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WASHINGTON-Employers with defined benefit pension plans can look forward to stable federal termination insurance premiums, says the head of the Pension Benefit Guaranty Corp.

Tougher pension funding requirements, better enforcement tools and an aggressive early warning program are part of a strong foundation to keep the PBGC solvent, said Executive Director David Strauss.

"Our situation has dramatically improved. I'm bullish. All the trend lines are positive," he said.

The assessment of Mr. Strauss, who joined the PBGC in the summer after nearly four years as deputy chief of staff to Vice President Al Gore, comes at a time when the agency's financial position has turned around.

Four years ago, the PBGC amassed a nearly $3 billion deficit in its single-employer insurance program as it incurred huge losses from the takeover of massively underfunded pension plans from failed companies such as Pan American World Airways and Eastern Airlines Inc.

The agency's financial woes prompted open speculation that only a taxpayer-funded bailout and a new round of premium increases could save it from collapse.

Those predictions now are a distant memory. In its last fiscal year, the PBGC, aided by strong investment returns and small losses from plan terminations, posted an $869 million surplus.

This turnaround is no fluke, Mr. Strauss said. It results from several factors, especially a 1994 law that requires employers to accelerate contributions to underfunded plans and that phased out a cap on PBGC premiums paid by employers with underfunded plans. Under the old cap, employers with underfunded plans could be charged a maximum of $53 per participant in addition to the basic $19 per participant premium. Removal of the cap has generated more revenue for the agency and has encouraged employers to better fund their plans.

Indeed, the PBGC's financial position has so improved that speculation about whether it could survive without a major infusion of government or employer money has been replaced by suggestions from some business groups that it might be time to consider lowering premiums.

Employers with fully funded pension plans pay the PBGC an annual premium of $19 per plan participant, while the rate for employers with underfunded plans is $9 per plan participant per $1,000 of plan underfunding.

Mr. Strauss, though, says it is too soon to consider a premium rollback.

"I would be very reluctant to make any recommendations based on a couple of years' snapshot," he said. "We have good tools, but we need more time for them to work before we make any judgments about (changing) the premium," Mr. Strauss said. In fact, the PBGC announced last month that it is taking over a pension plan sponsored by Allis-Chalmers Corp. That plan is underfunded by $63 million.

The reforms in the 1994 law and other factors did lead Mr. Strauss to make his first major decision-one widely applauded in the business community-since joining the PBGC this summer: elimination of the agency's list of the 50 worst-funded pension plans.

The so-called Top 50 list has been published annually since 1990. Publication of such a list, former PBGC officials said, would encourage employers-fearful of the negative reaction from employees and the public-to plow more money into their plans to get off the list.

But Mr. Strauss said the 1994 law made the list obsolete. That law, for example, requires employers with underfunded plans-plans less than 90% funded-to advise participants of funding shortfalls and the limits of what they would get if their employers failed and the PBGC had to take over those plans.

In addition, the list itself was unfair, Mr. Strauss said. "We were singling out companies that were meeting or exceeding legal requirements" to fund their pension plans, he said.

At the same time, few plans on the Top 50 list posed a significant risk to the PBGC or participants, because most were relatively well-funded.

"We have better tools, including improved funding requirements and participation notification requirements. These new tools made the list obsolete," Mr. Strauss said.

Reaction to the elimination of the list has been very positive from employer and union groups. Mr. Strauss said he wants to get more feedback and suggestions from the pension community.

"Customer service is not just for retirees and workers. It also is for premium payers. I see an important part of my role here as facilitating two-way communications with our customers to find out the sorts of things they are concerned about," he said.

In fact, Mr. Strauss encourages employers to use the Internet to send him e-mail about any problems, thoughts or comments they have. His e-mail address is

But Mr. Strauss rejects as impractical one suggestion-made by James Lockhart, the PBGC executive director during the Bush administration-that the agency's functions be privatized and that employers purchase pension termination insurance premiums from private insurers.

"We need a PBGC because there is a significant number of plans out there for whom it would be very difficult and expensive to buy insurance. This is an important insurance program that is rightfully run by the government. When you go back to (when ERISA was being drafted), it was pretty clear that these kinds of needs were not being met in the private sector and that is why we needed a government program," Mr. Strauss said.

He also rejects the possibility that the PBGC itself might become obsolete as more employers terminate defined benefit plans and establish defined contribution plans, which the agency doesn't insure. Since 1980, the number of single-employer plans insured by the PBGC has fallen to about 48,000 from about 95,000.

While the number of plans covered by the agency has declined, the numbers of single-employer and multiemployer plan participants have held steady since 1980 at about 33 million and 8 million, which reflects that most terminations have been by very small employers while large employers have maintained their defined benefit programs.

"About one in three workers is covered by a pension plan insured by the PBGC. Those are pretty significant numbers," he says.

Mr. Strauss says he intends to use his position as PBGC executive director to encourage defined benefit plans. Such plans, aside from the security they offer participants, can be less costly administratively when a pension plan reaches a certain size, he said.

"We think we have a very good story to tell about defined benefit plans," he said.

Unlike most of his predecessors, Mr. Strauss lacks an extensive pension background. Aside from his tenure with Vice President Gore, he worked for 13 years in senior management positions in the U.S. Senate, including serving as chief of staff to Sens. John Breaux, D-La., and the late Quentin Burdick. Previously, Mr. Strauss administered federal farm programs for four years in North Dakota.

Mr. Strauss says his professional background is an advantage as PBGC executive director. Through 21 years of federal management experience, he has developed good relationships with many senators and representatives as well as the White House.

After nearly four years in the White House, Mr. Strauss says he was looking for a new management challenge, and he thought the PBGC "was the perfect place to come to.'