When Pensions Go Bust
Comment When Pensions Go Bust When a judge recently agreed to let United Airlines renege on its pension promises to its workers, a new and cloudy day had dawned. A day of betrayal, to be followed...
...Here is one: "I am a retired United Airlines pilot," Captain David J. Taylor wrote, explaining that he and his wife are facing "about a $3,500 a month cut, roughly a 50 percent decrease...
...For even as George W. Bush is trying to slash benefits that Social Security would provide future retirees, businesses are already hacking away at benefits for current employees and retirees...
...This is not just about United...
...But that would require additional funding, either by the companies (which currently pay $19 a year per employee covered) or by the taxpayers...
...Tom Buffenbarger, president of the International Association of Machinists...
...How much worse does the problem have to get before Congress wakes up...
...I think they're going down the tubes," he says...
...It is extending well into the future-or denying entirely-the happy moment when most people can retire with firm economic footing...
...The increase in defined contribution plans has shifted the risk of investment failure from employers to employees," the Economic Policy Institute notes...
...We already sold our house in San Diego County and moved to rural Oregon to a much less expensive house in anticipation of this drop in income...
...Employees and retirees of such firms should be made whole by the Pension Benefit Guaranty Corporation...
...The last five years have brought unprecedented losses to the Pension Benefit Guaranty Corporation," it acknowledged in a May 27 press release...
...Over the long term, Dean Baker of the Center for Economic and Policy Research is not upbeat about old style private pensions...
...Other stopgap measures could be implemented...
...By September 2004, the total amount of underfunding was $450 billion, more than ten times what it was in 2000...
...The 401(k)-type plans are attractive to corporate executives because companies are not required to fund them...
...It is time for parity in how employees and executives are treated," Schakowsky said...
...United betrayed me," Cheryl Burns, a flight attendant, told the AFLCIO...
...Almost all retirement plans in the private sector will be defined contribution accounts, like 401(k)s, he predicts...
...In one fell swoop, United ditched its pension responsibilities to 110,000 employees and retirees, throwing responsibility for them onto the unsteady lap of the Pension Benefit Guaranty Corporation (PBGC...
...While that may seem a long way off, at least it approaches the kind of society that would be desirable and comfortable to live in...
...I feel angry, betrayed, and helpless," said Sarah de la Cruz, also a United flight attendant...
...The least the government should do is rectify those defects, he says...
...The bill would be retroactive to cover the United employees...
...But Baker knows that such plans don't provide any guarantees...
...A day of betrayal, to be followed by a long twilight of insecurity...
...I've worked twenty-seven years for this company...
...On top of that, "what is needed is a universal pension plan," says Gunnels of Sanders's office...
...At the moment, these are not portable, and not every employee can participate...
...In 2002, "almost one-fourth of the 100 largest plans were less than 90 percent funded," according to a May report from the Government Accountability Office...
...And after the airlines, other industries will look to do the same thing...
...But many of these United workers and retirees will see cuts to their pensions in the range of 30 to 50 percent...
...While most companies should be able to honor their promises to workers and retirees, far too many are reneging on those promises and shifting costs to the pension insurance program...
...But companies, whether flush with funds or not, will still look for ways to shirk their pension obligations...
...Since workers often lack the information and investment savvy of professional money managers and since funds in a 401(k) are not required to be insured, retirement security for many Americans has been dramatically weakened...
...Representative George Miller "The deepest recesses of hell are reserved for the employers, corporate bankruptcy attorneys, and government officials who conspire to eliminate pension benefits for millions of U.S...
...Many companies that aren't shirking their pension obligations by filing for bankruptcy are switching their defined benefit pension plans-which promise a fixed monthly check-over to riskier defined contribution plans like 401(k)s, or to no plans at all...
...Our ability to help our grandchildren with some of their needs will be greatly affected...
...The Government Accountability Office warned in January that if other large companies like United decided to ditch their pensions, then the finances of the Pension Benefit Guaranty Corporation would be in grave jeopardy Already the Pension Benefit Guaranty Corporation has a $23 billion deficit, even though it is ultimately responsible for covering the pensions of forty-four million people...
...That loophole could be closed...
...More than 1,000 people flooded them with letters...
...Many of the remaining companies with defined benefit plans can't be relied on either, because their plans are underfunded...
...Social Security is the only thing that will be left for many people," he says...
...Formed by the government in 1974, this entity was entrusted with ensuring the pensions of companies that go belly up...
...Rather than take a defensive stance, we should insist on expanding benefits for Social Security...
...Not by a long shot...
...We have dropped life insurance policies...
...Companies with defined benefit plans were trying to seriously cut pensions even when they were experiencing very good times," notes Warren Gunnels, the legislative director for Representative Bernie Sanders, Independent of Vermont...
...Most of our travel plans will go...
...And they've introduced another bill that would prohibit companies from lavishing payments on executive pensions if the workers' pension plans are underfunded...
...Today, 21 percent have such plans, according to the Bureau of Labor Statistics...
...We will probably have to discontinue spending on such things as long-term care insurance and premium Medicare supplement health care policies...
...About 60 percent of the largest corporate pension plans fail to make cash contributions to their accounts every year, the report noted...
...Now they're breaking their promise that I would receive a pension that I could live on...
...And we need to hold forth those visions, even-or especially-as corporations and Bush wage their savage attacks...
...The GAO also noted that the government allows corporations to slither through a loophole and avoid making cash contributions to their pension accounts...
...All the major carriers will look to the United agreement to see if they can cut their own costs by dumping their workers' pensions...
...Representative George Miller, Democrat of California, and Representative Jan Schakowsky, Democrat of Illinois, held what was billed as the first ever Congressional "e-hearing" recently, which took the online testimony of United employees...
...Those firms that are failing, though, don't have the wherewithal to make good on their pensions...
...Workers should be able to count on a pension from the government for their years of service, and not just the insurance that Social Security provides...
...This double whammy is altering the horizon for millions of elderly and soon-to-be elderly citizens...
...Other carriers are expected to follow the same route as United, and the auto companies, among others, may do so, as well...
...In 1978, 41 percent of private sector workers were covered by defined benefit pension plans...
...And it is conjuring up a future of economic elder abuse...
...Representatives Miller and Schakowsky have introduced legislation that would prevent bankrupt companies, for at least six months, from dumping their pension plans onto the Pension Benefit Guaranty Corporation...
...That's why he believes it's more important than ever to save Social Security from Bush's privatization scheme...
...One would require additional federal oversight...
...She told the AFL that she expects to lose $2,000 a month in retirement...
...The current pension plans are often "inadequate, misleading, and opaque," said the Government Accountability Office...
Vol. 69 • July 2005 • No. 7
