Legislation introduced last week could shift costs of union pension plans to taxpayers in an attempt to stave off organized labor’s pension funding crisis.
Senator Bob Casey, Pennsylvania Democrat, introduced the Create Jobs & Save Benefits Act of 2010 to address the funding problems faced by union-administered multi-employer pension plans.
Multi-employer pension plans have to cover the benefits of members, even if their companies are defunct. Currently the costs are shared among the companies that remain in the pool, but Casey’s bill proposes offloading them to the Pension Benefit Guarantee Corporation (PBGC), a federal corporation, which backs the pensions of 44 million workers, more than 75 percent of which are nonunion.
“Multi-employer plans face unique challenges that are overburdening pension plans and the bottom lines of companies,” Casey said. “My legislation would help correct these problems to protect the pensions of workers and unburden companies stuck paying a crippling expense that threatens its existence and the jobs of its employees.”
Casey said his bill would cost the federal government $8 to 10 billion.
Teamsters for a Democratic Union endorsed the proposal, reporting on their Web site:
Senator Casey’s bill is similar to the bill, H.R. 3936, in the U.S. House sponsored by Earl Pomeroy (D-ND) and Patrick Tiberi (R-Ohio). It would allow seriously troubled multi-employer pension plans to be partitioned: responsibility for pension credits derived from bankrupt or closed companies would be transferred to the Pension Benefit Guaranty Corporation (PBGC), which would have to be adequately funded.
… While it would cost federal money, Senator Casey was right when he said that it’s “a bargain compared to what could happen if we let some of these multi-employer plans get in greater jeopardy than they are right now.”
Meanwhile, unions recruit new members with promises of enduring financial stability.
“The most important thing to know is that when unions advertise for recruitment, they make promises of guaranteed pensions and financial security, even though their pensions are on the critical list,” said Diana Furchtgott-Roth, director of the Center for Employment Policy at the Hudson Institute, and a former chief economist at the Department of Labor. “The financial data don’t back it up — it’s false advertising.”
Pensions are required by federal law to disclose any precarious financial position they find themselves in, and many multi-employer plans find themselves on the Department of Labor’s official tally of critically endangered plans.
Also last week, the Financial Accounting Standards Board issued new guidance calling for increased disclosure for any companies that invest in multi-employer pension plans because of such risks.
Part of the bill would create large liabilities for PBGC, which acts as an insurance policy for the pension plans that buy into it.
“It’s been quite clear to us, and to many people following this issue, that there is a real urgency driving big labor’s push for EFCA (Employee Free Choice Act) — it’s nakedly designed to improve labor’s ability to add people to its rolls,” said Mark McKinnon, spokesman for Workforce Fairness Institute. “It’s not good for business or the economy, but it’s clearly good for labor.”
“This is their No. 1 agenda item … and the pension fund problem is driving the urgency. Because their pension funds are significantly underfunded and they’re going broke, EFCA is the quickest fix they can get.”
Union pension plans suffer from the same aging demographic problem as social security suffers.
Before the economic downtown, when the latest pension data were available, only 17 percent of labor pensions were fully funded, compared to 35 percent in the non-union sector. More interestingly, pension funds of union staff and officers are well-funded — in the 90-plus percent range — while the funds of labor’s rank and file suffer.