This month, Terrence M. Deneen will retire as chief insurance program officer of the Pension Benefit Guaranty Corp. Mr. Deneen joined the PBGC in 1978 and quickly became involved in drafting what became the Multiemployer Pension Plan Amendments Act of 1980. In an interview with Business Insurance Editor-at-Large Jerry Geisel, Mr. Deneen discussed a wide range of issues dealing with the nation's pension system.

Q: If you look at the defined benefit pension plan system today, you will see that virtually no new plans are being established, while many employers have frozen or soon will freeze their plans. Doesn't that suggest that the defined benefit plan system one day will be extinct?

The good news is that a pension plan freeze is not irrevocable. Plans can be unfrozen. As time goes on and corporate America emerges from the recession, it will become clearer (to employers) that if they want employees to retire, a defined benefit plan is one of the best ways to help. If you have frozen your defined benefit plans, that means employees will have to take maximum advantage of their defined contribution plans. If employees want to retire, they are going to have to save the maximum and invest assets with a lot more ingenuity and flair that the typical American is used to. That won't happen. So, if you want to encourage relatively highly compensated, older employees to step aside, you may have to rejuvenate and turn back to defined benefit plans.

Q: So, you are an optimist?

A limited optimist. As long as frozen plans still are in existence, there still is hope they will be revived again. In addition, the administration is looking long and hard at a variety of ways to encourage the formation of defined benefit plans. For example, the administration is looking at how defined contribution plans can be morphed into defined benefit plans. Say there is an employer with a frozen defined benefit plan. People are looking at how the law could be changed so participants could take a defined contribution plan balance and roll it over to a defined benefit plan for an enhanced benefit, a creative mix and match. It is an idea that is being pursued.

Q: Recently, a federal deficit commission recommended that the PBGC board be given authority to raise premiums for the agency's insurance programs. What do you think of that idea?

Under law, the PBGC board has authority to propose premium increases to Congress. Historically, that has not been the vehicle to raise the premium. When the deficit (currently $23 billion) has gotten big enough, Congress has decided to take action itself and set premiums on the basis it thought best. It is very difficult to know if Congress would be willing to cede that authority to a PBGC board.

Q: Given the size of its deficit, one has to ask if there will be a PBGC 20 years from now.

There will be a PBGC or a successor, if reconfigured, in the benefits payment business for generations to come. This is a long-term proposition. I'm confident that Congress is not going to allow the pension benefit backup to go insolvent. I can see changes in the future that may refashion the guarantee and there is precedent for that.

Q: What have been the most interesting issues you have worked on?

I was part of the team that drafted the Multiemployer (Pension Plan) Amendments Act. It was a tremendously demanding task, but a tremendously rewarding one, because the system we built in that law really did work for a full generation.