Home > Uncategorized > Boring But Important Element of COVID Relief: Rescue Package for Pensions

Boring But Important Element of COVID Relief: Rescue Package for Pensions

March 8, 2021

Today’s NYTimes DealBook article by Mary Williams Walsh and Alan Rappeport describes an element of the COVID relief package that is coming under fire from conservatives because it has nothing to do with the pandemic. The issue is the impact of the continuous underfunding of employee pensions by both the unions and management, an underfunding that was permissible under the guidelines set by the federal government. Here’s the description of the problem from the article:

…the $86 billion is a taxpayer bailout for about 185 union pension plans that are so close to collapse that without the rescue, more than a million retired truck drivers, retail clerks, builders and others could be forced to forgo retirement income.

The bailout targets multiemployer pension plans, which bring groups of companies together with a union to provide guaranteed benefits. All told, about 1,400 of the plans cover about 10.7 million active and retired workers, often in fields like construction or entertainment where the workers move from job to job. As the work force ages, an alarming number of the plans are running out of money. The trend predated the pandemic and is a result of fading unions, serial bankruptcies and the misplaced hope that investment income would foot most of the bill so that employers and workers wouldn’t have to.

Both the House and Senate stimulus measures would give the weakest plans enough money to pay hundreds of thousands of retirees — a number that will grow in the future — their full pensions for the next 30 years. The provision does not require the plans to pay back the bailout, freeze accruals or to end the practices that led to their current distress, which means their troubles could recur. Nor does it explain what will happen when the taxpayer money runs out 30 years from now.

Why is this relevant for schools? Because like the private sector, public employee unions have underfunded pensions and should the private sector retirees have experienced a cut of their payments there would be no basis for public sector unions to expect different treatment. Now that the government has rightfully backfilled the pension shortfalls that resulted from their lax oversight, they should expect STATE and local governments to do the same. I am not holding my breath for this, however.

A final note on the concluding paragraph of this article, which had a critique of this by a professor of actuary science:

“These plans are uniquely unable to raise their contributions,” said Mr. Naughton, whose clients included multiemployer plans when he was a practicing actuary. “When things go well, the participants get the benefits. If things go badly, they turn to the government to make it work.”

If that sounds familiar, you must have read the same articles as I did about the 2008 crash.

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