WORLD SOCIALIST WEBSITE
By Andre Damon
04/15/2014
Now, private sector pensions, already decimated in the wave of corporate bankruptcies and buyouts that took place in the 1980s, are coming under renewed attack.
The New York Times reported Saturday, “Labor officials, business groups, members of Congress and others have been quietly discussing a proposal to extend multiemployer plans’ life spans by letting them roll back even retirees’ pensions.”
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The Times noted that one major pension plan, the Teamsters’ Central States plan, pays out $2.8 billion per year in retirement funds, but only takes in about $700 million from corporations. The plan’s director said he expects the plan to run out of money in 10 to 15 years.
The multi-employer arm of the Pension Benefit Guaranty Corporation, the government agency that insures private pensions, is expected to run out of funds within seven years, according to a report issued in February by the Congressional Budget Office.
Last year, the Pension Benefit Guaranty Corporation posted a record deficit of $35.7 billion. “Within the next 10 years, more and more plans are going to run out of money,” said Joshua Gotbaum, director of the Pension Benefit Guaranty Corp, in a November report.
The Employee Retirement Income Security Act, enacted in 1974, forbids companies from cutting their employees’ pension obligations for work they have already performed. But a subsequent 2006 law, signed by George W. Bush, allowed under-funded multi-employer pensions to stop paying some benefits, such as disability, death benefits, and early retirement.
The Times noted that the PBGC multi-employer fund “now has premiums of about $110 million a year to work with. All it would take is the failure of one big plan to wipe out the whole program.”
Defined benefit pensions now cover only 18 percent of private-sector workers, down from 35 percent in the 1990s, according to data from the Bureau of Labor Statistics. These pension plans have largely been replaced by completely inadequate defined-contribution 401(k) plans. The bureau of labor statistics found that the median households aged 55–64 with a retirement savings account had just $100,000 to retire, or about twice the yearly household income for older households.
The calls to slash private pensions are coupled with renewed attacks on public sector retirement benefits. Last week, the hedge fund Bridgewater Associates reported that public pensions in the United States have only $3 trillion in assets to cover some $10 trillion in scheduled payments over the coming decades. According to the report, 85 percent of public pensions will run out of funds within three decades.
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In Detroit, Emergency Manager Kevyn Orr has proposed to slash city workers’ pensions by 26 percent—or 34 percent if workers do not vote in favor of the deal. These pension cuts, coupled with equally draconian cuts to their dental, vision, and health insurance coverage, will effectively reduce their incomes by more than 50 percent. 10 percent of Detroit city retirees already live below the poverty line, and pension officials have said that the cuts will force at least another 20 percent into poverty.
A group of California Democrats, led by San Jose Mayor Chuck Reed, is campaigning for the implementation of a constitutional amendment to remove the state’s protections on public employee pensions. With the proposed amendment, cities, counties, and other government entities could lower cost-of-living adjustments for retirees. In addition, they could increase the retirement age or demand larger pension contributions from current employees.
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Even as retirement benefits are being slashed, on the grounds that there is supposedly no money to pay for them, the super-rich are doing better than ever. Last week, Equilar, the executive compensation research firm, reported that the 100 top-earning corporate CEOs had their median pay increase by 9 percent in 2013, to $13.9 million.