Bankrupt Patriot Coal asks court to slash union pensions
ReutersApril 29, 2013
Patriot Coal Corp on Monday will seek court permission to slash healthcare and pension benefits for about 13,000 union workers, an issue that has set off weeks of street protests by affected workers.
The company, which declared bankruptcy last year, said it wants to save $150 million a year on its labor obligations to help it regain profitability.
But the United Mine Workers of America, the nation's biggest coal miners' union, says the cuts are unfair and plans to protest outside U.S. Bankruptcy Court in St. Louis when the hearing starts on Monday.
Under bankruptcy law, if companies cannot negotiate compromises with unions, they can seek court permission to impose cuts unilaterally. And because employees' claims are subordinate to secured debt like loans and bonds, worker benefits are often the first place bankrupt companies look for cost savings.
This is especially pertinent in the coal industry, where benefits for generations of retirees are shouldered by an ever-shrinking workforce.
At the hearing starting Monday before Judge Kathy Surratt-States, Patriot must show that the cuts are crucial to its survival and that a good-faith effort was made to achieve them cooperatively.
Patriot will call witnesses, and then the union will begin its rebuttal with its own set of witnesses, in a process that could go all week.
Patriot has said the cuts are not a matter of stinginess, saying that current benefit obligations could send the company into liquidation.
Under its latest offer, Patriot would cease pension contributions and replace current health benefits with a voluntary employees' beneficiary association. The VEBA would be funded by $15 million in up-front cash, plus $300 million in profit-sharing contributions and recoveries from litigation. The union would also receive a 35 percent equity stake in post-bankruptcy Patriot, which it could sell to help fund the VEBA.
Lawyers for the union have acknowledged Patriot's financial woes, which were brought on by high labor costs combined with weak coal prices caused in part by a glut of natural gas.
But they say that Patriot's bankruptcy is even harder on workers and retirees than most, alleging that former parent Peabody Energy Corp set Patriot up to fail when it spun it off in 2007.
Peabody, which retained profitable coal mines throughout the United States and Australia after the spinoff, loaded Patriot up with pension and benefit liabilities for retirees, many of whom retired before the spinoff and never worked for Patriot.
The union has filed a separate lawsuit in federal court in West Virginia, where many of Patriot's operations are centered, seeking to hold Peabody liable for the benefits workers might lose through Patriot's insolvency.
Led by Cecil Roberts, the union has staged protests in New York, Appalachia and St. Louis since Patriot declared bankruptcy in July.
Patriot also has several thousand non-union employees, with whom it reached new, consensual labor terms last week.
The bankruptcy is In Re Patriot Coal Corp, U.S. Bankruptcy Court, Eastern District of Missouri, No. 12-51502.
Bureaucrats Can Retire at 55 With a 3-Tiered Retirement Plan While Those Paying for Their Salaries, Benefits and Pensions May Have to Wait Until Age 70 to Receive Social Security Benefits and Medicare
Since 1987, federal employees including members of Congress have had the benefit of three guaranteed income payments in their retirement [for many federal retirees, their income is virtually unchanged — their retirement income is almost as much as their income while still employed by the federal government; and because they can retire so young, many of them start a second government career, double dipping into the public treasury].- First, like nearly all other workers, they receive Social Security.
- Second, like many workers, they have a 401k-style plan with an employer match (known as the Thrift Savings Plan or TSP).
- And third, like most public sector workers, they also receive a traditional pension through a system known as FERS (the federal employment retirement system).
