Tags: Private | Pensions | congress | bailout

Next Big Taxpayer Bailout: Private Company Pension Plans

By    |   Friday, 28 May 2010 11:30 AM

The woes of state government pension plans are well known, but many private sector pension plans are in trouble too.

And now Democrats in the Senate reportedly are considering a bailout of some of the troubled plans run together by companies and unions.

Financial Intelligence Report, a publication of Newsmax, predicted the private pension fund disaster and likely taxpayer bailout back in April 2009 in a headline article entitled “Pension Fund Time Bomb is Ticking.”

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Almost 400 of these multiemployer plans have revealed they’re underfunded, according to The Wall Street Journal. Unrealistic projections of investment returns for these pension funds have come back to bite them.

Multiemployer plans cover about 10 million workers, or almost 25 percent of workers who have private pensions. The plans are widespread in the hotel, construction and trucking sectors.

The country's largest multiemployer plans have long-term deficits of about $165 billion, according to a study last year by Moody's Investors Service, the Journal reports.

Sen. Bob Casey, D-Pa., has introduced a bill that would bail out several of the major troubled multiemployer plans, including a Teamsters Central States fund and another Teamsters pension plan in western Pennsylvania.

Casey claims his proposal doesn’t constitute a bailout, because the plans receiving aid would have to pay the first five years' worth of retiree benefits themselves.

Conservatives and anti-union groups aren’t convinced. They say the plan could easily turn into a taxpayer bailout of the entire multiemployer pension category, to the tune of tens of billions of dollars.

The possibility of a broader taxpayer bailout is "extremely dangerous," said Sen. Mike Enzi, R-Wyo., according to the Journal.

While he’s concerned about workers, "We have to ensure the taxpayer is not on the hook," Enzi said.

Casey’s bill puts the Pension Benefit Guaranty Corp. on the hook for longer-term costs. That means tax payers would be contributing an estimated $8 billion over the next 10 years.

The plan would apply to workers of companies that have gone belly up. And it would raise benefits paid to affected retirees.

Another provision introduced in Congress as part of the latest economic-relief package would help struggling pension plans on the accounting side. It would do so by letting them spread recent investment losses over longer periods.

Keith Hennessey, an economic adviser to President George W. Bush, isn’t too impressed with that idea.

“This is like planting a time bomb, with future retirees as potential victims,” he wrote on his blog.

Many employer groups want assistance.

The U.S. Chamber of Commerce and several construction and transportation groups urged Congress in a letter "continue to work to find appropriate solutions. Without a real resolution to this problem, more employers will be forced into bankruptcy and more workers will be left without a secure retirement," the Journal reports.

Conservative groups such as the Alliance for Worker Freedom and the Competitive Enterprise Institute, wrote in a letter of their own: "Using taxpayer funds to pay for private pensions would be a first" for the federal government.

Get a FREE copy of Milton Friedman’s classic book “Money Mischief” with your trial subscription to Financial Intelligence Report

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The woes of state government pension plans are well known, but many private sector pension plans are in trouble too. And now Democrats in the Senate reportedly are considering a bailout of some of the troubled plans run together by companies and unions. Financial...
Private,Pensions,congress,bailout
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2010-30-28
Friday, 28 May 2010 11:30 AM
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