Okay, something has to be done to shore up the Pension Benefit Guaranty Corp. (PBGC) and our beloved Congress is proposing some measures to do so. The problem is that a good deal of the changes proposed to strengthen pension plans comes at the expense of the employees supposedly covered by these plans, which, in my naive world, I consider contracts: You work for the company for 30 years and we'll pay you $x a year when you retire. But, like most things in the 21st century, this simple contract is no longer simple and companies such as US Airways, United Air Lines and Bethlehem Steel have walked away from their contracts and left us to pay some of what they contracted with their employees.
As I said, things in the world of defined-benefit pensions have grown quite complex. Congress is proposing that employers with underfunded plans pay more to PBGC. However, like many Congressional actions, this proposal has a reverse side. For example, if the pension plans become underfunded, companies can freeze and, in some cases, revoke benefits. The lump sum a worker thought he'd walk away with may be a heck of a lot smaller than what he bargained for. The benefits of the proposed legislation can also go to companies with well-funded plans: they can take some of their pension money and use it to pay for other retirement benefits.
I wonder what effect this will have on the pensions of the executives who have created this mess.
1 comment:
Like yours, my understanding was that company pension schemes were contractually binding. Sadly, it seems only those contracts imposed by the powerful on the weak continue to have any legal status these days. When the situation is reversed, the weak have nowhere to turn. High-powered lawyers twist the law to suit rich client's ends, particularly when those clients have the backing of government. I note this erosion of pension rights is now a problem for British workers, and will soon become a global issue as multi-nationals find it yet another convenient way to boost profits for the shareholders.
As to your final paragraph, I have no doubt executives with eroded pensions will be more than adequately compensated in other ways.
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