The Shameful Pension Bill

    We've been following the attack on the pension system for a long time. What an outrage: people save their own money--it is their money because pension money is deferred compensation--and, poof, it's either gone or taken over by the federal agency that is struggling with a $23 billion deficit, which could get even bigger if one or more airlines tank.

    So, down there in Washington, there was a move to try to fix the private pension system. But, what came out of this legislative dealing appears less like a solution and more like "the fix was in" for workers--and why should we be surprised? Today, Mary Williams Walsh tells us some of this tale in a front-page story in The New York Times:

With a strong directive from the Bush administration, Congress set out more than a year ago to fashion legislation that would protect America's private pension system, tightening the rules to make sure companies set aside enough money to make good on their promises to employees.

Then the political horse-trading began, with lawmakers, companies and lobbyists, representing everything from big Wall Street firms to tiny rural electric cooperatives, weighing in on the particulars of the Bush administration's blueprint.

In the end, lawmakers modified many of the proposed rules, allowing companies more time to cover pension shortfalls, to make more forgiving estimates about how much they will owe workers in the future, and even sometimes to assume that their workers will die younger than the rest of the population.

On top of those changes, companies also persuaded lawmakers to add dozens of specific measures, including a multibillion-dollar escape clause for the nation's airlines and a special exemption for the makers of Smithfield Farms hams.

   The problem is this: you can't fix the pension system without dealing with the larger issue of corporate greed and power. The system is still set up to allow corporations to run into bankruptcy and dump their pensions on the Pension Benefit Guaranty Corporation--and by allowing these looser rules to figure out how much money to put into pensions, it almost assures us of a worsening pension crisis. The PBGC is funded, essentially, by premiums paid by companies--but if the agency collapses, the bail-out will come from taxpayers.

    The most glaring deficieny, from my point of view, is that the bill does not change the basic rules that allow a company to dump its pensions through bankruptcy while, at the same time, continuing to pay executives multi-million dollar pay and benefit packages. There is no incentive for executives to save pensions. Indeed, the opposite is true: by dumping its pensions on to the PBGC, the company's stock rises and its lenders let out a sigh of relief because, all of a sudden, the corporate balance sheet looks better.

    The disgusting irony is that, if a taxpayer-financed bailout occurs down the road, workers will end up effectively subsidizing the rescue of their own pensions. They will essentially pay a ransom to get their pension back--while the executives who drove the company into bankruptcy live an opulent life. Is this a great country or what? (and, as an aside, I can't help but point out that Smithfield Farms, the beneficiary of a special deal, has engaged in some putrid anti-union behavior over the past few years).

    You can read the rest of Walsh's story here.

Comments

[Eubulides]

Re: Smithfield hams........Not to mention the ecological nastiness of large scale hog farming that's wrecking watersheds across the US

[anon]

And the UFCW has a major organizing campaign at Smithfield's largest plant, in North Carolina. See http://www.ufcw.org/issues%5Fand%5Factions/justice%5Fat%5Fsmithfield/

[supposed to be working]

some laughs.

http://www.theonion.com/content/node/46231

[David Tananbaum]

I agree with you. Please read my proposal to eliminate Defined Benefit Pension Bankruptcies at:

http://www.atprime.com/index9.cfm

I would like to offer you the opportunity of linking to http://www.atprime.com

David J. Tananbaum

[Jeff Sinatra]

The other shameful part of the Pension Bill is the repeal of the long-standing "conflict of interest" rule related to the 401(k). This has the potential to negatively impact millions of 401(k) account holders and has been essentially ignored.

More: www.myactium.com/blog