Currently, U.S. citizens cannot collect Social Security benefits until age 62 (lawmakers are considering raising this age to 67 or 70). The maximum Social Security benefit at age 62 is $21,636 per individual. [Source]
The Pension Benefit Guaranty Corporation (PBGC) is an independent agency of the United States government to guarantee payment of basic pension benefits earned by more than 44 million American workers participating in more than 27,000 private-sector defined benefit pension plans. If a company ends its pensions and hands the obligation for future payments to the PBGC, the agency limits how much it will pay, with the current top benefit now $54,000 a year for people who retire at 65; less for those who retire earlier. [Source]
The captains of “private” industry pump their bottom line for years with their worker’s pension contributions (much like the federal government has done with Social Security receivables). When it comes time to pay the pensions they dump the obligation onto the taxpayer through the Pension Benefit Guarantee Corporation which was reported to be $12.9 in the red for 2009. Once again, the taxpayers are funding their own servitude while the ownership class pillages on the way up and on the way down. [Source]
U.S. Insurer of Pensions Sees Flood of Red Ink
The New York TimesMay 20, 2009
The deficit at the federal agency that guarantees pensions for 44 million Americans tripled in the last six months to a record high, reaching $33.5 billion, largely as a result of surging bankruptcies among companies whose pensions it expects it will soon need to take over.
The agency, the Pension Benefit Guaranty Corporation, faced a shortfall of just $11 billion as of October. The combined effect of lower interest rates, losses on its investment portfolio and rising numbers of companies filing for bankruptcy produced the jump in its projected deficit, officials said Wednesday.
Because the agency has $56 billion in assets — most of which is invested in Treasury bonds — it is not facing any prospect of default in the short term, officials said.
“The P.B.G.C. has sufficient funds to meet its benefit obligations for many years because benefits are paid monthly over the lifetimes of beneficiaries, not as lump sums,” the agency’s acting director, Vince Snowbarger, testified Wednesday at a Senate hearing. “Nevertheless, over the long term, the deficit must be addressed.”The financial troubles are just a small part of the challenges facing the pension agency, which was created by Congress in 1974 and today is responsible for pension programs covering 1.3 million people. It pays about 640,000 people actual benefits worth about $4.3 billion a year.
The P.B.G.C.’s former director, Charles E. F. Millard, was subpoenaed to testify at the hearing Wednesday. But he cited his constitutional right to avoid self-incrimination and declined to answer any questions.
Mr. Millard, who resigned in January, has been accused by the agency’s inspector general of having inappropriate contact with companies including BlackRock, JPMorgan Chase and Goldman Sachs, all of which competed for and won contracts to help manage $2.5 billion of the agency’s funds. Those contracts will now most likely be canceled.Employers nationwide with so-called defined-benefit, or traditional, pension plans pay fees to the P.B.G.C. in return for a promise that it will take over their pension plan if a company fails.
On Tuesday, for example, the agency announced that it had assumed the pension plan once run by the Lenox Group, a bankrupt maker of tableware, giftware and collectibles based in Eden Prairie, Minn. Assuming control of pensions for this company’s 4,300 workers will cost the agency an estimated $128 million — the difference between what Lenox had in its pension fund and what the total estimated obligations are.
In the last six months, 93 companies whose pension plans are covered by the agency have filed for bankruptcy, including Chrysler, whose failure alone could cost the agency $2 billion. A bankruptcy by General Motors would make the situation worse. G.M. had 670,000 workers as of late last year in its pension system, whose collapse would cost the agency an estimated $6 billion.
Options to close the $33.5 billion deficit include a federal bailout by taxpayers, a change in insurance premiums it charges employers, or increasing its investment returns.
Last year, the agency’s board voted to allow it to shift its investment strategy to put more money into stocks, private equity and real estate, in an effort to reduce the deficit. If that shift had taken place, the losses would most likely have been larger. But only a relatively small amount of the funds have already been shifted to stocks, so the losses on the investment portfolio were responsible for just $3 billion of the jump in the deficit in the last six months.
Senator Herb Kohl, Democrat of Wisconsin and chairman of the Senate Special Committee on Aging, which held the hearing Wednesday, blamed poor supervision by the agency’s board and management, at least in part, for the troubles, adding that he intended to introduce legislation that would expand the board and require it to meet at least four times a year. The board has not met in person since February 2008.
“The role of P.B.G.C. is too crucial to allow its governance to slip through the cracks,” Mr. Kohl said.
