An article in the Wall Street Journal earlier this week depicted the various ways that employers can legally raid the pension fund of their employees and retirees.
The premise of the article, titled “Signs Your Pension Plan Is in Trouble,” was that even healthy pensions plans that are adequately funded can be in trouble.
The article doesn’t admit it, but all of the risks to healthy pension plans described in it come down to permitted but nefarious actions by employers, including:
- The employer selects financial assumptions that make the plan look like a bigger burden than it really is and uses that as an excuse to freeze payouts or commitments.
- The employer offers incentives for early retirement using the assets of the pension plan, which depletes the pension plan of funds to pay retirees.
- If the employer either sells or spins off the operation, the new owner uses the assets of the plan to pay off its own underfunded obligations to its plans, thus putting the strong plan in trouble.
- A religious or other nonprofit organization changes the status of its plan to a “church” plan, which exempts it from federal pension rules including the requirement to fund the plan.
The common theme in all these scenarios is that the employer legally takes money earmarked for paying the pensions of retirees and uses it for something else. It sounds a lot like what the rightwing wants to do with public pensions: cut them to pay for tax cuts.
The article basically mongers fear, but anyone reading the article who cares about fairness should feel outrage instead.
Every single one of these tricks should be illegal. Whether unionized or not, the employee accepts pension benefits in lieu of current salary. The money in the pension plans should be sealed off from other funds into which the employer dips to meet expenses, just like Social Security is sealed off from the rest of the federal government, with its own trust. Despite recent reform, pension laws still provide too little protection to both private and public employees.
When the mainstream media chatters about the retirement crisis in America, it usually points a finger at the profligate Baby Boomers, who spent most their earnings (and thus shored up the U.S. and world economies) and now don’t have enough saved for retirement. Perhaps more should be said about the profligate company executives who treated and continue to treat the assets of pension plans as their company’s private piggy bank.