NCPA - National Center for Policy Analysis

Union Pensions at Risk

September 20, 2010

Congress, with the support of some private firms, is considering bailing out the underfunded multiemployer pension plans, at a potential cost of $165 billion to the taxpayer, but this would be a mistake, says Diana Furchtgott-Roth, senior fellow with the Hudson Institute.

The advertised benefits of joining a union sound appealing, but what unions do not tell prospective recruits is that collectively bargained defined benefit pension plans perform poorly when compared to plans sponsored unilaterally by single employers for nonunion employees.  And pensions sponsored by unions that cover multiple employers (multiemployer plans) fare even worse than pensions offered by a single employer under a collective bargaining agreement with a union.

Consider:

  • Only 59 percent of union funds had 80 percent or more of the assets needed to pay expected costs.
  • By contrast, 86 percent of nonunion funds did.

This disparity raises an important question: is the promise of a union-run pension plan a valuable one?  The short answer is no, as many union plans are chronically underfunded, says Furchtgott-Roth.

Source:  Diana Furchtgott-Roth, "Union Pensions at Risk," Hudson Institute, Summer 2010.

For text:

http://www.hudson.org/files/documents/DFR_Pension_2010_highres.pdf

 

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