50,000 General Motors Retirees Face Destruction of Benefits
World Socialist Web SiteJuly 17, 2009
Earlier this week the WSWS spoke to a General Motors IUE retiree who responded to our article on the bankruptcy court’s approval of the sales of GM assets.
Tom Micale is a retiree from the Delphi Battery plant (formerly Delco Battery) in New Brunswick, New Jersey, IUE Local 416.
WSWS: Tom, how long did you work at General Motors?
Tom Micale: I started working for GM when I was 19 years old. I retired in 1999 when I was 49. I worked for the Delphi division of General Motors, in New Brunswick. I retired shortly before General Motors got rid of Delphi.
We had a choice to retire under GM, or to continue with Delphi. I thought I was making the best decision by going with General Motors. They implied that when we retired we would have lifetime pension and lifetime health benefits, even though when I retired that wasn’t my goal.
A couple of years after I retired, I worked at a battery division at Delphi. Delphi got rid of the division. Within a year, Johnson Controls, which bought the battery operations in 2006, dumped the two battery plants that it had operated. The New Brunswick plant closed in 2007.
Delphi declared bankruptcy in October 2005, as you know.
So I thought that I had made the right decision go with GM. Then things began to happen to the economy, and later General Motors declared bankruptcy, that’s when this whole thing started.
When I saw what had happened with the UAW and their VEBA, I thought perhaps we would be all right. However, I started really researching the GM bankruptcy proceedings, and it came to my attention that things were not as they appeared to be.
WSWS: Now, you are one of the tens of thousands of IUE and other non-UAW retirees facing the immediate elimination of your benefits. What is happening at this point, as far as you know?
TM: We have not received any official notification, but I have read the bankruptcy court judge’s decision, and as of right now my medical benefits are with the “Motors Liquidation Company” of GM [“the bad company”].
I can’t verify it, but I have read that the “old GM” intends to file a request to the judge within a few days concerning the benefits to retirees, because it cuts too much into the monies they have. And I fully expect by the end of the month that that will occur, and that we will, in fact, have lost all of our benefits.
As far as my pension is concerned, I am on what they call a Supplemental Pension, which is a base pension. GM makes up the difference between the base pension and what I will get when I qualify for full Social Security. Although under the contract, I will be required to file for Social Security when I am 62 at reduced benefits, so it will be somewhat less than what I get on my supplemental.
I cannot find out—and I have researched it! ... I cannot find out whether or not the pension has gone with the new GM, or is staying with the old GM. If the benefits stay with the old GM, it is most likely they will turn the pension over to the government’s Pension Benefit Guaranty Corporation, and they do not pay supplemental pensions. So I would take a hit on my pension by about 60 percent, from $2,400 to a little over $900.
WSWS: To be cut that much is drastic.
TM: If I sound like I am crying the blues or something, stop me. I don’t want people to feel sorry for me. I feel fortunate compared to some of the other retirees. My wife and I lead very simple lives. We don’t spend a lot. I live in South Carolina. I paid for my house. I don’t owe money to the bank.
We don’t qualify for Medicare for five years. But whatever savings I have is sucked out by the medical industry in this country. My wife has rheumatoid arthritis and asthma. She was young, 40 years old, when she was diagnosed with it. That was twenty years ago. She has been on every kind of medication there is. The latest one is often given to cancer patients and people who have transplants.
She started it two weeks ago, and it costs $1,600 a month. Not including her other medicines. With the medicine I take—I have heart disease—our costs for medication alone are $2,400 a month. And that doesn’t include doctor’s bills.
If I deplete my savings, and I would say that will happen within the next five years, only then will I qualify for Medicare or any form of charity care. If the benefits from GM are cut, we will eventually have to apply for charity!
I have to tell you, this is a shock, an absolute shock to me. I never expected this.
I also care for my mother who has Alzheimer’s disease. She was in a nursing home, but I couldn’t leave her there. I’ve cared for her for three years, and also my wife’s two brothers for the last six years. They’re legally blind and totally deaf. They each get a small Social Security payment, which helps defray some of their costs, but the time is totally spent at home doing this.
