WASHINGTON – The federal agency that insures company pensions for more than 40 million Americans says its top official is resigning.
Joshua Gotbaum, a former investment banker, was appointed by President Barack Obama as director of the Pension Benefit Guaranty Corp. in July 2010. That makes him the longest-serving head of the agency in its history, the PBGC said in a news release Friday. During his tenure the agency’s deficit — the gap between pension obligations and assets available to cover them — widened to about $34 billion as the weak economy triggered more corporate bankruptcies and failed pension plans.
Gotbaum will step down in August, the agency said. No further information was given, and agency spokesmen didn’t immediately return a message requesting it.
Gotbaum said in a letter to the PBGC staff that with three children in college, he had promised his wife he would return to the private sector, according to reports Friday in The Wall Street Journal and other publications.
The PBGC has complained for years that operating in the red threatens the agency’s ability to act as a safety net in the future, as more employers default on their pension plans.
The agency doesn’t expect to run out of money in the near future for the majority of pension plans it has taken over. But its funding for multi-employer pension plans has a small chance of running out by 2020, according to the agency’s projections. Multi-employer plans are pension agreements between labour unions and a group of companies, usually in the same industry.
The PBGC was created in 1974 as a government insurance program for traditional employer-paid pension plans. If an employer can no longer support its pension plan, the agency takes over the assets and liabilities, and pays promised benefits to retirees up to certain limits.
The agency backs defined-benefit plans, which are most prevalent in auto manufacturing, steel, airlines and other industries.
The number of companies offering traditional pension plans has shrunk dramatically in recent decades. U.S. employees increasingly have turned to defined-contribution plans such as 401(k)s to fund their retirement.
The PBGC has been in the red for 32 of its 39 years of operation. It did have surpluses in some years in the late 1990s and early 2000s, when fewer companies failed.