When people are old, should governments guarantee they have incomes?
In the 19th century — 125 years ago —
That concept spread to
Forty years ago, President
Companies could change, or even eliminate, pension plans, but workers were entitled to the benefits they had already earned. A government agency was set up to guarantee that pensions would be paid even if the sponsoring company went broke.
This year may well be remembered as the one when the fundamental tenet of Erisa, as the law came to be known, was abandoned.
The endangered pensions are not in the P.B.G.C.'s largest program, which insures pensions backed by a single company. That program is said to have a multibillion-dollar deficit, but there is no immediate danger for pension recipients.
The problem is in the area known as multiemployer pension plans. Those plans, often involving unionized workers, were once common in industries like coal mining, trucking and construction. Workers could accrue benefits while moving from employer to employer, with each employer contributing to the plan.
Those plans seemed so solid in 1974 that they were not even required to be covered under Erisa. When they were added, years later, they were put into their own separate insurance scheme.
Now that scheme is in danger of failing. The P.B.G.C. this year added two huge multiemployer plans to the list of those it expects to fail within 10 years.
It did not identify the plans, but it appears they were those sponsored by the
When those funds run out of money to pay benefits, it will be up to the P.B.G.C. to step in. It now pays a maximum of
But the P.B.G.C. says its multiemployer plan might run out of money in 2018 and is virtually certain to fail by 2025.
''When the program becomes insolvent,'' wrote
''These are generally low-paid people who worked really hard and do not deserve to be left with nothing other than
In another era, a consensus would have been reached that something should be done to prevent that from happening. It was, after all, not the workers' fault that the economy changed in ways that left unionized companies struggling to compete, or that some companies in such plans went broke, leaving the remaining ones to pick up bigger shares of the burden. It is not their fault that some plans now have four or five retirees for every active worker.
But this is the 21st century. When a commission was set up to look for solutions to the multiemployer problem — one that included representatives of pension plans, unions and employers — it started from the assumption that no government money would be available. The proposal it came up with was to allow such plans to cut benefits quickly, on the theory that depriving current retirees of income would leave some for future retirees. Such cuts would require legislation.
There are those who are outraged by the proposal.
It may not help that the multiemployer plans generally benefit union members, a group whose political influence is waning. Nor does it help that the
Erisa never covered public pensions, and there are plenty of troubles in that area now. While few companies still offer defined-benefit pensions, many local and state governments still do. But
The baby boomers now retiring — a group that includes me — may be the last American generation to leave work assured of adequate income in old age. In place of defined-benefit pensions, future generations will be left with their own savings.
Employers, private or public, are no longer willing to accept the investment risks that come from managing plans that promise benefits, so that risk has been transferred to workers. Whatever one thinks of 401(k) defined-contribution plans, they offer no guarantees and no assurances that even retirees who build up substantial balances will not outlive their money.
And the evidence is that most people are not saving much money. In ''Falling Short, the Coming Retirement Crisis and What to Do About It,'' a book to be published next week by
They say the typical household nearing retirement has only
They want to raise payroll taxes to shore up
All that makes sense. But it is a far cry from the spirit that defined the progress toward income security of the previous two centuries. Then there was a willingness to believe that those who had failed to navigate the road to comfortable retirements deserved at least some minimal level of public support. Now, with retired coal miners in danger of losing meager pensions, the political system seems unwilling to even consider a taxpayer-supported solution.
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|Source:||New York Times Digital|