WSWS: Could you tell me more about the decision of GM to file under Section 363 of the Bankruptcy Code and not Section 1114, which provides more protection?
TM: In my opinion it was all worked out beforehand by the government. It is unprecedented for a company the size of General Motors to go through bankruptcy in 40 days. It should have taken years.
At Delphi, which was one of their suppliers and a much smaller company, it has been four years and they are still working through bankruptcy. It’s just unprecedented, and I believe the whole thing was orchestrated before it ever got to a judge. Not only do I feel GM orchestrated this, I believe the government of this country orchestrated this. We are collateral damage.
WSWS: What do you think of the role of the UAW? It hasn’t said anything in defense of the IUE retirees.
TM: I think its great for the UAW to negotiate a VEBA and have a little bumper on their bumpers. From 1986-89 I was the shop chairman of the IUE, or shop steward, so I was involved in the union at that time as an officer. I can see it from the other side. What I see, however, is the total lack of support between the UAW and the other smaller unions. The unions have morphed into something that is no longer for the workingman, but merely better than nothing.
WSWS: This agreement was not negotiated for the benefit of the UAW workers, but for the benefit of the UAW officials. The last contract will bring new hires in at half the wages.
TM: I have to be honest here. I did the same thing to my local. I bowed to the pressure from my own plant, from those about to retire and from the IUE, and I was the one who negotiated our first ... what we called “competitive agreement.” It was a two-tier agreement, which brought people in at half our wages. It was the biggest and greatest mistake I have made in my life, and I have made many!
I regret it to this day. But the unions have gotten away from the principle of solidarity. Like I say, I was only in office three years, but during that time I got to see how the unions really operated. I was not disappointed that I lost the election, and I lost the election because of the two-tier wage system.
People brought in at lower wages were convinced that the man who ran against me would get their wages back, which would never happen. This was a real eye-opener for me. I had expected better until I saw how a union operated on the national level.
WSWS: Barack Obama came in saying he was going to save jobs.
TM: I supported Obama. In the last 30 years, there have only been two presidents I’ve voted for. I believed Obama. I am gravely disappointed since he took office; he is barely doing anything he said he was going to do. When he does, it is more heavily weighted, like the Republicans, for the wealthy in this country. The rest of us are just incidental, despite what he says.
We have a Congress that is majority Democrat, but again it shows that the Democratic Party does not have the courage to do anything. For example, they are supposedly working on this health plan, which I wholeheartedly support. But I don’t expect that anything will come from this Congress that’s going to help me or most Americans. It’s going to be a token.
I don’t have any confidence in them. I’ve lost my entire faith in this so-called representative government. It’s a shame. After 59 years of living in this country and following the rules, I’m just losing faith in the way things are done.
The health care plan will be a boondoggle for the health care providers. The elite in this country do not want a national health care system. As long as we pay taxes and buy their products, that for them is the bottom line.
The auto industry was doing poorly because the entire economy was doing poorly. When people tell me the autoworkers made too much money, they don’t understand we paid for those benefits by the hard work we did. I made a good living, but we paid for this with our sacrificing.
WSWS: They are trying to condition people to accept lower living standards. Those gains were the result of a long history of struggle. It was socialist-minded workers in the 1930s who led the struggles to form industrial unions.
TM: There is still on the local level a belief in the principles of the unions, but at the International level it is something entirely different. I saw it first-hand. Featherbedding, and “let’s not make waves” ... I hate it. It’s at the expense of the common, working man. That is why I am still trying to contact retirees, and so on. I want to bring some attention to the plight of the retirees.
I am not looking for the unions to support me in that. It’s something the people have to do themselves. If no one else will do it, I’ll be alone, walking on a picket line. But people in this country have do something and begin to take their country back.
There was a belief that this country had numerous classes, from the extremely poor to the middle class, right on up. There are two classes in this country now, the rich elite and everyone else. This past decade, it has hit us right in the face. In the past, the elite didn’t want us to know that. But now, they don’t even care, because they don’t think we’ll do anything and will be complacent.
