WASHINGTON -- Finances at the government's pension insurance program deteriorated further this past summer with its deficit reaching a record $8.8 billion as of Aug. 31, the agency's executive director told Congress on Tuesday.

The cash-strapped Pension Benefit Guaranty Corp., or PBGC, had previously reported a deficit of $5.7 billion through July.

PBGC is funded with premiums paid by companies that sponsor pension plans.

It receives no tax dollars.

The private pension system is underfunded by more than $350 billion, the agency estimates. About $80 billion of that is in plans in such severe condition that the agency may have to assume the obligations.

Low interest rates, the sluggish economy, stock market losses and an increase in retirees all have hurt the private pension system.

PBGC has taken over more than 3,200 private pension plans paying benefits to nearly 1 million current and future retirees. Payments totaled $2.5 billion in the financial year ending Sept. 30, and are expected to grow to nearly $3 billion this financial year.

Last week, the House offered $26 billion in relief to companies struggling to keep up with pension plan payments.

The legislation also would replace -- only for two years -- the 30-year Treasury bond interest rate that has been used to measure pension benefit liabilities. The Treasury Department discontinued the bond in 2001.

An interim formula to determine pension liabilities expires at the end of the year, and Congress is debating what measure to use.

The House bill sets a blend of corporate bond index rates that would be used through 2005, giving lawmakers more time to come up with a permanent plan.

The legislation also would help companies that complain they are paying too much under the current formula. It would reduce pension payments over the next two years by about 10 percent.

The Senate Finance Committee approved a more ambitious plan, offering a three-year reprieve to overextended companies before installing a more permanent and tougher measure.