PBGC Executive Director Bradley D. Belt said in an interview that United is only the latest — and largest — illustration of what ails the federal pension protection system: It allows companies to drastically underfund pensions, and even to disguise the problem. Defaults have so escalated in troubled sectors of the economy, Belt said, that the PBGC now is on the hook for $450 billion in pension obligations, compared with $50 billion only three or four years ago. In three years, it has gone from having a $7 billion surplus to a $23 billion deficit. Without changes to the 30-year-old pension protection system, he said, the PBGC could itself become insolvent.
Many retirees face a double hit because they had also invested heavily in United stock that lost much of its value over the past few years. Although the situation is clearly not the fault of the United employees, there is a lesson here for employees of other companies: diversification. Just as the collapse of Enron exposed the danger of investing 401(k) money too heavily in company stock, the United pension debacle shows that employees should review their entire investment and retirement portfolio as a whole to determine whether their financial security depends on the performance of a single company.