The system is broken. I think at some point in time, this country will have a third party. My views have always been on the far left, which cross into socialism in many respects. That’s the way I feel. I honestly am for the working people. I think it is unacceptable that the poorest of the poor don’t have a meal.
After Declaring Bankruptcy So That It Could Cut Wages, Pensions and Benefits, GM Posts Its Highest Profit Ever: $7.6 Billion
The Associated PressFebruary 19, 2012
Just two years after it was rescued and reconstituted through bankruptcy and a government bailout, General Motors Co. cruised through 2011 to post the biggest profit in its history.
GM, which released its earnings Thursday, performed best in its home territory, posting a $7.2 billion pretax profit in North America. The numbers were so good that 47,500 blue-collar workers will get $7,000 profit-sharing checks, the maximum allowable under their new union contract. International Operations, which includes Asia, made $1.9 billion before taxes, but that was down from 2010.
Why a Millionaire Wants Autoworkers to Take a Pay Cut
Yahoo! AutosDecember 16, 2011
The former head of the Obama administration's auto task force says he should have pushed the United Auto Workers for steeper sacrifices in the General Motors bailout, including wage cuts. The people earning $9 a hour in a suburban Detroit GM plant would disagree.
Former auto czar and wealthy Wall Street financier Steven Rattner told a luncheon in Detroit on Thursday:
That while the $50 billion GM bailout was successful, "we should have asked the UAW to do a bit more. We did not ask any UAW member to take a cut in their pay."He also said that "friends on Wall Street" were concerned by GM's earnings and communications with the market, pushing the stock down to a level that would lose the government $14 billion if it sold its shares today.
Meanwhile, at General Motors' Orion Township, Mich., plant about 45 minutes away from where Rattner spoke, there are three tiers of hourly workers.
- Roughly 900 workers at the top tier, the most senior UAW workers, make $29 an hour, a rate unchanged since 2008.
- Another 500 or so UAW workers are paid about $16 an hour — a rate, adjusted for inflation, equal to the famed $5 a day Henry Ford started paying his workers in 1914.
- And at the bottom scale are 200-odd workers technically employed by an outside supplier but who work in the plant moving parts to the assembly line, jobs once done by GM workers paid $29 an hour. The contractors' pay: $9 an hour with no health care, a rate which over a year's work would leave them below the poverty level for a family of four.
GM's North American arm posted operating profits of $5.7 billion in the past nine months, on which it will pay little to no federal income tax thanks to a law passed during the bailout preserving tax credits from the years when it bled money. The estimated savings to GM of its tiered wages at Orion: $112 per vehicle, on Chevy Sonics and Buick Veranos that start at $14,500, and can sell for $29,000. By GM's own stats, $29,000 is also the average annual wage of all GM hourly and salaried workers at Orion.
The UAW wants to move tier two workers up in the coming years, while all three Detroit automakers expect to expand the number of workers being paid the lower wage. Rattner's friends on Wall Street may want GM to cut deeper and answer their whims, but I don't see many of them embracing a life of poverty just to keep their jobs -- despite their far larger bailout.
Why America Faces a Big Fat Greek Bankruptcy
Public sector employee unions have no legitimate public purpose, but are instead in league with bureaucrats against the taxpayer.By AmericanElection.com
May 6, 2010
Why We’re All Greeks Now.
Forget Global Warming -- Catastrophic Government Spending Is the True Threat to Our Survival.
Have you read the news lately? Greece is bankrupt. The entire country was poised to default on its debt, when the European Union (led by Germany) and the IMF (led by the USA) decided to bail them out…or risk the collapse of the entire EU and their currency, the euro. As always happens any time government is involved, the dollar figure necessary to save Greece keeps rising…first it was $50 billion…then $100 billion…now $145 billion, the biggest loan to a country ever.
