AUSTIN,
Texas -- The entire political world is agog: Tom DeLay indicted, Scooter
Libby in danger, Karl Rove rumors abound, Miers' nomination in doo-doo.
So I'm writing about ... pensions. They're just so sexy, I couldn't resist.
Of course, the word pension is a terminal turnoff for anyone under 60
-- so redolent of the blue-rinse perm set. As one whose idea of financial
planning consists of playing bingo at the Safeway, I'd prefer to be out
listening to reggaeton, myself. Still, when you're getting screwed, you
really should know about it.
This column is part of a continuing effort to see if we can keep our eyes
on the shell with the pea under it, even while some other shells, mighty
flashy and colorful, are whizzing around. Our particular shell bears the
fatal rubric, "You are getting screwed again."
Even the most paranoid among us would not suggest that members of the
Bush administration are getting themselves into legal trouble just to
keep attention away from the effects of their policies. But it is the
policies that can mess up our lives. Indictments may provide satisfaction
to some, but they do not clean up the messes left by bad policy.
Envision this, oh mod, rad, chic young people: Until 20 years ago, about
the time you were born, most geezers approaching retirement had a traditional
defined-benefit pension plan. The longer you worked at a company and the
more money you made, the more you got at your retirement. Employers kept
increasing their contributions to these plans, and whatever risk that
came with them was assumed by the employers.
Gone with the wind. For years, companies have been cutting their contributions
and moving more and more of the market risk from themselves to their employees.
They switched to "defined-contributions" plans, like the 401(k),
where the employee chooses the investments and assumes the risk (think
of the stock market in recent years).
In 1984, only 19 percent of employers with plans used defined, contribution
plans. In 2004, it was up to 93 percent, according to a comprehensive
series in the Minneapolis Star Tribune on what the pension changes are
doing to people in that state. By contrast, in 1984, 57 percent of companies
had defined- benefit plans. By 2004, that number was 15 percent.
The Bush administration has approved a change that makes it legal for
companies to modify their pension plans in a way that usually discriminates
against older workers who were covered under the earlier plans. But this
is the just the beginning.
Making your pension disappear is a new corporate art form. There is, for
example, the "wear away." The Star Tribune gives this example:
Say you've been working for a company for 20 years, at the end of which
you are entitled to a pension of $2,000 a month. BUT, your company decides
to "revise" the plan and, lo, suddenly you have to have worked
for 40 years to qualify for $2,000 a month.
Technically, the company has not reduced your pension benefit -- it is
just holding the benefit in place until time "wears away" the
difference between the new terms and the old terms.
Another trick is just underfunding the pension plan. During the last five
years, underfunded company pension plans have increased by five times
and are short in funds by $340 billion, up from $20 billion.
The latest corporate craze is for companies to declare bankruptcy, dumping
pension responsibilities on the federal government and walking away, only
to start doing business again without that nasty pension anchor around
their necks. Your pension gets dumped to the Pension Benefit Guaranty
Corp., a government entity that ensures $2 trillion of pension benefits.
The PBGC is funded by employers, who pay it $19 per employee annually.
This worked fine for years, until a bunch of steel companies and airlines
declared bankruptcy. The Guaranty Corp. is now responsible for $62.3 billion
in pension checks, but it has only $39 billion. Employer contributions
have not kept up, so the PBGC now has a $23 billion deficit -- and chances
are the taxpayers will wind up bailing it out, as we did the savings and
loan industry.
In addition, the PBGC does not cover health benefits. If your company
chooses the temporarily-bankrupt-until-we-can-dump-our-pension-plan route,
you'll be out that much more. Among the Fortune 1000 companies, the number
of pension plans frozen or terminated went from 45 in 2003 to 71 last
year, according to Watson Wyatt Worldwide, an employee benefits consultant
quoted by the Star Tribune. Another 25 companies closed their pension
plans to new hires.
There are several proposals now about what to do rumbling around in Congress.
One I particularly like would forbid companies from continuing to fund
their special executive retirement plans if their rank-and-file pensions
are seriously underfunded.
"The biggest byproduct of these changes is fear," said the Star
Tribune in its series. Fear may be a more dangerous emotion than anger.
It turns life into an "every man for himself scramble" without
unity, community, caring or sharing.
In fact, every one of us comes into this world naked and helpless, and
most leave it in the same condition -- and we are dependent on one another
every single day in between. The "stand on your own feet and take
care of yourself" attitude the right wing keeps pushing is not only
cruel, but stupid, too.
