The U.S. Government Accountability Office issued a report on Thursday about the ongoing efforts of the Treasury Department to restructure the American auto industry. Part of that report focused on the risk that the underfunded pensions of GM and Chrysler may have to be paid by taxpayers if the companies go under. The summary of that report said:

In the event that Chrysler or GM cannot continue to maintain its pension plans–such as in the case of liquidation–the Pension Benefit Guaranty Corporation, a government corporation, may be required to take responsibility for paying the benefits for the plans, which are not fully funded.

In the body of the report, they identify the seriousness of the situation, noting that the two pension programs are underfunded by $29 billion, enough to put significant strain on the PBGC:

A potential area of significant financial exposure is the government’s liability for terminated pension plans. Specifically, the Pension Benefit Guaranty Corporation (PBGC)—a self-funded government corporation—insures private-sector defined benefit plans.30 When PBGC takes over a terminated pension plan, it assumes responsibility for future benefit payments to the plan’s participants, up to the limits set in law.31 An underfunded pension plan that is insured by PBGC may be terminated only if certain statutory criteria are met. In general, an employer is permitted to terminate an underfunded plan only if it can demonstrate that it is in serious financial distress and cannot continue in business or reorganize (if in bankruptcy) unless the pension plan is terminated.

The pension plans of Chrysler and GM pose considerable financial uncertainty to PBGC. In the event that Chrysler or GM cannot continue to maintain their pension plans—such as in the case of liquidation or an asset sale—PBGC may be required to take responsibility for paying the benefits for the plans, which are currently underfunded by a total of about $29 billion.32 Although it is impossible to know what the exact claims to PBGC would be if it took over Chrysler’s and GM’s pension plans, doing so would likely strain PBGC’s resources, because the automakers plans’ represent a significant portion of the benefits it insures.

The report notes that there would be political pressure to maintain the pensions of the 600,000 retirees currently receiving them and that this would likely require a large infusion of cash into the PBGC in order to handle the task.