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Sometimes it's worthwhile, and forgivable, to steal an old magazine from a doctor's office. You can get a chuckle out of politicians' predictions of, say, victory in Iraq or a balanced budget. But Time magazine of last Oct. 31 supplied background that helps understand today's efforts by business, the administration and Congress to swindle working Americans out of pensions.
By Saul Friedman Time's cover story, "The Great Retirement Ripoff," was written by a couple of former colleagues, ace investigative reporters Donald Barlett and James B. Steele (who sadly lost their jobs this week in a corporate budget squeeze). They conclude that "corporate [pension] promises are often not worth the paper they're printed on. Businesses in one industry after another are revoking long-standing commitments to their workers. ... Result: a wholesale downsizing of the American dream." Globalization, competition from places where governments provide health care and pensions, bankruptcies, and the decline of the labor movement - all have played roles in the disappearance of defined benefit pension plans that workers counted on. Time's investigation concluded that Congress, rather than passing legislation to protect workers from these winds of change, made policy decisions "favoring corporate and special interests, [decisions that] will drive millions of older Americans ... into poverty ... and turn retirement years into a time of need for everyone but the affluent. "Lawmakers wrote bankruptcy regulations to allow corporations to scrap health insurance they promised employees who retired. ... They wrote pension rules that encouraged corporations to underfund their retirement plans or switch to plans less favorable to employees. " Well, now Congress is at it again. The nonprofit, nonpartisan, Washington-based Pension Rights Center says that the currently pending House version of a pension reform bill "would eviscerate critical fiduciary protections ... by eliminating long-standing procedures that guard against conflicts of interest between pension plan trustees and the brokers, lawyers, record-keepers, consultants and others who provide services to plans." The 1974 Employee Retirement Income Security Act (ERISA), authored by the late, lamented Republican Sen. Jacob K. Javits of New York, has prevented Wall Street and employers from using pension plans as a piggy bank in most cases. The House bill, said the Pension Rights Center, "will be turning the clock back to the days ... when abuses and self-dealing in pension plans were commonplace." Most defined benefit pension plans, which already are shrinking in number, were created and improved as a result of negotiations between employers and unions. The House bill would keep unions from negotiating future increases that are deemed too generous, thus weakening a union's ability to improve pensions or use pension benefits as a bargaining chip in seeking other wage and health care increases. If employers have not sufficiently funded a pension plan, the legislation - rather than allowing or requiring further funding - would automatically "freeze" pensions, meaning employees would stop accumulating benefits. Dallas Salisbury, president of the centrist Employee Benefit Research Institute in Washington, D.C., predicted this "would make it more likely that employers would freeze plans and make it less likely that new plans would be formed." Pension advocates and labor leaders say that pension reform, as contemplated by the Republican-led Congress, is not needed because ERISA has worked well to protect workers' pensions. But employers have chafed under ERISA's restrictions and have sought ways to end or lessen the obligations toward retirees. Shaun O'Brien, the AFL-CIO's assistant director of social policy, says most of the pension system's problems are not due to under-funding, but to "companies that are simply walking away because they can." And, I would add, because Congress has let them. This is the same Congress which, if given the opportunity, would have turned the nation's best-known defined benefit pension plan, Social Security, into millions of 401(k) plans. Congress, employers and the administration have touted 401(k)s and similar defined contribution plans as alternatives to pensions. Just a few days ago the administration said it would compensate government contractors for 401(k) expenses, but not pension costs. Why do bosses like 401(k)s? No ERISA regulations; no contributions from employers are required; the worker takes all the risks of the market and an employer may encourage workers (like those at Enron) to put too many dollars in company stock. As 401(k)s have grown, the number of company-sponsored pension plans has declined from 115,000 in 1985 to about 29,000 today. The portion of private-sector workers covered by pension plans has dropped from 35 percent in 1980 to less than 20 percent. But despite their growth in numbers, most 401(k) plans have too little value to qualify as significant retirement vehicles. In another move to dodge ERISA obligations to older workers, IBM led the way in trying to change pension plans by converting them to "cash balance" plans, freezing benefits for older workers while helping new hires. Companies that have made the switch have been sued, some successfully, for age discrimination, so the Republican Senate has moved to limit such suits. Said Nancy Hwa of the Pension Rights Center: "It's part of the whole idea of the 'ownership society' ... that you should be responsible for your well-being, whether it's your health care or your retirement." |