But here’s the clincher -- this gigantic loan will last only one year. The IMF (International Monetary Fund) assumes in one year, when Greece needs more money to stem the flow of red ink, they’ll be financially stable enough to attract loans on the open market, with no more government help. But what if the IMF is wrong? Then we’ll see one big fat Greek meltdown -- taking all $145 billion down the tubes (much of it from U.S. taxpayers). That’s assuming that Greece is telling the truth about their debt in the first place. But just like the U.S. government, Greece has lied to themselves and their citizens for years. And just like AIG, GM, Fannie Mae, Freddie Mac, and the failing public school system in America, the money we give Greece will never be enough. It’s a bottomless pit.
But Greece is the EU’s smallest problem. The other PIGS (Portugal, Italy, Ireland and Spain) are in far deeper trouble than Greece. Unfortunately the EU and IMF just used up most (if not all) of their bullets on Greece. There isn’t enough money in the world to bail out the rest of Europe. We are staring at economic Armageddon.
So what caused this? Very simply, big government and government employee unions. Greece’s problem is Europe’s problem…and following closely behind, America’s problem too. We’re all Greeks now. Quite simply, Greece’s problem starts and ends with government employee unions.
- There are too many government employees (1 in 3 Greek citizens works for government);
- Their salaries are way too high;
- Their bonuses can only be described as insane (2 months for each public employee);
- Their pensions are ridiculous (retirement far too young and free healthcare for life); and
- Their government jobs are guaranteed for life.
The solution to save America from economic Armageddon? Simple. Use the same “austerity measures” imposed upon Greece, in return for this $145 billion loan, to dramatically cut spending on government employees:
- Freeze government hiring for the next 3 years.
- Eliminate bonuses and raises for the foreseeable future.
- Institute layoffs and across the board wage cuts. Why should government employees enjoy “privileged status” that no employee in the private sector enjoys?
- Change pensions from ‘defined benefit’ to ‘defined contribution’ pension plans, meaning retirees receive only what has been built up in their 401K-type retirement accounts.
- Raise the retirement age. In Greece it is going from age 53 to 67. Gold-plated pension plans are the single biggest factor that bankrupted Greece. The same problem bankrupted U.S. automakers GM and Chrysler.
- Require government employees to pay more of their healthcare (through co-pays and deductibles).
- Change the way pensions are calculated by eliminating overtime and raises in the last years of employment to “game the system.”
To give you some perspective, the New York Post recently reported that one New York firefighter is retiring on a pension of $240,000 per year. If he lives 40 years beyond retirement, that will cost the taxpayers almost $10,000,000. That’s for one single government employee.There are millions upon millions of them on the federal, state and local level. Can you say “fiscal disaster?”
Government employees should be cheering these solutions. The plan above might actually save their jobs and pensions. But keeping the status quo of unsustainable spending will sink this country -- in which case government employees will lose their jobs and pensions. Anything that saves our economy, will be healthier for them (as well as the rest of us) in the long run.
It turns out that the Greek model is the American model. It turns out that we need saving too. We're all Greeks now. We either stop the insanity or we wind up with our own big fat Greek bankruptcy.
Private Union Pensions Are the Next Bailout
CNSNews.comAugust 18, 2010
The addition of a powerful Senate ally may be what supporters of a new union bailout bill need to get legislation passed that would put the responsibility for funding union pension plans on the shoulders of American taxpayers.
That new ally is Senate Majority Whip Dick Durbin (D-Ill.), the Senate’s number two Democrat and longtime union ally. The bill, the Create Job and Save Benefits Act of 2010, is the plan of Sen. Bob Casey (D-Pa.) and had languished in committee since March 23.
With the addition of Durbin – who lent his support shortly before the Senate went on summer break – the bill could
see new life, especially
since Senate Democrats failed to pass the Employee Free Choice Act,
known as Card Check, a top priority of their union allies.The bill would allow the federally chartered Pension Benefit Guarantee Corporation (PBGC) to use taxpayer money to bailout so-called “orphan” benefits plans.
Currently, the PBGC acts as an insurance fund for retirement pensions, charging a fee to extend coverage to private pension plans, should those plans fail. In the event that a pension fund cannot pay the benefits it promised, the PBGC can step in and use the fees it collects to pay benefits. The PBGC is not allowed to tap into taxpayers’ money to bail out pension plans.
