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KAI RYSSDAL: Even before the economy went down the tubes, public and corporate pension programs in this country were in deep and serious trouble. Airlines, automakers and a whole slew of smaller companies had either given up on their pension plans or handed them over the government agency that tries to make retirees whole.
Since the market crash last fall though, it's only gotten worse. By some estimates, pension plans have lost about $2 trillion over the past year or so. And the businesses and local governments that run the plans are having to come up with billions of dollars in new or unanticipated contributions at the worst possible time. Marketplace's Steve Henn reports.
Steve Henn: Debbie Elmore's goals for her retirement are pretty simple.
Debbie Elmore: I do not want to end up being a burden down the road.
Elmore's a 3rd grade teacher in Fayette County, W.Va. She doesn't want a beach house and isn't planning elaborate tours of Europe. All she wants is:
Elmore: To be able to retire with some dignity.
And because Elmore is part of West Virginia's state pension plan, she doesn't have to worry. Even though her plan and hundreds of others are under funded, West Virginia and its taxpayers guarantee Elmore's retirement benefits. The catch though is that public pension plans around the country lost more than a trillion dollars during the financial crisis, according to the Center for Retirement Research. And plans in some poorer communities may need a bailout.
Elizabeth Kellar: Absolutely.
Elizabeth Kellar is at the Center for State and Local Government Excellence.
Kellar: They will probably need help from their state governments if not the federal government.
Even well-run local governments are hurting. Huge unexpected pension payments are due as tax revenues fall and schools and health programs face cuts. The pension crunch is hitting businesses too. Private pension plans lost almost a trillion dollars themselves in the stock market. Federal law requires businesses to replace all that cash in just seven years.
Steve Dobrow: Let's say you're a company that's doing reasonably well in this downturn.
Steve Dobrow is president of the American Society of Actuaries and Pension Professionals.
Dobrow: You are struggling to meet a pay roll -- you are trying very hard to manage your cash flow, and then your actuary taps you on the shoulder and says, "Oh, you remember those millions you lost in the U.S. stock market, in your pension investments? You now have to come up with 15 percent of that amount of money right now, in addition to your regular pension contribution."
One of Dobrow's clients -- who owns a fruit distribution company with just 15 employees -- is facing a half million dollar mandatory pension contribution this year.
Dobrow: Now, I don't know very many small businesses that can afford a hit like that all in one year, in a profitable year.
In some cases, pension obligations could push companies into bankruptcy. And Jim Klein at the American Benefits Council says the federal government should relax pension funding rules given the scale of this crisis.
Jim Klein: It's an issue about jobs.
Klein argues that if businesses have to funnel more than a hundred billion dollars a year into their pensions plans, that could kill economic growth. He says businesses want to fully fund their plans but they need a bit more time to get there. And Elizabeth Kellar at Center for State and Local Government Excellence says public pensions need time as well.
Kellar: I think if we take a long view -- and by long view I mean not five years but 20 years -- I think that we will smooth this out over time.
But a $2 trillion hole could be hard to fill.
In Washington, I'm Steve Henn for Marketplace.