Pensions: Stop Shafting Employees

By Bob Gerecke and Andy Winnick

Insurance companies cannot arbitrarily reduce what they have contracted to pay.  Why should both private companies and governments be allowed to break their pension contracts when they wish?

Private employees began to lose their pensions several years ago.  Many companies failed to fund their pension obligations.  Some of them then declared bankruptcy to avoid making up the funding deficit.  Others simply stopped funding or reduced future pension credits to existing as well as new employees.  Either way, they cheated their existing employees by failing to keep their promises.  Employees had accepted lower pay in return for a better retirement.  The employer's failure to fulfill its side of the bargain is wage theft as well as pension theft.

Public employees have also been promised retirement benefits in lieu of salary increases, and then many agencies failed to fully fund their pensions.  Now those agencies, too, are trying to stiff their existing employees.  Some are writing ballot measures that will ask voters to approve stiffing their employees.  Don’t vote for such measures.

Even Social Security is under attack.  False "conservatives" in Washington want to pay us less than we were promised rather than increase the trust fund's income by raising the salary cap or contribution rate or by investing in securities which pay more than Treasury bonds. These same alarmists falsely claim that Social Security is taking in less that it is paying out. They fail to understand (or maybe they just fail to admit) that with the modest income the 3 trillion dollar Social Security Trust Fund earns, that fund is still growing and will do so for some years.

When an insurance company sells you an annuity, it promises a return of no less than a certain percent.  It promises to return more if it can afford to do so.  It also promises that you'll be able to select payouts which are guaranteed.  If the company promised more than it could ever deliver, or it if made less on its investments than it expected, it doesn't get to change the terms of your existing policy.  It has to promise less to new customers or improve its investments or both.  The same should go for pensions and Social Security.  Contribution rates should be set by actuaries, not executives or politicians, and the law should require that the contributions be made.  That's a ballot measure that should be supported.

Whenever the big shots mess up -- whether it's funding pensions or Social Security, writing mortgages or speculating on derivatives -- they expect to get away with it and to make the rest of us pay for it.  One of their tactics is to turn us against one another, for example by saying "if you don't have a decent pension, they shouldn't either".  Corporate and public officials who fail to meet the financial obligations which they freely undertook should be personally liable for at least a reasonable percentage of the losses they cause to others. This would be accountability that might make a difference There’s another ballot measure sensible people would support.  It wouldn’t be enough to cover all of the past losses, but it would change their behavior in the future.

In addition, the cure for your inadequate retirement plan isn't to make another retiree poorer.  The cure is to have a better deal for all.  Many other countries have figured it out.  We can, too.