Congress must address underfunded pensions before it’s too late
The congressional spending spree that’s followed the coronavirus lockdown has obligated our children and grandchildren to trillions in debt that won’t be paid off easily. The blame for this doesn’t lie with the Trump Administration but goes back over many years because Congress, no matter which party was in charge, has failed to consider seriously the financial obligations it’s put on future generations.
It’s not just Social Security and Medicare that could bankrupt us when they reach the tipping point where more retirees are living longer and healthier than the workforce can afford to support. There are other problems we can already see coming over the horizon that aren’t being addressed.
Take the issue of the public and private pension plans current and future retirees are counting on to provide for them in their golden years. Many are now badly underfunded and, if they crash, it will make the Great Recession look like a small market correction.
Both Washington and the states have for too long allowed pension plans to exist in the private and public sectors that were simply concentrated wealth under the control of so-called experts who’d keep it safe. Except they haven’t. Illinois could default anytime over the pressure created by its pension obligations to retired state workers.
The truth is these plans have been abused and raided for decades. More than once the workers have been left with nothing unless someone or something stepped in with a bailout. Alternatives exist now, like Roth IRAs and 401Ks that anyone can open. Employers can contribute to these plans, even match what their employees invest, which makes them preferable to the defined benefit plans of the past. They don’t leave everyone exposed to a potential taxpayer-funded bailout if they go bankrupt, and they give workers who participate a significant measure of control over their retirement finances.
For all the good that’s come with reform since the 1970s, there’s still a lot wrong with the existing system that needs to be fixed. There are currently about 1,400 pension funds that, as defined by the federal Pension Benefits Guaranty Corporation (PBGC), are “collectively bargained plan(s) maintained by more than one employer, usually within the same or related industries, and a labor union.” There are more than 10 million workers who’ve invested in them in everything from mining to manufacturing to trucking. They constitute a powerful voting bloc and they’re worried that their plans are underfunded and in financial trouble.
Ohio Republican Sen. Rob Portman, a leading advocate of multiemployer plan reform, estimates they’re underfunded by more than $638 billion while the PBGC, the government guarantor for pension plans, is projected to become insolvent in less than five years. Can you say problem?
Polling commissioned by the Retirement Security Coalition in swing states where control of the Senate over the next two years may be decided in the next election found voters care deeply about this issue. In Michigan, where the latest polls show the race very tight between incumbent Democrat Gary Peters and GOP challenger John James, a whopping 70% of the more than 440,400 people surveyed agreed these plans are endangered and in need of reform. Similar numbers come from states where other Senate races will help determine control of the chamber like Iowa, North Carolina, and Georgia.
The data suggests Mitch McConnell, the Kentucky Republican who runs the Senate – and presumably wants to continue doing so over the next two years – needs to make the issue more of a priority if he wants to keep his current job. Portman’s proposed a set of commonsense reforms for multiemployer plans that at least deserve a hearing – preferably before retiree benefits start getting cut and the demand for a bailout starts.
The Senate needs to get moving.