Union bosses have bamboozled millions of their members by operating inadequately funded pension plans. Now union-loving lawmakers want to spend at least $165 billion tax dollars to bail out the plans. In a detailed 80-page study released Aug. 31, the Hudson Institute, a nonpartisan policy research organization, illuminates the causes of underfunding and how political interests have played a leading role in the sorry shape of the pensions, that exist to pay promised retirement benefits to workers. The dollar estimate came from Moody’s Investors Service.
If the bailout legislation becomes law, it ultimately could cost taxpayers unknowable hundreds of billions of dollars. If the rescue is extended to public-sector employees, the cost could reach into the trillions, as will be explained.
The Hudson Institute study examines the crucial link between the bailout legislation (expansively called the Create Jobs and Save Benefits Act of 2010) to the Employee Free Choice Act. That’s the act that would snatch away the secret ballot from members voting in union elections. The Hudson Institute study shows the disparity between union and non-union pension plans. With union membership down to only 12 percent of employed wage and salary employees, “unions are striving to recruit new members,” wrote Diana Furchtgott-Roth, senior fellow at Hudson, and author of this latest update of her study. “The advertised benefits of joining a union sound appealing,” including reliable pensions. “What unions do not tell prospective recruits….is a widespread pattern of poor performance…among pension plans… compared to plans sponsored unilaterally by single employers for non-union employees (and that) many union plans are chronically underfunded.”
Furchtgott-Roth writes that legislation to bail out underfunded multiemployer pension plans sponsored by Sen. Robert Casey, Jr. (D-PA) and in the House by Rep. Earl Pomeroy (D-ND) and Patrick Tiberi (R-OHIO) “would be a mistake.” It would not only add to the $1.5 trillion budget deficit, it would “reward a union pattern of negotiating for high up-front wages and benefits while neglecting the health of the pension funds,” which workers count on for their retirement. Her new study offers explanations that illuminate the causes of underfunding.
If Congress convenes for a lame duck session after the election, with Democrats still being in the majority in both chambers, it could very well include the bailout bill as a piece of a large appropriations bill, in the judgment of Furchtgott-Roth and others. Big union labor is expected to be pushing for a multi-billion taxpayer pension bailout in a lame duck session after the elections, said Human events Aug. 23. “The union multi-employer pension trouble “was not caused by the recent economic woes but by mismanagement. The economic downturn has only exacerbated the problem.”
Pensions fall into two broad categories. 1. Defined benefit plans promise a specific monthly amount during a retiree’s lifetime. This is the type unions typically have. 2. Defined contribution plans are essentially investment accounts to which the employee, and often the employer, too, makes contributions. Employees usually can choose how the money is invested. Labor Department data show that union-negotiated pension plans “have fared consistently worse than plans sponsored by single employers for non-union employees,” Furchtgott-Roth wrote.
Pension plans for the benefit of union bosses, by contrast, remain healthy and well funded as liabilities threaten pensions of their rank and file members. Among those unions where union officials’ pensions are solid is the Service Employees International Union (SEIU) which was long headed by President Obama’s close pal, Andy Stern, the Washington examiner.com reported. Furchtgott-Roth also took note of this inequity, saying it “shows a real moral failing on the part of the [officials of the] unions.”
Labor unions contributed “more than $130 million to the 2008 Senate, House and Presidential election campaigns.” She wrote that “it’s important to know” the source of this money “and who decides how to spend it.” Many unions, such as the Service Employees International Union, “have been explicitly claiming that their memberships are financing their political agenda.” Although the Supreme Court in 2010 upheld the right of unions and corporations to spend funds on elections, political spending, by law, “it is supposed to come from voluntary contributions, not the dues that members are required to pay.” SEIU spent $70 million to influence the 2008 elections. It spent $6.5 million on Obama buttons and T-shirts, Furchtgott-Roth said. And union members each had to contribute “at least $6.”
Enforcement of the Pension Protection Act of 2006 has exposed more than 300 poorly funded plans. In the thinking of union bosses, a way to relieve the funding crisis is to sign up armies of new, young union members “who would pay into these funds for many years before retirement.” It explains why “many unions are supporting the Employee Free Choice Act,” taking away the secret ballot. This would be “unfair to workers, who, while qualifying for their own pensions, might be paying into underfunded pension plans for decades in order to fix past administrators’ mistakes,” Furchtgott-Roth explained.
In her “Union Pensions at Risk” study, five union pension funds are examined as examples of underfunded plans. “The Glaziers pension plan (Southern California. Arizona, Colorado, and Southern Nevada Glaziers, Architectural Metal and Glassworkers) whose “administrators made poor investment choices.” It became insolvent with assets of $32 million to cover liabilities of $266 million, Furchtgott-Roth said. The International Brotherhood of Electrical Workers “misleads rank and file members about the investment performance of its national retirement funds….”Three of SEIU’s pension funds were in endangered status as of 2008, and the 1199 SEIU Greater New York Pension Plan announced that it was in critical status in 2009.”
Sen. Casey, when he introduced his legislation in May, said it would “ensure the solvency “of multi-employer plans and protect the pensions of more than 10 million Americans covered under such plans. Multi-employer plans were designed to allow union members to move from union job to union job while keeping the same plan. If a company taking part in the plan because of its collective bargaining agreement should go bankrupt, the other companies participating in the plan have to pick up the pieces and fully fund these usually expensive plans. Michael H. Belzer, a Wayne State University professor and labor law expert, has blasted the multi-employer concept as an “inconceivably great failure.”
Vested union members with no participating company are called “orphans.” Casey’s bill would also put these “orphaned” union members on the dole making taxpayers bail them out so they’d get their full pensions. This could be done, under the Democrats’ scheme, through the Pension Guaranty Corporation (PBGC). PBGC would be granted the authority to pay these “orphans” for their lifetimes at taxpayer expense. At present, PBGC obligations are not obligations of the federal government. It doesn’t use taxpayer money to aid pensions. It charges insurance fees to the funds it covers, using that money to meet pension obligations if a pension fund gets in financial trouble.
The Pension Benefit Guaranty Corporation is responsible for the current and future pensions of nearly 1.5 million people, and it is already billions in the red.
The Casey bill would create a new fund within PBGC that would be taxpayer financed. Already 30,000 private-sector pensions are insured by PBGC–but through fees, not taxes. If the Casey bill becomes law, it would open the flood gates to PBGC to justify tax-paid bailouts for public-sector unions as well. And their unfunded pension liabilities add up to trillions of dollars, according to an American Enterprise Institute paper. Casey’s bill has no statutory limit on the amount of taxpayer dollars that could be doled out. And Obama, as “President Bailout,” would surely sign it. So, this could potentially drive the PBGC into the much idolized category the Democrats seem eager to call “too big to fail.”
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