A once-obscure federal agency, the Pension Benefit Guaranty Corp., (PBGC) threatens to be making headlines as it rapidly becomes a financial time bomb. In a scenario now playing out, more and more major corporations operating under bankruptcy protection are dumping their pension obligations on the PBGC.

While the organization is intended to be a safety net for failed pension funds, it is rapidly being overwhelmed, with obligations already exceeding assets.

Though funded by payments from companies operating traditional, defined-benefit pension programs, the PBGC is already underfunded - the same situation that exists for the abandoned pensions it is now being forced to administer.

In recent years, the underfunded pension obligations of Bethlehem Steel and other failing, so-called legacy companies have been shifted to the PBGC. Though the pension benefits eventually paid by the PBGC fall well short of the promises made to the workers by their employers, the rapidly growing burden threatens the PBGC.

After winning a bankruptcy judge's approval, United Airlines and US Airways have dumped tens of billions of dollars worth of pension obligations on the PBGC. The two struggling airlines, both in Chapter 11, argued that they needed to unburden themselves of the pension obligations in order to compete with the newer, low-cost carriers that have no significant pension obligations to fund. The airlines argued they needed to make these moves to survive, but their actions have set up a potential domino scenario as other legacy airlines, such as American, Continental and Delta watch their competitors unload pension obligations that they continue to carry and fund. And they couldn't be faulted for wanting to shed their own pension obligations. But it should not happen.

With the airline industry's estimated $32 billion in underfunded pension liabilities and the automotive industry's $60 billion shortfall, the PBGC is facing the kind of financial implosion that hit the Federal Savings & Loan Insurance Corp. when the S&L scandals erupted in the 1980s.

Taxpayers ended up paying for a $200 billion dollar bailout in the S&L debacle. Some analysts fear a similar situation could arise from the looming pension crisis and the growing strain on the PBGC.

Efforts should begin now to avoid such a burden falling to taxpayers over promises made by corporations, that have failed to live up to - or adequately fund - those promises.

For the past two decades or so, many defined-benefit pension programs have been replaced by defined-contribution plans such as 401(k) programs, which represent similar costs, but no unknown future liabilities. This trend is expected to continue, as it should.

But the existing defined-benefit plans must be scrutinized more closely by federal regulators. In addition, the funding of the PBGC should be strengthened so that it is better equipped to handle the pension promises that are dumped in its lap.

One idea offered in recent a editorial in BusinessWeek magazine suggests changing the uniform funding, so that companies with underfunded pensions pay more and companies that are fully funding their pension obligations are rewarded by a lower payments. It's a logical approach and one that should encourage more companies to properly fund their pension obligations.

The PBGC insures the retirement benefits of some 44 million workers through 30,000 private pension plans. If trends continue, and more troubled companies dump their pensions on the PBGC, taxpayers could wind up footing the bill. That would be unfair and Congress must act soon to ensure that that does not happen.

- J.L.W.III