Pensions are our next dinosaur: Who pays up when guarantor goes under?
Not everyone has heard of the Pension Benefit Guaranty Corporation, a government group created by the Employee Retirement Income Security Act of 1974 to insure the pensions of workers and retirees in the private sector when their companies go belly up. With offices among the lobbyists and special interests on Washington DC’s K Street, the PBGC ideally represents those left on the shoreline by the ebb and flow of big business by collecting insurance premiums from companies and then swallowing their pension funds whole if they flounder. They grow their base with investments and then pay out pensioners from that pile of money.
On the surface it seems like a sound and just system.
But in the last three years the PBGC has lost nearly $30 billion and their deficit as of 2004 is set at $23 billion, compared to a surplus of $7.7 billion in 2001.
This body, which has traditionally shown a profit in its 30-year history, is starting to lose money. Lots of it.
This is happening for several reasons, most notably increased pressure on the system by big corporations who have learned to take advantage of it.
United Airlines is one of the most flagrant offenders, defaulting on nearly $9 billion in pension liability after filing bankruptcy and forking the whole mess over to the feds. United followed the letter of the law, using accounting principles acknowledged by the federal government, to underfund their floundering pension system and when the time came to pay the piper, they asked for a huge handout.
Many other companies followed suit, abusing the system by refusing to pay into their pension funds, cutting pension benefits or even abandoning them wholesale and turning to the PBGC to pick up the pieces.
A House subcommittee is now drafting legislation to ease the PBGC’s burden.
Rep. Sam Johnson, a Texas Republican who is co-sponsoring the bill and is chairman of the House Employer-Employee Relations Subcommittee of the House Education and the Workforce Committee, said: ‘“The whole system is broke. We have to address it,’”
But the problem here may be the concept of a pension and its place in modern America.
Who in the private sector gets a pension these days? Certainly not the staff at YES! Weekly, nor do we expect one. The days when a person gets a job with a company, puts in her 20 years and then trusts that the company will provide in her twilight are no more, gone like the leaves and the green grass in winter.
People change jobs roughly every five years these days; they have IRAs and 401(k) plans and investments as hedges against retirement. Many people of a certain generation lost trust in the pension system years ago.
So instead of issuing preventative legislation, let’s have the PBGC absorb all existing pension funds, make reparations to those owed and then shut down the whole thing.
The corporations can’t handle the responsibility. The PBGC can’t handle the payload. Most people under 30 don’t even know what a pension is, let alone expect to get paid by a company for whom they no longer work.
The pension is a dinosaur, an example of a noble idea that cannot withstand the climate of ethics and business in this new century, and we’ll mourn its demise as we fend for ourselves in old age.