THE UNION PENSION BAILOUT
June 1, 2010
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, says the Wall Street Journal.
Casey is gathering support for his "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 percent funded), or critical (less than 65 percent 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 percent of multi-employer plans were fully funded, compared to about 31 percent of single employer plans. The real problem is that multi-employer plans have become a sort of pension Ponzi scheme, says the Journal.
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, says the Journal.
Source: Editorial, "The Union Pension Bailout: A scheme for taxpayers to cover mismanaged multi-employer plans," Wall Street Journal, June 1, 2010.
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