Pensions are not what you think they are. They are annuity funds that employees build up aided by the help of investment professionals. Read on find out about the present state of pensions and what Congress is doing to help support them.
The United States of America is the best country in the world,
but unfortunately it is not perfect. Our economy is falling short of what it’s supposed to be doing: creating a good job for everyone who wants a job.
To foster careers, we need to end bad trade deals, stricter regulation in the financial industry and fairer rules for unions to organize workers. We also really need to fix our pension system.
Pensions have become a bad word lately, probably because less people have them. Some individuals do not even know what pensions are. Pensions are fundamentally annuities for people who put money into them, either by having the money deducted from their paychecks or choosing to place money directly into the fund. They are called “defined benefit plans” because pensions provide a specified monthly amount to recipients. Pension funds are managed by investment professionals who are imagined to know what they’re doing.
Our country’s private pension system is gradually being dismantled. With 401(k) plans, companies have shifted responsibility for retirement planning to their employees. Many 401(k) plans are ravaged by high hidden fees and market downturns. I am concerned that millions of baby boomers will retire in the coming years and find their 401(k) plans are grossly underfunded.
Congress did not create 401(k) plans using the intention of replacing pensions. They were meant to supplement pensions and Social Security. While pensions aren’t perfect, you are generally better off with a pension than a 401(k).
There are many, many small company owners that would like to do the right thing by their employees and promise them a comfortable, secure retirement. However, they don’t have the expertise to manage a pension fund. The answer: multi-employer pension plans, which covers workers from more than one company.
About 2,000 businesses give to one multi-employer fund; 90 percent of them employ less than fifty people and the typical annual benefit is about fourteen thousand dollars.
In multi-employer plans, company contributions for the fund are collectively bargained. Multi-employer plans are not union run. They are controlled by trustees chosen by both management and labor, and they’re managed by investment professionals.
Like some single-employer pensions, some multi-employer plans are in trouble. They suffered from the worldwide financial crisis and structural changes within the economy that have forced many contributing employers out of business.
A few years ago, Congress approved new laws that raised the amount businesses must give to the plans. These new funding rules are threatening the survival of many small companies. Unless Congress acts, some will have to divert cash towards the multi-employer plans rather than expanding their companies. Others will lay off workers and many may shut down.
As of July 2010, legislation to ease the hardship of these employers was proposed by Democratic Senator Bob Casey of Pennsylvania, Democratic Representative Earl Pomeroy of North Dakota and Republican Representative Pat Tiberi of Ohio. The bills hope to lessen the burdens of companies who have to support retirees whose employers went out of business. They’ll also prevent a downward spiral that stiff funding requirements drive employers out of business that will trigger even stiffer funding requirements driving more employers out of business.
These Congressional bills deserve the support of all citizens. For the reason that they will help our economy create jobs. Therefore, they’ll help all citizens.
