Pension Benefit Guaranty Corp. Director Joshua Gotbaum said that while the agency's first priority continues to be preserving traditional defined benefit pension plans, efforts to modify and offer more retirement plan options could serve people better in enhancing their chances for a comfortable retirement.
"We are not going to enhance retirement security by just sticking to the old models," Gotbaum said April 3 at the National Press Club in Washington. "What we need to do is provide options so that, case by case—employer and employee—they have choices. … And I think that, actually, is an important part of the future."
"We think that traditional pension plans serve people better," he added. "But—and this is where I think it is important to recognize the realities—it is also important to offer alternatives so that, as circumstances change, as companies change, as lifestyles change, we still have those kinds of plans."
Gotbaum referenced the American Airlines Inc. Chapter 11 bankruptcy case throughout the 30 minutes he spoke and reiterated the PBGC's position that the airline has the ability to restructure its way out of bankruptcy without sacrificing its pension plans.
"It's now clear that American can do both," Gotbaum said. "It can restructure, it can be competitive, and still keep its pensions and pay a pension in the future." Earlier, American said it will freeze three of its four massively underfunded plans and is working with the PBGC and the pilots' union on an approach that would allow American freeze the pilots' plan.
Gotbaum also called for change in how the PBGC charges premiums for the plans it covers. Gotbaum has asked federal lawmakers to pass legislation to transfer to the PBGC from Congress authority to set premium rates to help erase a funding shortfall. So far, Congress has not yet acted on the proposal.
"Because the way our system works right now is that there's a fundamental unfairness in it," Gotbaum said. "The people who pay our premiums know that their rates are raised because of the actions of other companies, not themselves."