Pension Editorial In The Nyt


Jun 20, 2003
Pension Tension

Published: August 8, 2004

First it was the steel companies. Now it's the airlines. Is the auto industry next?

In the past three years, bankrupt companies, mostly in unionized, old-economy industries, have dumped $11.2 billion in pension obligations on the Pension Benefit Guaranty Corporation, the federal agency that insures the pensions of 44 million people. As a result, the agency has gone from having a $7.7 billion surplus in 2001 to an estimated deficit of about $9.7 billion. And the situation may soon become much worse. The agency now faces a possible $5 billion default by United Airlines and the prospect of more airline defaults. Plenty of other companies, like Goodyear, also have seriously underfunded pension plans.

Not surprisingly, the specter of a taxpayer bailout hangs over the pension agency, inviting comparisons to the savings and loan debacle of the 1980's. Things are not that bad - yet. As long as the economy and stock market improve, so should many pensions, since their health is tied to prevailing financial conditions.

But in one way, the S.&L. comparison is apt. In the 1980's, government missteps exacerbated the S.&L. crisis. Today, again, government bears some responsibility for current pension problems. Congress must take steps now, both to strengthen pensions and the agency that insures them.

To begin, lawmakers should allow companies to overfund their pensions to build a cushion for hard times. Currently, Congress restricts overfunding, ostensibly to prevent companies from stashing excess cash in tax-sheltered pensions. But another reason lawmakers restrict contributions is that doing so forces companies to pay taxes on income that would otherwise go into pensions, thus raising revenue to improve the government's own dismal budget outlook. The result of this self-serving machination is that many companies entered the recent economic downturn with less in their plans than would otherwise have been the case.

To protect taxpayers, Congress should raise the amount it charges companies for pension insurance. Currently, premiums are estimated to be underpriced by one-sixth to one-half - a dangerously high dose of corporate welfare. The pension agency should also be given the authority to freeze a seriously troubled pension when an employer stops contributing to it, as United did recently.

These are tough remedies for a tough problem. But Congress would do better to tackle the problem now rather than wait until after a full-blown crisis.

Pension Tension
The govt and tax payer get stuck with the defunked pensions of these huge companies. You think there would be some sort of oversight commitee. The corporate execs walk away unscathed while the employee gets the shaft. Then the PBGC gets stuck with the payouts. Either way the govt is going to have to pay. So why not pay a commite now instead of letting the PBGC pay when it is all ready to late. It must be rocket science. To hard to understand. But thats the republicans for you. :shock: