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How PBGC is changing the narrative on Retirement Security

From J. Jioni Palmer, Director, Communications and Public Affairs:

Photo of J. Jioni Palmer, Director of Communications & Public Affairs, CPAD

J. Jioni Palmer
Director of Communications & Public Affairs

I've always been fascinated by storytelling: The Harry Potter series, This American Life, Grimm, The Twilight Zone, The New Yorker and just about anything by Walter Mosely. Books, movies, radio, print or online periodicals, fact or fiction, it doesn't matter. Interesting characters and a compelling narrative rivet me.

I also particularly like watching commercials and I'm constantly amazed by the brilliance of ad writers who can develop the scene, introduce relatable characters and tell a complete story in 30 or 60 seconds. Beyond hawking products or pushing ideas, I find commercials offer interesting insights on the zeitgeist of a particular demographic, culture or society.

Today, in almost any hour of evening television, sandwiched between myriad commercials for insurance companies and the latest solution to make housecleaning a breeze, you'll see spots about encouraging the viewer to plan for retirement.

One really resonates with me because it echoes a true story we at the Pension Benefit Guaranty Corporation tell a lot lately: people are living longer but retirement security isn't keeping pace. In the commercial, the narrator asks people to place a blue sticker along a timeline next to the age of the oldest person they've ever known. Not surprisingly, there are many dots ranging between 80 and 110. The spot closes with, "How do you make sure you have enough money to enjoy all of these years?"

Disclaimer: Neither the author nor PBGC endorses the products or services of the sponsor.

Since its inception in 1974, PBGC has been at the forefront of protecting the retirement security of the American people in defined-benefit pension plans offered by private companies. Now, most people probably don't know the agency exists, let alone think about us until the business they work for goes belly-up and they hear talk that the pension they've been looking forward to is about to evaporate.

Fortunately, PBGC does exist, and the safety net it provides allows most workers and retirees to keep the full promised benefit they've earned over many years.

However, it's even better if companies keep their own pension promises rather than turning them over to the PBGC. The maximum amount Congress lets us pay, $57,500 a year, fully covers at least 85 percent of retirees who come into our care, but does not cover the total number of retirees. We also don't provide health and other benefits that employers may offer.

Providing security in uncertain times is an important and fundamental part of our mission. It gives solace to the 44 million Americans in the more than 23,000 pension plans we insure. However, it is only part of what we do to make sure people keep what they earn.

By changing the way we think about our mission and do our jobs, we are able to produce different outcomes that actually enhance retirement security. In the cases of American Airlines and Hawker Beechcraft, PBGC turned conventional wisdom upside-down by beginning with the end of the story in mind, doing what many thought impossible or at the least very unlikely.

When American Airlines filed for bankruptcy in November 2011, the company signaled it intended to terminate the pension plans of its 130,000 workers and retirees. This would have been the largest default in U.S. history increasing the agency's deficit by nearly one-third — roughly $12.5 billion. PBGC responded by sharpening its pencils, and deploying a public affairs and legal strategy to explain how the airline could reorganize without terminating the plans. The airline was asked to examine what effect the terminations would have on participants and beneficiaries as well as PBGC's finances. The result: American Airlines decided that it could afford its pensions, preventing 130,000 workers and retirees from losing their pensions.

A year ago, when aerospace manufacturer Hawker Beechcraft entered bankruptcy, it intended to terminate all three of its pension plans covering the company's nearly 18,000 workers and retirees. Again, PBGC was unwilling to just accept that was the only alternative. As a result, the company agreed that it could actually afford to sustain one of the plans and chip in an additional $2.5 million to cover benefits for those retirees whose benefits exceeded what Congress allows us to pay. This is what happens when people work together.

Under the agency's current leadership, we are also reforming our regulations to make it easier for employers to offer pension plans. New proposals would exempt 90 percent of company sponsors from some reporting requirements, where extra red tape does not result in better protection for pensions.

None of these successes would have been possible if we narrowly viewed our mission as being the place where pension plans come to die when businesses go bust. Sure, that would provide a slightly comforting footnote to a story's otherwise unhappy ending. However, I'm convinced that we could all tell entirely different stories if, through our thoughts and actions, we rewrote the narrative every day with a happy ending in mind — a secure and dignified retirement for all Americans.

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