PBGC's mandate -- encourage the adoption of new pension plans, not discourage employers from continuing or improving their existing plans, while keeping PBGC premiums at the lowest feasible level.

- David Langer, a consulting actuary and president of David Langer Co., Inc.
New York