The agency that insures 43 million pensions could run out of money by 2020 if there is no taxpayer-funded government bailout, according to an independent study.

The 29-page report by the Center on Federal Financial Institutions said the Pension Benefit Guaranty Corp. (PBGC) “is insolvent on the basis of Generally Accepted Accounting Principles (GAAP) and would be shut down if it were a private insurer.”

If the agency does run out of money, retirees would reportedly lose their pensions if the government doesn’t bail the plans out. The report’s dire warning seems especially ominous coming the same week that US Airways filed for bankruptcy. Rival UAL Corp. has been in bankruptcy for nearly two years and AMR Corp., the parent of American Airlines, and Delta Air Lines, are desperately trying to shore up their financial situations. Pension funding has been cited as a key source of the carriers’ woes.

In June, the PBGC said the airline and steel industries had accounted for more than 70 percent of claims since its insurance program was created in 1974.

PBGC would run out of cash by 2020, according to the report, which is based on a cash-flow model created by the center. The federal pension insurer’s $34 billion of assets as of the end of fiscal 2003 would be exhausted by pension payments despite premiums of $900 million per year and income on the investments. If all airlines terminated their pensions, the cash crunch would come in 2018, the center thinks.

The “root cause of the cash crisis is PBGC’s existing insolvency,” according to the center. The insurer started 2004 insolvent by $11.2 billion, or about 25 percent of its obligations. By 2018, PBGC’s existing liabilities would exhaust its existing investments and future investment gains, according to the report. That assumes the PBGC were to be shut down, with no new premiums, claims, or the pension assets associated with new claims.

Filling the existing hole, without new claims, requires a $14 billion rescue now (or greater funding later), earmarking $720 million of yearly PBGC premiums, or hiking investment returns to 7.8 percent from 5 percent, according to the report. A $14 billion rescue would cover the $11 billion insolvency plus added projected expenses.

Carving out $720 million a year out of premiums could require higher premium rates because the amount would not leave a cushion for future claims and expenses, the center added. Raising investment gains to 7.8 percent “would require a substantial, winning bet on the stock market or a sharp, sustained rise in interest rates,” the center reported.

The New York Times reported that a PBGC representative declined to comment in detail on the projections. The spokesperson said that the agency uses a different statistical model and does not try to make predictions greater than 10 years into the future. The spokesman said, however, that the forecasts are generally consistent with the pension corporation’s own finding, according to the newspaper.

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