|ALAN FRAM, Associated Press|
But with many companies already freezing or getting rid of pension plans, many critics are reluctant to force the issue.
Some expect the changes, passed by
The equation underscores a harsh reality for unions, consumer advocates and others who normally go to the mat for workers and retirees: When it comes to battling over pensions, the fragile economy of 2012 gives the business community a lot of leverage.
"That wouldn't do our members any good" if the government forces companies to make pension contributions they can't afford, said
Even the Pension Rights Center, which advocates for pensioners, was torn. Executive Vice President
The short-term contribution cuts worry
Nearly half of Americans say they are counting heavily on their pensions for retirement, according to an Associated Press-LifeGoesStrong.com poll conducted last October. Yet times are rough for pensions.
Only 15 percent of private sector workers participate in defined benefit plans, which guarantee company-paid monthly retirement payments, according to the
During that same period, the number of workers in defined contribution plans, like 401(k) investments to which workers and companies contribute, has grown to 43 percent. These plans are considered less advantageous for employees because workers contribute much of the money and bear the investment risk.
Four of every five of the 27,000 single-company pension plans insured by the government's
Liabilities are due over workers' lifetimes, not all at once.
More than one in four companies have frozen benefits, meaning employees can no longer collect a bigger check in retirement by working additional years or getting promotions and raises. In the government's 2011 budget year, the PBGC took over 152 plans, bringing to nearly 4,300 the number it controls or is planning to take over, covering 1.5 million workers and retirees.
The bill Obama signed into law last Friday renews transportation programs and extends low interest rates on student loans. It was partly paid for by changing pension laws. It would raise around
That computation change will let companies estimate their pension fund earnings by assuming the interest rate will be near the average of the past 25 years, rather than the past two years when interest rates have been extremely low. Since they will now be able to assume that their pension investments are earning higher profits, they will be required to contribute less money from corporate coffers to make up the difference.
The government makes money because companies will make fewer pension contributions, which are tax deductible.
Employers disliked the previous system because interest rates bounce around from year to year, making pension contributions hard to plan. Business leaders also complained that low interest rates meant the old formula was forcing them to make artificially high contributions, diverting money from other priorities.
"It means we're not going to be going out and hiring people, building more factories, giving more benefits to people" with that extra money, said
Workers should be concerned that the old requirements were hurting "to the point where they have to be more worried about their jobs," said
The contribution reduction would peak at
For now, failing to use current interest rates means "plan underfunding will worsen, threatening not only the pension system" but also the federal
To help address that, the new law will gradually increase the
When the PBGC takes over a pension plan, it pays retirees the full amounts they were entitled to, up to an annual maximum of nearly
The new system is riskier because there is no guarantee that pension funds will earn more than today's low interest rates, said
"I think it should make people wary," Fuerst said, but it shouldn't be their prime concern.
"What they should really look to is, is the company that sponsors their pension plan a financially strong company" that can weather market ups and downs, Fuerst said.
Many analysts say with such large sums invested in corporate pensions, they don't expect the reduced contributions to have a major impact.
"Lowering contributions is not desirable, but the amount by which contributions are lowered is probably not that substantial," said
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