When Did Pension Become a Bad Word?

The United States of America is the greatest country on earth, but unfortunately it isn’t perfect. Our economic system is falling short of what it is alleged to be doing: setting up a decent job for everyone who wants a job.

To generate jobs, we need an end to bad trade deals, improved regulation of the financial industry and fairer rules for unions to organize workers. We also really need to fix our pension system.

Pensions have become a bad word lately, probably because fewer people have them. Some individuals don’t even comprehend what pensions are. Pensions are basically annuities for people who contribute to them, either by deferring some of their wages or paying directly into the fund. They are called "defined benefit plans" because pensions offer a specified monthly amount to recipients. Pension funds are managed by investment professionals who're imagined to know very well what they’re doing.

Our country’s private pension system has been gradually dismantled. With 401(k) plans, companies have shifted responsibility for retirement planning to their employees. Many 401(k) plans have been ravaged by high hidden fees and market downturns. I’m concerned that millions of baby boomers will retire in the coming years and find their 401(k) plans are grossly underfunded.

Congress did not create 401(k) plans using the intention of replacing pensions. They were meant to supplement pensions and Social Security. While pensions aren’t perfect, you’re generally more contented having a pension than a 401(k).

There are many, many small company owners that would like to do the proper thing by their employees and promise them a comfortable, secure retirement. However, they don’t have the knowledge to manage a pension fund. The solution: multi-employer pension plans, which covers workers from multiple companies.

About two thousand companies contribute to one multi-employer fund; ninety percent of them employ fewer than 50 people and the typical annual benefit is about $14,000.

In multi-employer plans, company contributions to the fund are collectively bargained. Multi-employer plans aren't union run. They’re managed by trustees chosen by both management and labor, and they are managed by investment professionals.

Like some single-employer pensions, some multi-employer plans are in trouble. They suffered from the worldwide financial crisis and structural changes within the economy that have forced many contributing employers out of business.

A few years ago, Congress passed through new rules that raised the amount companies must give to the plans. These new funding laws are threatening the survival of many small businesses. Unless Congress acts, some must divert cash to the multi-employer plans instead of expanding their companies. Other small businesses will lay off workers and some may shut down.

As of July 2010, legislation to ease the hardship of these employers has been proposed by Democratic Senator Bob Casey of Pennsylvania, Democratic Representative Earl Pomeroy of North Dakota and Republican Representative Pat Tiberi of Ohio. The bills will lessen the burdens of companies who have to pay for retirees whose employers went under. They’ll also prevent a downward spiral that stiff funding requirements drive employers out of business that will trigger even stiffer funding requirements driving even more employers out of business.

These Congressional bills deserve the support of all citizens. Because they will help our economy creates jobs. Therefore, they will help all hard-working individuals.







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