The problem for many union pension plans is that they are structured as multi-employer plans, which means that employers in certain unionized industries contribute to the plan. While employers are required to fund the plans, they do not control how that money is invested, a responsibility that falls to the unions.
In the wake of the 2008 financial crisis and recession, many of these plans have gone into distress, facing both funding and liquidity issues as the value of the plans’ assets have declined and some of the businesses funding them have closed.
This poses a problem because if a company goes out of business, it can no longer fund the pensions of its former employees, even though those workers can still draw from the pension fund. This places increased financial strain on the remaining companies and puts pressure on the unions to cut benefits.
A 2009 report from Moody’s Investment Services found what other economists had previously warned about: that many union pension funds were already underfunded and would probably not be able to pay out all of the benefits they had promised to current and future retirees. This becomes a major problem for the unions because their plans are defined-benefit plans that promise to pay a certain level of benefit no matter what.
The underfunded state of many union plans -- 27 such plans far this year -- could prove disastrous for the unions, since the PBGC will only pay a maximum of $12,870 per year per retiree if it bails out a multi-employer pension.
When a multiemployer pension is unable to pay promised benefits it goes into critical status, a designation that allows the PBGC to take it over and begin paying benefits. The Casey bill would solve many of the union plans’ problems by shifting the burden from the unions to the taxpayers, shielding the unions from having to accept the reduced benefits that come when the pension plans go bankrupt.
Plans that are considered critical are those with only 65 percent of the assets needed to pay all current and future benefits. When a plan goes into critical status it must immediately cut its vested benefits.
Casey’s bill would set up a special “fifth fund” within the PBGC that would be used specifically to bail out multi-employer pension plans that fail and assume critical status. Once a plan goes into critical status, the Casey bill would empower the PBGC to step in and draw from the fifth fund to pay out benefits.
The PBGC would then guarantee the benefits of union pensioners.
“The monthly benefit of a participant or a beneficiary … which is guaranteed under this section by the corporation with respect to a plan is equal to the nonforfeitable benefits of such participant or beneficiary” before the plan went bankrupt, according to the legislation.In recognition that many union plans -- confronting a combination of increasing liabilities and decreasing funding -- are likely to face serious financial difficulties in the future, the Casey bill allows the PBGC to use taxpayer money to fund the union pension bailout.
“[O]bligations of the corporation [PBGC] which are financed by the fund created by this subsection shall be obligations of the United States,” the bill states, meaning that the federal government -- “obligations of the United States” -- would ultimately be responsible for paying the pension benefits of union retirees.
The Union Pension Bailout
National Center for Policy AnalysisJune 1, 2010
Feeling tapped out after stimulus, ObamaCare and everything else? Senator Bob Casey has one more deal for you. If the Pennsylvania Democrat gets his way, U.S. taxpayers will also pick up the astonishing tab for poorly managed union pension plans, says the Wall Street Journal.
Casey is gathering support for his "Create Jobs and Save Benefits Act," a bailout for union run retirement plans. Similar to House legislation from North Dakota Democrat Earl Pomeroy and Ohio Republican Patrick Tiberi, the bill would transfer tens of billions of dollars worth of retiree liabilities to the Pension Benefit Guaranty Corporation, i.e., to taxpayers.
At issue are multi-employer pension plans, in which companies across an industry pay into a single pension pool:
- The plans are predominately run by unions and for years have distinguished themselves by poor management.
- The Labor Department in 2008 listed 230 multi-employer plans that were either endangered (less than 80 percent funded), or critical (less than 65 percent funded), or that had applied to government for funding relief.
- By 2009 that number had soared to 640.
Unions love multi-employer plans because they let workers keep their retirement benefits even if they switch jobs to another participating company. This encourages lifelong union membership. Unions are less enthusiastic about paying the bills. The negotiating priority of union leaders is to get hefty wage increases and benefits for current workers, leaving the scraps to the pensions of retirees who no longer vote in union elections, says the Journal.
