crb
01-23-2011, 11:58 AM
Really good article from reason on unfunded pensions, a new accounting rule, multiemployer pension plans, all sorts of good stuff.
Unbeknownst to most people, there are about 1,500 multiemployer pension plans in the United States covering about 10 million unionized workers. In these plans, different companies—usually but not always in the same sector—come together to form a single pension plan that covers all the employees at each business. While in the rest of the economy most nonunion employees now have a 401(k) or other plan that emphasizes portability and does not guarantee specified results, multiemployer plans were designed so that union members could switch jobs while still reaping the benefits of a more traditional defined-benefit pension.
The catch is that each company participating in a multiemployer (or “last man standing”) plan assumes the liability for all the other employees’ pensions. If five companies are in a plan and four go bankrupt, the fifth company is responsible for meeting the pension obligations for the four failed enterprises.
For the last three decades, businesses in multiemployer plans have only had to report their annual pension fund contributions. They have not been required to report their withdrawal liabilities—that is, the amount a company would have to pay to cover its pension obligations to the other participants and exit the plan. These unreported liabilities dwarf annual pension expenditures. But the accounting fiction didn’t mean the companies themselves had any illusions about their liabilities and associated risk. In 2007, for example, the shipping giant UPS coughed up $6.1 billion to withdraw from the Teamsters Central States Fund, even though analysts had previously estimated that the company’s multiemployer liabilities amounted to just $4 billion.
On September 1, 2010, the Financial Accounting Standards Board (FASB) tried to narrow the reality gap by issuing a draft of a new regulation requiring companies to more accurately report liabilities from multiemployer pension plans.
http://reason.com/archives/2011/01/18/labors-last-stand
They also talk about the Pension Benefit Guarantee Corporation, which has always pissed me off. I personally think it is probably unconstitutional (equal protection under the law). Why should 7% of the private workforce get federally insured retirements purely by the virtue of their unions political donations? Our 401ks and IRAs aren't insured against losses, are they? A union parasite that kills its host should have members be forced to rely on social security, like everyone else, they should not be entitled to an extra government stipend just because.
Accordingly, unions have been doing everything they can to get their hands on the nation’s purse strings. Democrats have outspent Republicans in the last three national election cycles. That hadn’t happened in at least a generation. This surge in Democratic campaign cash is largely due to union contributions: In 2006 unions spent more than $166 million, in 2008 they coughed up an astounding $400 million, and in the recent midterms they contributed well over $200 million.
So Democrats have a very big incentive to bail out union pension plans. Toward that end, in March 2010 Sen. Bob Casey (D-Pa.) introduced the Create Jobs and Save Benefits Act. The legislation would create a separate fund in the Pension Benefit Guarantee Corporation (PBGC), a government-sponsored enterprise set up in 1974 to pay for failed union pension plans. Under current law, when the PBGC steps in for a failed pension fund, each member of the plan is guaranteed only $12,000 a year from Uncle Sam, regardless of what they were owed. That’s dog food money, and unions instead want their pensions paid in full. Casey’s fund would do that.
While the Casey bill is popularly referred to as a “bailout,” that’s not quite accurate. It’s really more of a new entitlement. Here’s what the plain language of the bill says: “Notwithstanding any other provision of this title, obligations of the corporation which are financed by the fund created by this subsection shall be obligations of the United States” (emphasis added). Under this bill, unions will get their failing pension plans paid out by the U.S. taxpayer in perpetuity, no matter how much money it takes. No dollar figure is mentioned.
It is a really good article, long, go read the whole thing.
http://reason.com/archives/2011/01/18/labors-last-stand
Unbeknownst to most people, there are about 1,500 multiemployer pension plans in the United States covering about 10 million unionized workers. In these plans, different companies—usually but not always in the same sector—come together to form a single pension plan that covers all the employees at each business. While in the rest of the economy most nonunion employees now have a 401(k) or other plan that emphasizes portability and does not guarantee specified results, multiemployer plans were designed so that union members could switch jobs while still reaping the benefits of a more traditional defined-benefit pension.
The catch is that each company participating in a multiemployer (or “last man standing”) plan assumes the liability for all the other employees’ pensions. If five companies are in a plan and four go bankrupt, the fifth company is responsible for meeting the pension obligations for the four failed enterprises.
For the last three decades, businesses in multiemployer plans have only had to report their annual pension fund contributions. They have not been required to report their withdrawal liabilities—that is, the amount a company would have to pay to cover its pension obligations to the other participants and exit the plan. These unreported liabilities dwarf annual pension expenditures. But the accounting fiction didn’t mean the companies themselves had any illusions about their liabilities and associated risk. In 2007, for example, the shipping giant UPS coughed up $6.1 billion to withdraw from the Teamsters Central States Fund, even though analysts had previously estimated that the company’s multiemployer liabilities amounted to just $4 billion.
On September 1, 2010, the Financial Accounting Standards Board (FASB) tried to narrow the reality gap by issuing a draft of a new regulation requiring companies to more accurately report liabilities from multiemployer pension plans.
http://reason.com/archives/2011/01/18/labors-last-stand
They also talk about the Pension Benefit Guarantee Corporation, which has always pissed me off. I personally think it is probably unconstitutional (equal protection under the law). Why should 7% of the private workforce get federally insured retirements purely by the virtue of their unions political donations? Our 401ks and IRAs aren't insured against losses, are they? A union parasite that kills its host should have members be forced to rely on social security, like everyone else, they should not be entitled to an extra government stipend just because.
Accordingly, unions have been doing everything they can to get their hands on the nation’s purse strings. Democrats have outspent Republicans in the last three national election cycles. That hadn’t happened in at least a generation. This surge in Democratic campaign cash is largely due to union contributions: In 2006 unions spent more than $166 million, in 2008 they coughed up an astounding $400 million, and in the recent midterms they contributed well over $200 million.
So Democrats have a very big incentive to bail out union pension plans. Toward that end, in March 2010 Sen. Bob Casey (D-Pa.) introduced the Create Jobs and Save Benefits Act. The legislation would create a separate fund in the Pension Benefit Guarantee Corporation (PBGC), a government-sponsored enterprise set up in 1974 to pay for failed union pension plans. Under current law, when the PBGC steps in for a failed pension fund, each member of the plan is guaranteed only $12,000 a year from Uncle Sam, regardless of what they were owed. That’s dog food money, and unions instead want their pensions paid in full. Casey’s fund would do that.
While the Casey bill is popularly referred to as a “bailout,” that’s not quite accurate. It’s really more of a new entitlement. Here’s what the plain language of the bill says: “Notwithstanding any other provision of this title, obligations of the corporation which are financed by the fund created by this subsection shall be obligations of the United States” (emphasis added). Under this bill, unions will get their failing pension plans paid out by the U.S. taxpayer in perpetuity, no matter how much money it takes. No dollar figure is mentioned.
It is a really good article, long, go read the whole thing.
http://reason.com/archives/2011/01/18/labors-last-stand