Friday, March 20, 2015

Pension Insecurity

                                                        From The Ramparts   
                                                     Junious Ricardo Stanton
                                                      Pension Insecurity

“It's no secret that pension plans around the country are in trouble. The old-fashioned defined benefit plans in both the public and private sectors face funding shortages, and some radical solutions have been proposed to fix them. The trouble extends to so-called multiemployer pension plans that provide benefits -- or promise them -- to more than 10 million union members, including those of the Teamsters, the United Food and Commercial Workers International Union, and the National Electrical Contractors Association. Some are running alarmingly short on money, prompting a coalition of union officials and industry executives to put aside their differences and hammer out what they hope is a potential solution that involves compromises from all involved, including existing retirees.” The Fix for Multiemployer Pension Plans Jennie L. Phipps
It’s no secret but it is not something the monopoly media talks about regularly because they don’t want workers to know what’s happening. The US pension system both the private and public sectors is in deep trouble. Current private and public pension systems are severely underfunded and face humongous shortfalls that will impact both future and current retirees. One estimate says private pension funds are underfunded to the tune of $343 Billion. “For many investors, last year's stock market gains helped make up for the heavy losses inflicted by the 2008 financial collapse. But it turned out to be a lousy year for private pension funds, which lost ground on their funding levels. After gradual progress rebuilding the funds they need to pay retirees, the average private pension fund held about 80 percent of what it needs to cover those payments, according to a report by benefits consultant Towers Watson. That's down from 89 percent at the end of 2013 and represents an overall deficit among large corporate plans of about $343 billion, nearly double the shortfall a year earlier. Much of the shortfall came from an increase in liabilities (or the amount they now expect to owe beneficiaries). Even as companies have pared back their defined-benefit plans—the ones that pay a guaranteed check for life—the cost of keeping that promise has increased. There are two big reasons: lower interest rates and longer life expectancies.” Private Pension Fund Levels Fall Behind John W. Schoen
Things are so bad for private pension funds employers and unions are coming together to resolve the crisis but their solutions do not bode well for workers and retirees. The workers many of whom are members of trade unions are going to be asked to work longer and take reduced benefits and some current retirees maybe asked to take cuts in their benefits. “The National Coordinating Committee for Multiemployer Plans, a coalition of unions and companies that employ union workers, has released its report, ‘Solutions Not Bailouts,’ which recommends taking these and other drastic steps: raise retirement ages in line with those of Social Security. Allow trustees of the most troubled pension plans to suspend some benefits and even cut benefits that current pensioners already receive. Create new types of plans, such as variable annuity plans in which the benefit would rise or fall depending on investment performance but provide a minimum ‘floor’ using conservative return assumptions. This would reduce employers' liability.” The Fix for Multiemployer Pension Plans Jennie L. Phillips
The owners/employers are pushing for changes that will allow the ones who underfunded the programs in the first place, themselves, to suspend and or cut benefits for current retirees and workers. Keep in mind the government has a type of insurance fund that was created to cover the shortfalls when private pensions go belly up. That’s the good news. The bad news is the Pension Benefit Guarantee Corp (PBGC) is experiencing a cash shortfall itself! “The latest annual report from the Pension Benefit Guaranty Corporation makes for some very uncomfortable reading. The deficit in PBGC’s multi-employer program quintupled in 2014, soaring to $42.4 billion from ‘only’ $8.3 billion in 2013. That massive deficit is problematic for millions of workers who now stand to receive mere pennies on the dollar in promised pension benefits. It’s a huge headache, too, for federal taxpayers, who could be charged with bailing out underfunded private-sector pensions that were never intended to become public liabilities.” As The Pension Agency Falters Who Gets Stuck With the Bill? Rachel Greszler
There is a vicious Class War going on in America and workers in the private and public sectors are under attack by the corporate owners. Since Ronald Reagan decertified the Air Traffic Controllers Union all unions have been under an unrelenting attack from both the Republicans and Democrats. There is a bi-partisan class war being waged by the millionaires in the US Senate and Congress on working folks. While Congress did move to infuse more cash into the PBGC by raising the premiums employers pay into it, these increases have not kept pace with the cost of living due to sub par returns on the investments and a failure to maintain the premiums in accordance with pension plan benefits and actuarial liabilities. So now Congress has to come up with another plan but don’t think they are going to give the tab to the people who bribe them with campaign donations. “The