The Next Pension Bailout
August 16, 2010
Congress is gone for August but that hasn't stopped unions from quietly mobilizing to push through a big new priority this fall: a pension bailout. Big Labor is going Code Red on the issue, in the face of a looming accounting change that would force companies to confront the Ponzi-style nature of multi-employer pension plans, says the Wall Street Journal.
Currently, there are some 1,500 union-run retirement vehicles which fall into this class, in which companies across an entire industry pay into a single pension pool. Hundreds of these multi-employer pools are badly underfunded, thanks to years of labor funneling money into new pay and benefits, rather than into the funds for retirees, says the Journal.
The big problem with these plans:
- When one company in the pool goes out of business, the other companies remain on the hook for the cost of the plan.
- These spiraling liabilities inspired Pennsylvania Senator and Big Labor favorite Bob Casey to introduce legislation to cordon off "orphaned" pensions -- those for which an employer has stopped contributing or withdrawn from the plan -- and drop them on the federal Pension Benefit Guaranty Corporation (PBGC).
- The PBGC is already significantly underfunded and taxpayers are its ultimate backstop. Yet the Casey bailout could dump as much as $165 billion in new liabilities on the PBGC, while multi-employer plans would get a clean bill of health.
This cause has taken on new political urgency, and no less than Senate Majority Whip Dick Durbin has endorsed the bill. The reason for the rush is new rules that may soon be issued by the Financial Accounting Standards Board (FASB). Those proposed rules would expose the multi-employer time bomb, says the Journal.
Source: Editorial, "The Next Pension Bailout New momentum to dump union retirement burdens on taxpayers," Wall Street Journal, August 15, 2010.
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