Source: The Union Pension Bailout: A scheme for taxpayers to cover mismanaged multi-employer plans, Wall Street Journal, June 1, 2010.
Update: The Next Pension Bailout , Wall Street Journal, August 15, 2010.
Obama Plans to Takeover 401K to Bail Out Union Pension Funds
For the first time, taxpayers may become responsible for the nongovernmental pension liabilities of union collective bargaining contracts in construction, trucking and other industries in which workers move from one employer to another. Some estimate that these multi-employer pensions are $165 billion short of committed obligations for paying retirees' defined benefits. It's not a new problem, but it has been under the radar for years as it's worsened. - Editorial: Private union pensions the next bailout?, The Orange County Register, August 20, 2010Gateway Pundit
May 4, 2010
The Obama Administration is making plans to take over the nation’s 401(k)s in order to bail out their union backers and their bankrupted pension plans.
Connie Hair at Human Events reported:
In February, the White House released its “Annual Report on the Middle Class” containing new regulations favored by Big Labor including a bailout of critically underfunded union pension plans through “retirement security” options.Republican Leader John Boehner released this statement today in response to this recent move by democrats:
The radical solution most favored by Big Labor is the seizure of private 401(k) plans for government disbursement — which lets them off the hook for their collapsing retirement scheme. And, of course, the Obama administration is eager to accommodate their buddies.
Vice President Joe Biden floated the idea, called “Guaranteed Retirement Accounts” (GRAs), in the February “Middle Class” report.
In conjunction with the report’s release, the Obama administration jointly issued through the Departments of Labor and Treasury a “Request for Information” regarding the “annuitization” of 401(k) plans through “Lifetime Income Options” in the form of a notice to the public of proposed issuance of rules and regulations. (pdf)
Keep Bureaucrats’ Hands off Americans’ 401(k)sSeveral GOP House members signed on to a letter delivered to labor Secretary Hilda L. Solis and Treasury Secretary Timothy Geithner expressing their concerns today.
House Republican Leader John Boehner (R-OH) and members of the House GOP Savings Solutions Group sent a letter to Labor Secretary Hilda Solis and Treasury Secretary Timothy Geithner warning the Obama Administration that the government should keep its hands off of the retirement savings of Americans, and should reject proposals that would dismantle or nationalize the private 401(k) system in favor of a government-run retirement security regime. Several Administration officials, including the Vice President, have voiced support for efforts to create so-called “Guaranteed Retirement Accounts” or impose new government mandates which would undermine 401(k) retirement savings plans and jeopardize employers’ willingness to continue offering them to their workers. Boehner issued the following statement:
“The American people are asking ‘where are the jobs?’ They aren’t asking for job-killing policies that jeopardize their retirement savings. Unfortunately, Washington Democrats are pursuing policies that make it more difficult to offer 401(k) savings plans to their workers, and some are even advocating replacing them with government-run accounts and ending 401(k)s altogether. That’s unacceptable and not the solution Americans need at a time when they are still rebuilding their retirement, college, and personal savings.
“Republicans are committed to offering better solutions, and the proposal we have offered – the Savings Recovery Act – will help restore Americans’ savings and ensure that Washington does not stand in the way of families’ ability to save more. It’s time for Democrats to stop advocating policies that will destroy Americans’ savings and work with Republicans on better solutions to help rebuild them.”
Related:
- Total U.S. Federal Revenue Requested for 2013 is $2.9 Trillion and Total Expenditures Requested is $3.8 Trillion (for a Deficit of $901 Billion); Obama Orders $109 Billion of Reductions to Military and Domestic Programs Starting in October 2013
- Federal Agency Which Insures Private Pensions Shifted to Stocks Just Months Before the 2008 Collapse
- Pension Tsunami is About to Hit
- Congress Has No Authority to Steal the Fruits of Your Labor
- The Problem Is Not Public Employee Wages (Federal Civil Servants and Public School Systems Being the Exception), It Is the Pensions and Benefits
- Collective Bargaining in the Public Sector