latest assault on private pensions may be coming from the U.S. Congress. Lawmakers on Wednesday were finalizing a deal to shore up the government's pension insurance fund with provisions that would raise premiums and allow troubled pension plans covering more than one employer to cut retiree benefits. As of midday Wednesday, the reform provisions, which drew loud opposition from unions and other groups representing retirees, were not included in the latest version of a massive, $1.1 trillion spending bill, according to a spokeswoman for the House Appropriations Committee. The measure may be voted on as an amendment in the Rules Committee, she said. Payments to backstop these so-called multiemployer pension plans have run to hundreds of millions of dollars in the last decade. The Pension Benefit Guaranty Corp. has warned it may run out of funds unless Congress implements reforms.” Congress Eyes Move To Cut Pension Benefits  John W. Schoen
Current and future behavior can easily be predicted by looking at past behaviors.  During bankruptcies by the airlines and steel industries in the early 2000’s the owners were allowed to file bankruptcy, renege on their pension fund obligations and dump their obligations onto the PBGC which was both overwhelmed and underfunded! “Legislation enacted in July 2004 relaxed funding standards across the board and specifically allowed two distressed industries, airlines and steel, temporary additional underfunding. If this legislation represented a massive bet for the government, then the Pension Protection Act of 2006 could be seen as doubling down on this bet. The new law generally requires plans to reach full funding over a seven-year transition period, with longer periods specifically allowed for airlines. If the funding levels do not recover over time, the PBGC will be forced to take on plans that have become even more severely underfunded. With the PBGC itself already severely in the red, the prospect of allowing any employers to further underfund their plans may come back to bite the agency with a vengeance.  Recent legislation was driven by the fact that the airline and steel industries, already financially weak, were particularly hard hit in the wake of the terrorist attacks of September 11, 2001. United Airlines terminated all its DB plans, dumping an additional 120,000 employees into the system with a projected cost to PBGC of over $5 billion. This follows the distress termination of the US Air’s pilots’ pension plan. As one airline after another dumps pension plans on the PBGC, the temptation for the remainder increases. The industry is highly competitive, lacks pricing power, and suffers from overcapacity; established airlines are being undercut by start-up ventures with lower operating costs. Cutting costs by dumping pensions may be the only way some carriers can survive. Unfortunately, the U.S. taxpayer may end up paying the bill.”
            The goal of the one percent is to fleece the rest of us and to put us on the hook for their failures. So don’t be surprised if there isn’t a push to get taxpayers to bail out the PBGC sometime in the not too distant future! About twelve years ago Kelly Patricia O’Meara an investigative report with the Washington Times informed me about his situation when I had her as a guest on my Internet radio program. At that time the PBGC was insolvent. Since then Congress pumped more money into it but as the 2014 report indicates, PBGC is again facing major problems which will negatively impact employees in the larger unions like the Teamsters.
            The public sector   doesn’t have PBGC to bail them out, usually it is the taxpayers who are forced to step in and pony up the money to shore up the severely underfunded public pensions. “State and local pension plans are currently underfunded by $4.7 trillion, up from $4.1 trillion just last year.  Worse, just 36% of what is owed is now funded — meaning taxpayers at the state level will be asked to either pony up the taxes to pay for it or cut benefits sharply. All told, State Budget Solutions notes, the liability across the U.S. is over $15,000 a person. But not all states are equal: Three big, heavily unionized, mostly Democratic states account for 30%, or $1.4 trillion, of the pension underfunding — California, Illinois and New York. Because of chronic mismanagement and the power of public sector unions in these and other states, millions of citizens face a grave financial risk they might not even know about… A big problem is underfunded pensions aren't included in state budgets right now. So they're largely invisible. But $4.7 trillion is a lot of money, and as time goes on and the underfunding remains, states will be forced increasingly to raise taxes, cut services and/or add to their debt to make good on extravagant promises made by union-supported politicians to public employees.
The magnitude of the red ink has been carefully hidden by faulty and in some cases downright dishonest accounting. Many states routinely overestimate returns on pension investments, while underestimating the payouts. The State Budget Solutions report bluntly calls this a ‘betrayal’ of both retirees and taxpayers.” States In Danger As Pension Underfunding Of $4.7 Trillion Threatens Their Fiscal Health
            Unionized workers in the US are being fleeced and the politicians are siding with the one percent. Their goal is to decimate unions and return the nation to the gilded age of the robber barons. Tax breaks for the rich and corporations, pension cuts for workers. Don’t say you weren’t warned.



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