Fix pen­sion cri­sis be­fore bi­par­ti­san good will fades

Pawtucket Times - - OPINION - By DAVID VON DREHLE

The post-elec­tion mo­ment, when vic­to­ri­ous can­di­dates wax grandil­o­quent reach­ing across the aisle to ac­com­plish im­por­tant things for the Amer­i­can peo­ple, is as evanes­cent as a rain­bow. Be­fore it van­ishes this time – be­fore the 2020 wannabes are in full cry and sub­poe­nas be­gin fly­ing – here’s an ur­gent prob­lem our frac­tured Congress can ad­dress, if both sides will swal­low a lit­tle pain for the shared gain of more than a mil­lion hard-work­ing Amer­i­cans.

Over their ca­reers as fac­tory work­ers, truck driv­ers, seam­stresses and so on, th­ese men and women of­ten ac­cepted re­tire­ment ben­e­fits in­stead of higher wages. In fact, Congress of­ten dic­tated th­ese trade-offs. Dur­ing World War II, when the govern­ment froze wages, com­pa­nies were al­lowed to of­fer fringe ben­e­fits to com­pete for em­ploy­ees. Later, dur­ing the stock mar­ket boom of the 1990s, tax laws steered pen­sion funds to­ward more lav­ish com­mit­ments.

Now, those prom­ises are un­der stress. Many so-called mul­ti­em­ployer pen­sion plans are run­ning out of money, and, if they fail, the fed­eral Pen­sion Ben­e­fit Guar­anty Corp. will go bust along with them.

Congress en­cour­aged mul­ti­em­ployer plans years ago as a way of se­cur­ing the re­tire­ments of highly mo­bile work­ers in heav­ily union­ized in­dus­tries. Team­sters, gar­ment work­ers, car­pen­ters and oth­ers built pen­sions over years of work even as they moved from one em­ployer to the next, be­cause mul­ti­ple em­ploy­ers in each in­dus­try par­tic­i­pate in jointly run plans.

Some of those plans con­tinue to be ro­bust. But in­dus­try dis­rup­tion, union de­clines and longer aver­age life­spans have pushed a num­ber of plans over the brink, and many more are headed to­ward the cliff.

Take truck driv­ers. With­out their hard work and will­ing­ness to spend days away from home and fam­ily, Amer­i­can com­merce would freeze up like a Min­nesota pond in Jan­uary. But the truck­ing in­dus­try of to­day is a far cry from the in­dus­try of 40 years ago. Just as many of to­day’s re­tirees were start­ing out, freight haul­ing was up­ended by a wave of dereg­u­la­tion.

This was great for Amer­i­can busi­nesses and con­sumers, as com­pe­ti­tion drove the cost of ship­ping down while en­hanc­ing the ef­fi­cient use of fuel and roads. But the com­pe­ti­tion killed scores of in­ef­fi­cient re­gional truck­ing mo­nop­o­lies. The pen­sion prom­ises of the bank­rupt com­pa­nies fell to the sur­viv­ing mem­bers of the plans. (And some fell through the cracks.)

Now the largest of those plans, the Cen­tral States Team­sters, is fail­ing. Of the 50 largest em­ploy­ers pay­ing into the plan in 1980, only three con­trib­ute to­day, ac­cord­ing to tes­ti­mony in Congress this year. Prom­ises once shared across an in­dus­try are now borne by this tiny rem­nant. The mod­est, but liv­able, pen­sions earned by hun­dreds of thou­sands of work­ers and their spouses will soon be cut in half – or worse – un­less some­thing is done.

Sim­i­lar sto­ries can be told of auto deal­er­ship work­ers, brick­lay­ers, iron­work­ers, min­ers, fur­ni­ture-mak­ers. As the cri­sis loomed, em­ploy­ers in many of th­ese in­dus­tries sig­nif­i­cantly raised their con­tri­bu­tions to strengthen their plans. But the un­der­ly­ing dynamic is in­ex­orable: more re­tirees, liv­ing longer lives, de­pend­ing on fewer work­ers in fewer com­pa­nies. At least 25 mul­ti­em­ployer plans have ap­plied to the Trea­sury Depart­ment for per­mis­sion to slash ben­e­fits, with more to come.

None of this is news to Congress, which has cre­ated a spe­cial joint com­mit­tee to ad­dress the prob­lem, cochaired by Sens. Or­rin Hatch, R-Utah, and Sher­rod Brown, D-Ohio. This bi­par­ti­san­ship is ap­pro­pri­ate, be­cause poli­cies cham­pi­oned by both par­ties – con­ser­va­tive union-bust­ing and lib­eral tax rules, for ex­am­ple – played their parts in steer­ing us to this pass.

And yes, so did union cor­rup­tion, most no­tably in the case of the Team­sters.

But beg­gar­ing the work­ers who trusted prom­ises made by their em­ploy­ers, their unions and their govern­ment is not the an­swer. Congress should move quickly on a two-pronged so­lu­tion, part bailout, part re­form.

The bailout part is tough for true con­ser­va­tives to con­tem­plate be­cause the fed­eral govern­ment is al­ready bleed­ing red ink. But con­sign­ing a mil­lion or more re­tirees to poverty is no way to save money, and cur­rent fund­ing for the Pen­sion Ben­e­fit Guar­anty Corp. is too mea­ger to de­liver on the “guar­an­tee” in its name.

As for re­form – pro­gres­sives in the new Demo­cratic House ma­jor­ity aren’t go­ing to like it. Mul­ti­em­ployer pen­sion plans need to be re­struc­tured along the same lines al­ready adopted by most pri­vate em­ploy­ers. The fu­ture of work, fu­ture life­spans and fu­ture eco­nomic growth are too un­cer­tain to sus­tain open-ended guar­an­tees of gen­er­ous monthly checks. A new cul­ture of in­di­vid­ual sav­ings must be fos­tered and ac­cel­er­ated through ve­hi­cles such as 401(k) plans and in­di­vid­ual re­tire­ment ac­counts. Min­i­mal back­stop pen­sions might be part of a hy­brid plan.

The gather­ing cri­sis posed by Amer­ica’s un­der­funded wave of baby-boom re­tirees – of which this is one sliver – is too im­por­tant to be hostage to par­ti­san ran­cor. As can­di­dates, Congress, you promised so­lu­tions.

Let’s see one.

David Von Drehle writes a twice-weekly col­umn for The Post.

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