Beware: Your Pension May Be In Trouble

I happened to see an AP news item that some 300 large corporations were sending a letter to Congress asking that certain portions of the Pension Protection Act of 2006 be delayed. These stipulations required that companies fully fund their pensions. However, with investments in funds plummeting on the stock market, many companies now find their pensions once again severely underfunded. Companies want more time to fully fund the pension plan.

However, these pension plans would not be underfunded had the companies invested in the pension instead of pointing that money into other business operations (or worse into obscene executive compensation). That is, the company management made a good short-term decision at the cost of a bad long-term decision. Now they want a no strings bye on the funding requirement. It amounts to another bailout, this time funded by your retirement pension, and enabled by your representatives in Congress.

Like the other bailouts passed by Congress or being considered, big business is basically extorting money from their employees. If they don't get relief on pension finding, they may have to lay-off employees or, in the worst case, declare bankruptcy. If the latter, the pension plan would be one of the first things to go meaning retirees would lose their pension. Even if the pension plan were to be taken over by the Pension Benefit Guarantee Corporation, the retiree would receive only pennies on the dollar of the benefit promised to them by the company. This also assumes that the Pension Benefit Guarantee Corporation does not go bankrupt--they are already out of money. The result would be a required bailout of the PBGC. Your taxpayer dollar at work.

I think there should be a cost for getting the full-funding delay--a shared sacrifice. First, executive pensions are typically in a separate plan from the rank-and-file employee. If management wants pension relief, they should be required to fold their pension plans into the employee plan. Their pension should also be at risk.

Second, any executive bonuses and raises should be eliminated until the pension is fully funded.

Third, sacrifice should start at the top. Therefore, corporate management should take an across-the-board pay cut of 40% until the pension is fully funded. This sacrifice could perhaps be higher, but 40% feels like a good painful number.

Fourth, golden parachute clauses in executive contracts should be recinded. Executives should get the same separation package as any other employee. If the executives don't like it, they are free to leave the company.

Fifth, executive perks should be eliminated. These perks are nothing more than compensation and should be the first to go in tight economic times. Indeed, this should have been done BEFORE asking for relief.

Sixth, in exchange for pension relief, the companies must stop all lobbying activities. That money should be directed at funding the pension plan.

Seventh, bankruptcy laws should be amended to require that a percentage of executive compensation, all bonuses, all golden parachutes, and all perks be directed to fully funding the pension plan. The pension plan should be the first debtor.

While these actions may seem drastic (especially to executives and management), there should be no free lunch. If relief is needed, there should be a high cost. The alternative is fund the pension plan.

I also think many of these actions should be stipulations for a Congressional bailout.

What are your thoughts? Agree? Disagree? Other suggested alternatives? Let me hear from you. Start a dialog with you Congressional representative to let them know how you feel.

[Posted with iBlogger from my iPhone]