PBGC Arbitrary Solutions

The Washington Post ran a scare story warning that the Pension Benefit Guaranty Corporation (PBGC) is “running out of cash” noting:

With roughly $2 billion in assets, the fund for multi-employer plans does not have enough money to pay benefits for the plans that are expected to become insolvent over the next decade.

The Central States fund alone, which pays about $2.8 billion in benefits each year and is the largest multi-employer plan in financial trouble, would overwhelm the multi-employer insurance program if it went under.

Yes, the Central States Pension Fund (CSPF) is likely to get PBGC money but two important facts and one speculation are omitted from the story since upon a PBGC takeover:

  1. CSPF retirees will NOT be getting $2.8 billion annually as PBGC limits the benefits it covers; and
  2. The PBGC WILL be getting all the remaining money ($15 billion?) in the CSPF plan so it will then have roughly $17 billion in assets.

The main reason for the Multiemployer Pension Reform Act (MPRA) was to put in place a process where:

  1. the people running these plans keep getting paid,
  2. the employers funding these plans keep making contributions, and
  3. the PBGC does not have to do (or farm out) a massive amount of work.

With the rejection of the CSPF application the MPRA is likely dead as, outside of the size, most other multiemployer plans would be similarly situated.

The solution: cut the benefits PBGC covers arbitrarily, raise PBGC premiums on ongoing plans arbitrarily, and locate another source of revenue, however arbitrary.

The trick: make it look like it’s not arbitrary.

7 responses to this post.

  1. Posted by steve on May 31, 2016 at 7:44 pm

    Ignorance is bliss—I have talked about this very issue with a close friend of mine who is a retired teamster—After much prodding he called his local–The gentle man handling retirement ( I.D as Smilely ) was not aware of any such problem and if it existed could not possibly happen in the east.–ergo-the” check is in the mail” or could it be that that the people employed by the unions are totally immune to any such dire consequences ?

    Reply

  2. Posted by Anonymous on June 1, 2016 at 7:28 am

    It’s ashamed we all couldn’t have been employed as the upper management type with no DBP, just a big salary with bonuses right before the company went belly up and left the rank and file in the lerch. Your right, ignorance is bliss and the deck is stacked but not in the majority’s favor.

    Reply

  3. there is a certain element of society that has an entitlement mentality. they will get what they want, all else be damned.

    we have to stop this type of thinking, the thinking is psychopathic, that they can get so much without others suffering.

    the authorities in charge of the money need to be held accountable, not just pass the buck to taxpayers.

    ****all db plans are ponzi schemes. convert to dc plans NOW**** spread the word 🙂

    Reply

  4. Posted by S Moderation Douglas on June 1, 2016 at 12:12 pm

    “If incoming contributions, plus interest earned on assets under management, offer sufficient extra capital to fund distributions, a pension fund is sustainable. A Ponzi scheme by definition is not sustainable.’

    http://unionwatch.org/defending-defined-benefits/
    _________________________
    Quoting Ed Ring again, from “Saving Defined Benefits Requires Lower Pensions for Existing Workers and Retirees” Dec. 6, 2112

    “comparing defined benefits …… to Ponzi schemes or Pyramid schemes are specious arguments that do not belong in serious debate.”

    Reply

    • Posted by dentss dunnigan on June 1, 2016 at 1:01 pm

      If the promises are a lot more generous that contributions and Interest plus what the employer could contribute …if those promises deplete the pensions over 5%plus yearly…it’s a ponzi because math wins in the end

      Reply

  5. Posted by MJ on June 1, 2016 at 1:45 pm

    If the insurance premiums continue to be raised to help fund the PBGC, I wonder how many private employers will opt out of providing DB pensions? Let the Teamsters and the members figure it out and pay for it, why should the taxpayers have to pay for retired Teamsters?

    Reply

    • Posted by PS Drone on June 1, 2016 at 5:32 pm

      ERISA established the PBGC. Forcing sponsors of DB plans to pay “premiums” to fund it is one of the principal reasons (that and all of the funding, reporting and other BS bureaucratic mandates) so many DB plans got converted to something else or were terminated. Leave it to government to F-up a good thing. Now the PBGC is going broke along with many DB plans. So much for “government” bailouts of all these failing private and public sector plans.

      Reply

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