The Pension Benefit Guaranty Corp. is buckling under a load of steel company and airline pension plans that were dropped on it in recent years. Those plans account for more than 70 percent of benefits the pension insurance agency now pays. And it estimates that teetering airline pension plans, such as those at bankrupt US Airways and United Airlines, are under-funded by $18 billion.

What's more, benefits paid to retirees from terminated plans often fall well short of those promised when the companies established the pensions.

Promised to folks like veteran US Airways pilot Harry Krenitsky, 57, of Youngstown, Ohio. In order to supplement his truncated pension, he is fixing up an apartment complex to rent out near his home.

The airline terminated the defined-benefit plan for its pilots in March 2003 and dumped it on the pension agency. The action saved US Airways $600 million over seven years -- and capped pilots annual benefits at $44,386 a year.

"I would have gotten an annuity of about $100,000 a year," said Krenitsky, who earns more than $170,000 a year flying jumbo jets across the Atlantic Ocean.

"What I'm going to get is somewhere around $35,000 to $40,000," said the 28-year pilot, who is due to retire within three years. "That's a helluva cut."

The local responsibility

Nearly 40,000 people in the Pittsburgh region receive or will receive pension payments from plans turned over to the Pension Benefit Guaranty Corp., according to data it provided to this newspaper. That is, the insurer supports 22,851 current retirees and 16,690 workers in the six-county area.

"If something were to happen to the PBGC, it would be devastating to Western Pennsylvania," said Jim Centner, director of the Steelworkers Organization of Active Retirees, an offshoot of the United Steelworkers of America, Downtown.

The pension insurer began the year with a deficit of $11.2 billion. Put simply, that's the difference between benefits owed (liabilities) and cash (assets) the agency holds to pay them. That's a wild swing from just three years ago, when the pension organization recorded a $7 billion-plus surplus.

In the interim, a wave of bankruptcies ranging from Enron to US Airways first filing piled an unprecedented number of underfunded plans on the agency.

Currently, "There's no threat of not being able to handle (PBGC's) near-term obligations," U.S. Commerce Secretary and pension agency board member Donald Evans told the Pittsburgh Tribune-Review recently. "It doesn't mean lower benefits."

The longer term is less clear. Evans wants the companies that sponsor pension plans to do more to shore up the pension system, but won't back a federal bailout of the agency.

"One thing we can't do is shift the burden from company shareholders to taxpayers," Evans said.

How the funding works

As devised by Congress, the Pension Benefit Guaranty Corp. is not funded by tax receipts but by premiums paid by company pension plans. Each plan covered by the insurer annually pays $19 per worker. The insurer also earns money from investing the funds from plans it inherits.

People retiring at age 65 whose pensions were terminated this year receive up to $3,699 a month, or $44,386 a year. The amount, adjusted annually, is lower for those retiring before 65, such as pilots who must retire at 60.

Retirees who receive -- or workers due to receive -- more than $44,386, or $3,699 a month, get no more than that when a company dumps a plan on the pension insurer.

Sam Sherlock, 63, of Munhall, worked for the LTV Corp.'s coke plant in Hazelwood for 35 years. He then transferred to LTV's tin plant in Aliquippa for three more years before retiring in 2001. LTV went bankrupt and liquidated soon afterward.

"I started getting a pension check from the PBGC, otherwise we'd be talking about no pension at all," said Sherlock, of the plan LTV had terminated.

"If LTV had stayed healthy, I would have wound up with about $2,500 a month," he said. "But the cut I took from the PBGC was $1,313 of that."

Busted benefactor

If the pension insurer were held to strict accounting principles, it would be deemed insolvent "and would be shut down if it were a private insurer," said the Center for Federal Financial Institutions, a think-tank in Washington, D.C.

The center warned in mid-September that the Pension Benefit Guaranty Corp. could run out of money by 2020. It also said that depending on a host of variables, including a rise in terminated plans, the pension insurer might need an infusion of between $14 billion and $67 billion.

"The truth of it is nobody knows for sure," said Gail Webb, manager of the Ohio Pension Rights Project, Cincinnati, which helps pensioners collect their benefits.

"But if we have more big companies go bankrupt, is Congress going to work on a bailout or put more money in the pot?" Webb asked.

Created in 1974, the Pension Benefit Guaranty Corp. pays the benefits of some 44 million Americans. These retirees participate in more than 31,000 defined-benefit pension plans, which companies turned over to the pension insurer.

Centner recalls a host of area companies that have terminated their pension plans since the mid-1980s and turned them over to the pension insurer.

Wheeling-Pittsburgh Steel, for instance, terminated pensions covering more than 22,000 people in 1985, Centner said.

Other area plans terminated in the metals industry now footed by the pension organization include such companies as Edgewater Steel, Oakmont; Copperweld Corp., Pittsburgh; and Heppenstall Co., Lawrenceville.

Pat Carnevale, 67, of Brentwood, spent 40 years at LTV Corp.'s Hazelwood coke plant before retiring in 2000, after the plant closed. He started retirement with a full pension, until it was terminated in April 2000.

"I lost about $700 a month, going from about $2,400 to $1,700," said Carnevale, of his benefits.

"Now if I drop dead tomorrow, my wife would get about $200. Whereas, she would have gotten $800, if the PBGC hadn't taken over the plan" after LTV terminated it, Carnevale said.

Terminated plans in this region are hardly confined to steelmakers, records show. The pension corporation also administers defined-benefit plans of such diverse companies as Menzie Dairy, McKeesport; Sterling Packaging Corp., Jeannette; and Jones Brewing Co., Smithton.

Defined-benefit plans oblige companies to fund however much is necessary to bring pension fund balances and benefit payments to a specified level. When investment returns on those funds do poorly, companies must shore up the pension plans with more money.

Many companies -- including US Airways -- have terminated those plans and substituted profit-sharing plans or defined-contribution (401(k)) pension plans. They set company contributions to the pension plan at a fixed amount, despite swings on fund returns. And they don't guarantee a floor on the benefits paid.

The Pension Benefit Guaranty Corp.'s deficit could widen even further in the coming months. Cash-strapped US Airways could yet terminate the defined benefit plans for nearly 25,000 aircraft mechanics and flight attendants, which are running a $2.3 billion deficit, the pension insurer estimates.

And United Airlines, also in bankruptcy, could turn over pensions running a $6.4 billion deficit.

US Airways skipped a $110.5 million contribution to employee pension plans that was due Sept. 15. Bankruptcy law allows the airline to skip the pension contribution because it was part of US Airways' debt incurred prior to bankruptcy. The carrier also will skip $14.5 million contributions due Oct. 15 and Jan. 15, say court documents.

"We need to make clear that pension contributions are required, whether a company is in bankruptcy or not," said Pension Benefit Guaranty Corp. Executive Director Bradley Belt in a recent statement.

Leaving Las Vegas

Pilot Krenitsky even lives next door to a fellow bankrupt-company pensioner.

"He's a retiree of J&L Steel whose pension was dumped on the PBGC. So, they're paying his pension too," said the pilot.

"It used to be I could go to Vegas on vacation, and if I lose a bunch of money, I could make it up," said LTV coke-plant pensioner Carnevale. "I haven't been to Vegas in three years."

Pension terminators

Companies based or with a strong presence in Western Pennsylvania whose pension plans were taken over by the Pension Benefit Guaranty Corp.: