On the Foxnews.com website, there is an article by Rachel Greszler, Heritage Foundation, discussing a potential bailout of the UMWA pension plan (coal miners). She laments the potential federal taxpayer bailout of this plan, proclaiming that this could be the tip of the underfunded pension iceberg, which she estimates could result in trillions of taxpayer funds being used to prop up these plans.
Greszler also mentions a second proposed piece of legislation that is being considered at this time, which is a loan to the insolvent plan(s). She calls the loan a bailout because “there’s virtually no chance of repayment”.
She asks, “so what happens if Congress doesn’t step in to bail out the UMWA’s unfunded pension promises?” She mentions that the Pension Benefit Guaranty Corporation (PBGC) would step in just as it has for more than 50 other failed union-run pension plans. However, she doesn’t discuss that the PBGC’s solvency is on thin ice or the fact that union workers have benefits protected at roughly 20% of private sector workers ($13,000 annually).
You may recall that Ron Ryan, Ryan ALM, and KCS are working on the implementation that supports the “loan” proposal (see the August KCS Fireside Chat). The process that has been created has been tested on the UMWA plan, as well as that of other large, poorly funded multi-employer plans, and the math works! This legislation can protect the promised pension benefits despite the current poor funded status.
Does Ms. Greszler really believe that by allowing these plans to fail that the federal government won’t play a role in subsidizing the retirement plan’s beneficiaries? The potential collapse of these plans will thrust millions of union workers onto the welfare ranks, where neither they nor their fellow citizens want them to reside!
The fact that the implementation designed by Ryan ALM works, means that this process could be the foundation for a new direction for state and municipal plans, many of which are in dire shape, too. State and city finances are coming under significant pressure because of growing pension and OPEB liabilities. Unfortunately, a significant majority of these plans continue to be managed as they have been for decades. A major rethinking is in order, and we have proposed a solution that should be given serious consideration.
The demise of the defined benefit pension system in the private sector has created social and economic issues that will be felt for generations. We shouldn’t be fooled into thinking that the elimination of these pension benefits for union and public employees could somehow be positive for our economy.