Contrary to assertions by several business and employer benefit groups, we don't think the Pension Benefit Guaranty Corp.'s report that its 2011 deficit hit a record $26.1 billion is a “nonevent.”

The PBGC's announcement last week, according to a document signed by the American Benefits Council, the Business Roundtable, the ERISA Industry Committee and the U.S. Chamber of Commerce, is a “nonevent” because much of the deficit is “directly attributable to the decline in interest rates.”

The growth in the agency's deficit, which climbed from $23 billion in 2010, “will simply be the product of government-created artificially low interest rates,” the groups said in the document.

No one would disagree that interest rate assumptions are critical in valuing pension plan liabilities.

If one assumes that invested assets will generate a 10% return, it obviously will require a much smaller amount of money to pay off a liability—in this case the benefit obligations of participants in failed pension plans taken over by the PBGC—than, say, a 1% rate of return.

Whether the interest rate assumptions used by the PBGC are reasonable is beyond our scope of expertise. But in an economic climate where interest rates on fixed investments are low, it would be imprudent to assume high rates of return.

To us, the issue isn't the size of the PBGC's deficit. The real issue is the long-term future of an agency supported in part by premiums paid by employers with defined benefit plans, which help fund an insurance program that currently pays more than $5.5 billion a year.

Given current trends, the long-term future of the agency isn't promising. As more employers freeze their pension plans, the income the PBGC receives will dwindle, raising the question of whether the agency will have sufficient income to honor its guarantees to participants in failed plans.

Rather than being a nonevent, we think the agency's deficit should be a signal for lawmakers to examine what changes in law may be necessary to encourage employers to continue their defined benefit plans.

The deficit report also should encourage policymakers to closely examine whether the PBGC's suggested changes in its premium structure, which would take into account the financial strength of plan sponsors, make sense.