Pension Insecurity
Pension Insecurity
Two stories today show just how tenuous more and more Americans’ retirement security is becoming.
USA Today reports that the Pension Benefit Guaranty Corporation – the government’s insurer of corporate pensions – “has moved from about a $10 billion surplus in the late 1990s to a $23 billion deficit in its single-employer insurance program.” The PBGC “estimates underfunding in [America's overall] pension system has reached a record $450 billion.” In other words, companies are refusing to adequately fund their pension, risking more meltdowns a la. United Airlines.
Meanwhile, the LA Times reports that the Securities and Exchange Commission “has found that many pension and 401(k) consultants receive large hidden payments from the investment firms they recommend to retirement-plan clients.” That creates massive conflicts of interest, whereby consultants may be urging pension administrators to put workers’ retirement money in investments the consultant has a financial stake in.
Despite these problems, corporate America is agressively resisting serious reforms. The ERISA Industry Committee, which lobbies for corporations on pension issues, recently sent a letter to Congress urging lawmakers to vote down legislation forcing them to contribute more to the PBGC. These companies have no interest in protecting workers, and instead want taxpayers to foot the bill when things go wrong (think S&L bailout). Let’s hope Congress, however, keeps corporate America’s feet to the fire and makes these companies fulfill their promises to their workers.
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1) Terrible reporting from the LA Times. I just read the report from the SEC’s website, it was an investigation of pension consultants and has nothing to do with 401k’s.
2) So the problem here is with pensions. In the UAL case, the problem lies with the government for bailing out UAL. The second case shows another problem with pensions, namely that having other people manage your retirement assets is bad for you and your money.
That’s why 401k’s and IRA’s are better, they give you 100% control over your retirement assets.
May 16th, 2005 at 1:19 pmWhen the corporations all switched to defined benefit plans they cut off the right of workers to contribute to their company pensions. At that time it was financially beneficial to the corporations to do that. In fact, my employer even gave back the conributions we had already made, so the plan would be entirely employer funded. Times change. Now, of course, they all would prefer that employees have been doing the contributing and the plans be defined contribution and not defined benefit plans.
May 16th, 2005 at 1:33 pmState pensions are in trouble as well, thanks in part to unions.
May 16th, 2005 at 4:34 pmYes, Tony,
Ultimately it is the Unions who have dropped the ball. Don’t the Union lawyers understand the concept of corporate bankruptcy? Do the unions not understand the vulnerability of the pensions in the event of corporate bankruptcy. If not, why not?
Perhaps there are reasons the unions condoned this type of pension structure. D’ya think? The union’s number one goal is the collection of union dues. Perhaps the union accomplished their goal for as long as possible, and now will cut themselves loose from the sinking ship and look elsewhere for some floating flotsam to attach themselves to.
A union is sort of like a church – they’d like to help their members, but it isn’t the first priority.
May 18th, 2005 at 1:26 pmjdunhlb erdfcv http://tyghbnocze.com/
June 28th, 2005 at 6:47 pm