For some time, the House and the Senate have been trying to come up with solutions to the problem of major corporations that have not set aside or invested enough money to support their pension programs. Proposed solutions involve the companies that subscribe to the government’s Pension Benefit Guaranty Corporation (PBGC) that, to a certain extent, insures pension programs much like the Federal Deposit Insurance Corporation (FDIC) insures bank deposits.
The hooker is that many companies belonging to this program feel that they should not be forced to pay for the problems of companies mishandling their pensions by having their own insurance costs rise. It’s a justifiable complaint since the PBGC continues to say that it does not depend on general taxpayer support. In other words, it supposedly “insures” pensions solely on the basis of premiums it collects just like any good insurance company should be doing.
This subject gets little media attention although the New York Times published an article titled “A Pension Overhaul Gives, and Later Takes Away” on August 5th of this year that pertains mostly to the special treatment Delta and Northwest Airlines may receive under bankruptcy protection with current legislative proposals.
I would just like to make one point.
It is not true that the PBGC is independent of taxpayer support. And the reason for this is exactly the same reason other federal insurance programs like Social Security, Medicare, Military Retirement, and other entitlements have the same problem.
Instead of investing premiums in something with worthwhile and liquid growth potential, the “surplus” premiums collected by the PBGC have continuously been taken by the federal government and spent elsewhere.
Whether this criminal behavior is written off as “borrowing” or “investing” in treasuries has nothing to do with anything. The fact is that PBGC currently (at the close of fiscal 2005) holds $13 billion ($12.997 billion) in nonmarketable bonds and is part of the Intragovernmental Holdings (IH) portion of the national debt – a debt that can only be paid off with very real taxpayer dollars.
Admittedly much smaller than Social Security’s $1.8 trillion in the same boat, and you and I will barely notice the eventual withdrawal over time of $13 billion from the “General Fund” of taxpayer dollars, once the PBGC’s so called “trust fund” is depleted it’s gone forever. It will no longer appear on the books unless higher contributions are forced upon the companies paying for this insurance.
In other words, the federal government will lose another of its slush funds unless premiums are drastically increased which is exactly what the companies that have proficiently managed their pension accounts are complaining about. Why should they pay for the mistakes of others?
Another alternative proposed by our progressive Congress is to encourage companies to take advantage of 401(k) plans instead of pension plans. In other words, to abandon any kind of pension program and backup insurance, and simply do it themselves just like rebuilding
Add this to the reasons Social Security should be taken out of the hands of Congress and the Administrative Branch and either privatized or put entirely in the hands of an efficient and independent Social Security Administration in Baltimore, Maryland. Let them put our excess payroll taxes in 401(k)s.