Tags: pension | public | bailout

Proposed Public Bailout of Unions May Have No Ceiling

Friday, 04 Jun 2010 07:54 AM

Legislation introduced by Sen. Bob Casey, D-Pa., for a proposed bailout of troubled union pension funds could put taxpayers on the hook for $165 billion — and perhaps an unlimited amount of money.

As of 2006, well before the market dropped and the recession began, only 6 percent of these private sector pension plans (run together by companies and unions) were doing well.

If passed, the bill will essentially let multiemployer union pension plans get the Pension Benefit Guarantee Corp. to pony up for the benefits of workers of defunct companies.

And although right now taxpayers could possibly be on the hook for $165 billion, the liability could essentially be unlimited because these pensions have to be paid out until the workers die.

Almost 400 of these multiemployer plans reportedly have revealed they are underfunded. 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.

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.

Casey says that the bill, which would put the Pension Benefit Guarantee Corp. behind struggling pensions for union workers, will save jobs and help people.

“When you give someone money because they've gotten their finances into an untenable state, that's a bailout,” financial journalist Megan McArdle notes in the Atlantic.

“The multiemployer plans have not paid any premiums for the benefits Senator Casey now wants to give them.”

The employers knew what they were getting into, McArdle notes, as did the unions.

“The PBGC exists to shelter workers from total destitution in the event that their pension fund does not have resources to meet its obligations, and there is no going concern behind the fund able to make up the shortfall,” she points out.

“It does not exist to make UPS more profitable, or more competitive with FedEx.”

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Legislation introduced by Sen. Bob Casey, D-Pa., for a proposed bailout of troubled union pension funds could put taxpayers on the hook for $165 billion and perhaps an unlimited amount of money. As of 2006, well before the market dropped and the recession began, only 6...
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2010-54-04
Friday, 04 Jun 2010 07:54 AM
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