Jim wrote:

The PBGC funds pensions based on premiums paid by companies with
pensions--not taxes. From their website:

"Our financing comes from insurance premiums paid by companies whose
plans we protect, from our investments, and from the assets of pension
plans that we take over, but not from taxes."

The problem is that the PBGC doesn't have enough money to pay for all
the pensions it has to support. Also from their web site:

"As of September 30, 2004, the PBGC’s own balance sheet showed a $23.3
billion deficit, with $39 billion in assets to pay $62.3 billion in
guaranteed pension benefits to more than 1 million workers and retirees.
By law, the PBGC is required to keep premiums as low as possible and has
no call on the U.S. Treasury beyond a $100 million line of credit."

This was before almost $7 billion in additional unfunded obligations was
added by the shift of the United Airlines programs over to the board,
not to mention the possibility of Delta and other airlines also coming
under its umbrella in the future. The board estimates that single
employer plans in the country as a whole are underfunded by about %450
billion. Perhaps %100 billion of that problem could be passed on to the
PBGC in future years.

The reality is that the PBGC will have to significantly increase
premiums paid by other healthy companies to make up the difference.
This leads to a couple of problems: One is that the other companies will
find themselves competing with restructured companies that have reduced
their pension obligations, and in essence passed them, through premiums
paid to the PBGC, to their competitors. How long do you expect Delta or
Northwest to last when they not only have to pay their own premiums, but
those of a restructured UAL and US as well? There was a cascading effect
in the steel industry as each company in turn passed obligations on to
the PBGC, and the airline industry is now doing the same.

The second problem is that there is a point where all the companies
under the plan will balk at significantly increased premiums, and will
appeal to Congress for relief. Consider that many companies in the auto
industry is approaching the same state as the airlines and the steel
companies before them. It's only a matter of time before GM dumps its
plan on the PBGC.

My bet is that Congress will have to take action and inject cash into
the plan to keep it solvent.

Here is some testimony given by the director of the PBGC that goes into
further detail:

http://www.pbgc.gov/news/speeches/testimony_100704.htm
http://www.pbgc.gov/news/speeches/testimony_042605.htm