USA Today published an editorial recently regarding pension legislation which could make matters worse for the average American counting on a pension. Here’s the editorial:
Will your pension be there? Congress may raise risk
The Bush administration has been pushing for years to shore up the nation’s increasingly shaky private pension systems. As Vice President Cheney put it at a Washington conference in March, “If you put in your hours, and do your part … your promised pension will be there for you when you retire.”
Or will it?
Congress now appears poised to deliver just the opposite, giving companies new leeway to fake their pension math. More pensioners would be placed at risk. Chances that taxpayers will be stuck with a huge bill would rise significantly.
Both groups already are at risk. Traditional pensions offered by private employers, known as defined-benefit plans, are underfunded by more than $450 billion â€” an eleven-fold increase in just five years.
At the same time, the government-sponsored pension insurance system, designed to protect workers whose company’s plans go belly up, is running a $23 billion deficit â€” about $200 for every household in the country.
To fix the problems, Bush asked Congress to produce a simple guarantee that any company pension is adequately funded and its financial status clear for all to see.
So what has Congress done?
The plans on the table â€” one passed by each chamber â€” are pockmarked with sweetheart deals for those with political pull.
Companies would be given more time to cover pension shortfalls, more flexibility to lowball estimates of how much they will owe workers and, in some cases, even to assume that their employees will die younger than will the population at large.
As a result, the government’s Pension Benefit Guaranty Corp. projects that, instead of making the pension system stronger, the two plans before negotiators in the Senate and House of Representatives would lower corporate contributions to the already underfunded system by $140 billion to $160 billion over the next three years.
Among the dozens of deals obtained by various industries, corporations or groups:
â€¢ Airlines could get 20 years â€” nearly three times as long as other employers get â€” to eliminate the funding gaps in their pension plans. Moreover, they would be allowed to use peculiarly optimistic assumptions about investment returns in calculating how much they have to contribute.
â€¢ A formula for requiring employers to disclose any serious shortfall in their pension funds would be wholly inadequate. Had it been in effect, about half the companies that have ever defaulted on their pensions might never have had to give any warning of trouble.
â€¢ Wall Street financial service companies would get authorization to handle bigger amounts of retirement money, even in unregulated and volatile hedge funds, with fewer restrictions.
â€¢ Smithfield Foods, which has substantial operations in Ohio, would receive a unique exemption from having to comply with new rules until 2014, thanks to Sen. Mike DeWine, R-Ohio.
Of course, each special interest has a plausible-sounding argument as to why it deserves special treatment: the ongoing financial woes of airlines and automakers, the free-market genius of Wall Street, Smithfield’s bailout of another company’s bankrupt pension plan, and so on.
But by caving in to so many of these pleadings, lawmakers are making the prospects for pension security worse. If President Bush still wants to protect pensions, he’ll have to start by exercising his first veto.
Charles W. Sanders, candidate for US Congress in Ohio, is doing a letter-writing action to legislators to demand real pension reform. You can participate in the action here.