When Did 'Pension' Become a Dirty Word?
By Teamsters General President Jim Hoffa
Published By The Detroit News
The United States is the greatest country in the world, but unfortunately it isn’t perfect. Our economic system is falling far short of what it’s supposed to be doing: creating a decent job for everyone who wants one.
To generate more jobs, we need an end to bad trade deals, better regulation of the financial industry and fairer rules for unions to organize workers. We also need to fix our pension system.
Pensions have become a dirty word lately, perhaps because fewer people have them. Some don’t even understand what they are. Pensions are basically annuities for people who contribute to them, either by deferring some of their wages or paying directly to a fund. Pensions are called “defined benefit plans” because they offer a specified monthly amount to recipients. Pension funds are managed by investment professionals who are supposed to know what they’re doing.
Our country’s private pension system has been gradually dismantled. With 401(k) plans, companies shifted responsibility for retirement planning onto their employees. Numerous 401(k) plans have been ravaged by high hidden fees and market downturns. I am concerned that millions of baby boomers will soon retire and find their 401(k) plans are grossly underfunded.
Congress did not create 401(k) plans with the intention of replacing pensions. They were meant to supplement pensions and Social Security. While pensions aren’t perfect, you’re generally much better off with a pension than a 401(k).
There are many, many small business owners that want to do the right thing by their employees and promise them a comfortable, secure retirement. However, they don’t have the expertise to manage a pension fund. The solution: multi-employer pension plans, which cover workers from more than one company.
About 2,000 businesses contribute to one multi-employer fund; 90 percent of them employ fewer than 50 people and the average annual benefit is about $14,000.
In multi-employer plans, company contributions to the fund are collectively bargained. Contrary to what the right wing is saying on the Internet, multi-employer plans are not “union run.” They are run by trustees chosen by both management and labor, and they are managed by investment professionals.
Like some single-employer pensions, some multi-employer plans are in trouble. They suffered from the global financial crisis and structural changes in the economy that have forced many contributing employers out of business.
A few years ago, Congress passed tough new rules that raised the amount businesses must contribute to the plans. These onerous new funding regulations are threatening the survival of many small companies. Unless Congress acts, some will have to divert cash to the multi-employer plans instead of expanding their businesses. Others will lay off workers and some may shut down.
Legislation to ease the hardship of these employers has been proposed by Democratic Sen. Bob Casey of Pennsylvania, Democratic Rep. Earl Pomeroy of North Dakota and Republican Rep. Pat Tiberi of Ohio. The bills will lessen the burdens of companies that have to pay for retirees whose employers went under. They will also prevent a downward spiral in which stiff funding requirements drive employers out of business, which will trigger even stiffer funding requirements, driving even more employers out of business.
These bills deserve the support of all Americans, for one simple reason: they will help our economy create jobs – and therefore they’ll help all Americans.