Merry Christmas, Your Pension is History

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If you’ve got a multi-employer pension, the new budget passed by Congress and signed into law by the President just maybe made it go away.  Well, maybe not all of it, but certainly a bunch of it, and maybe all of it.

Here’s the short form on how this works.

Multi-employer pension plans.  Small companies can’t get the same kind of pricing on pension benefits as large employers.  They band together, and in the case of unionized companies, with the approval of the unions, and form a “multi-employer” pension plan.  In theory it’s a better deal for everybody.  Larger pools of employees reduces the per-employee administrative cost and should provide better benefits at a lower cost.  In theory.

PBGC.  In comes the Pension Benefits Guaranty Corp.  PBGC is basically a federal guarantee of pensions.  If a firm goes out of business, the federal government makes up the difference so pensions are protected.  It’s kind of an insurance company funded by taxpayers.

Here comes the wrinkle.

Many of these plans are underfunded.  Under the old rules the taxpayers would be making up the difference when the plans run out of money.  Under the new rules, the funds now will reduce the payouts to pensioners.

Under the law, “plans that estimate they won’t have enough money to pay 100 percent of benefits within 15 or 20 years can cut benefits,” but not for retirees who are 80 or older, or those who are on disability. Cuts would also be phased in gradually, so retirees between the ages of 75 and 79 would face smaller cuts than those under 75.

Or, they could increase their payments into the plan.  Or they could raise the contributions of current employees.  In other words, there are no “good” options.

This is what happens when employees don’t own their “benefits” like pensions.  Or health insurance.

If you’re collecting Social Security, you’re in the same boat.  You don’t “own” your Social Security “benefit.”  The money you paid in over your working years were not “benefit contributions” or “premiums,”  according to the Supreme Court – back in the early 60s – you paid social security TAXES and you don’t “own” anything.  In other words the pension you are getting, or think you’re going to get, is courtesy of the benevolence of the federal government.  Those would be the same people who just pulled the rug out from under folks in multi-employer pension plans.

Social Security needs to be privatized so you can own your retirement.  Or do you really trust the federal government?  Really?

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