"Wes" wrote in message
...
"azotic" wrote:
Feeling tapped out after stimulus, ObamaCare and everything else? Senator
Bob Casey has one more deal for you. If the Pennsylvania Democrat gets his
way, U.S. taxpayers will also pick up the astonishing tab for poorly
managed
union pension plans.
Mr. Casey is gathering support for his curiously named "Create Jobs and
Save
Benefits Act," a bailout for union-run retirement plans. Similar to House
legislation from North Dakota Democrat Earl Pomeroy and Ohio Republican
Patrick Tiberi, the bill would transfer tens of billions of dollars worth
of
retiree liabilities to the Pension Benefit Guaranty Corporation, i.e., to
taxpayers.
http://online.wsj.com/article/SB1000...180553530.html
Best Regards
Tom.
The link is to subscriber only page. I have a question, did the union
plans pay into the
pbgc?
Wes
Here is the entire article:
Feeling tapped out after stimulus, ObamaCare and everything else? Senator
Bob Casey has one more deal for you. If the Pennsylvania Democrat gets his
way, U.S. taxpayers will also pick up the astonishing tab for poorly managed
union pension plans.
Mr. Casey is gathering support for his curiously named "Create Jobs and Save
Benefits Act," a bailout for union-run retirement plans. Similar to House
legislation from North Dakota Democrat Earl Pomeroy and Ohio Republican
Patrick Tiberi, the bill would transfer tens of billions of dollars worth of
retiree liabilities to the Pension Benefit Guaranty Corporation, i.e., to
taxpayers.
At issue are multi-employer pension plans, in which companies across an
industry pay into a single pension pool. The plans are predominately run by
unions and for years have distinguished themselves by poor management. The
Labor Department in 2008 listed 230 multi-employer plans that were either
endangered (less than 80% funded), or critical (less than 65% funded), or
that had applied to government for funding relief. By 2009 that number had
soared to 640.
The financial crash is partly to blame, but even before 2006 only about 6%
of multi-employer plans were fully funded, compared to about 31% of
single-employer plans. The real problem is that multi-employer plans have
become a sort of pension Ponzi scheme.
Unions love multi-employer plans because they let workers keep their
retirement benefits even if they switch jobs to another participating
company. This encourages lifelong union membership. Unions are less
enthusiastic about paying the bills. The negotiating priority of union
leaders is to get hefty wage increases and benefits for current workers,
leaving the scraps to the pensions of retirees who no longer vote in union
elections.
When a company in an industry goes out of business, meanwhile, the remaining
firms are still on the hook for all costs of the multi-employer plan. This
explains why the trucking industry is backing Mr. Casey's bill, and why Mr.
Casey announced his legislation at a Pennsylvania facility of YRC Worldwide,
a Kansas trucking outfit. Someone has to pay for years of the industry
agreeing to Teamster demands.
Mr. Casey's bill would cordon off "orphaned" pensions-those for which an
employer has stopped contributing or withdrawn from a multi-employer
fund-and put them into a separate account. Surviving companies would pay
benefits to these orphans for five years, after which they'd get kicked to
the PBGC, which would shoulder the benefits until the last retiree or
beneficiary dies. The remaining multi-employer plan would be back in the
black, free to start the negative-feedback loop of underpayments and
overpromises again.
All of this is a raw deal for union pensioners who worked a lifetime in
expectation of certain benefits. The PBGC's current maximum payment to any
plan participant is $12,800 a year. Mr. Casey's bill raises that to $21,000
year, still only a fraction of existing pension promises.
Not that the PBGC has the cash to pay more. The agency's deficit was $21
billion as of last September, and it is expected to rise to an estimated $34
billion by 2019. Mr. Casey is claiming his multi-employer-bailout scheme
will cost a mere $8 billion, but Moody's estimated last year that
multi-employer plans were $165 billion underfunded.
The tab is likely to be much higher given the moral hazard Mr. Casey would
create. As Hudson Institute economist Diana Furchtgott-Roth notes, the bill
creates "a vicious circle. Once PGBC took over some plans, other employers
would want to declare bankruptcy, unload plans on the PGBC, and reorganize
under another name. The incentives to do this would be enormous."
In 2006 Congress passed the Pension Protection Act to prod companies and
unions to shape up their pension plans, whether by lowering benefits,
increasing contributions from employers and workers, or even raising
retirement ages. The fact that many unions and companies have refused to use
these tools does not make their mistake the obligation of U.S. taxpayers. If
unions really cared about protecting retirees, they'd ditch defined-benefit
plans and adopt 401(k) plans that give workers control over their retirement
assets.
Union chiefs prefer the power that comes with managing huge pension
investments-even if they're failing. They are now counting on Mr. Casey to
preserve their power by making taxpayers pick up the tab for years of
pension mismanagement. With the union priority of "card check" stalled, word
is that the Casey bailout is Big Labor's consolation prize. Taxpayers should
let Congress know they don't want to pay.
Best Regards
Tom.
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