December 18, 2014
Ten Million Seniors Face Pension Cuts!
During December, the Congress passed an omnibus spending bill with several bad features. President Obama already signed it.
For seniors, the worst part was that underfunded multi-employer pension plans can now be cut. Details of the bill are on line. The actual severity of the cuts will be largely in the hands of each plan’s trustees. Trustees are not necessarily retirees, nor are they necessarily sympathetic to retirees. This may be the first time in American history that the government has ordered cuts for current retirees, even though the bankruptcy laws have been used for that purpose since around 1986.
The Pension Benefit Guarantee Corporation, which is supposed to underwrite pensions from private employers, said that they didn’t have enough money to cover the multi-employer plans that were already in bad condition. The PBGC itself is underfunded.
How did we get into this mess?
Historically, American corporations opted to provide pensions and health care to their employees rather than follow the European model, and the model of the rest of the industrialized world, in having national pension plans and health care. The Congress of Industrial Organizations (CIO), which had stood for national health care and steady increases in Social Security Old Age Insurance, gave in to the corporations in the late 1940s. America was at that time in a period of unprecedented post-war prosperity. The Pension Benefit Guaranty Corporation (PBGC) is an independent agency of the United States government that was created by the Employee Retirement Income Security Act of 1974 (ERISA) to encourage the continuation and maintenance of voluntary private defined benefit pension plans, according to Wikipedia. Companies pay into the PBGC to cover any future defaults.
As retirees began to find out during the Reagan years when bankruptcy became a popular way for corporations to cut retirees, the PBGC doesn’t pay the full amount that pensioners are owed. The amount they will pay is set by the government. As America’s post-war opulence wore off, cutting retirees became more and more popular with corporations. The strain on the PBGC was bad enough, but legislators made it much worse by handing out corporate welfare to corporations in the form of letting them lower their contributions to the PBGC.
American Airlines is a good case in point. When they were headed toward bankruptcy, they were able to get Congress to let them off the hook on their pension payments. Now, while earning record profits, American Airlines is seeking more legislation to let them continue to underpay their pension obligations. Many corporation pension funds are dangerously underfunded, and the PBGC itself is underfunded and could not even live up to the reduced pension payments required by law.
Some people would say that the dilemma is temporary and will pass as soon as American corporations begin making profits, but corporate profits have been very high for some time, and there has been little or no movement toward funding the pension plans fully.
It is my opinion that retirees are getting cut because we are perceived as defenseless and friendless, not because of actual needs of corporations. It is my further opinion that the government will do nothing about it without a strong retiree movement that can mobilize members and votes in our behalf. Come and join us!
–-Gene Lantz, President
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Contact Gene Lantz at labordallas@sbcglobal.net
Judy Bryant at 214-729-0063
facebook: Texas Alliance for Retired Americans
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