Facts For The Good Fight
ONE – COFFERS ARE DRY
The government estimates corporate pension coffers are empty: according to estimates, company funds are $450 billion short of what they need to make good on pensions. [Boston Globe]
TWO – FLYING WITHOUT A NET
If companies can’t pay pensions, they can get a bail out from the federal government’s Pension Benefit Guaranty Corp. Make that they USED to be able to get a bail out; the PBGC is currently in the red to the tune of $23 billion.
THREE – THE LEGISLATION
The new pension plan requires corporations to fully fund their pension plans by 2015. (Right now, corporations are only required to have the money to fund 90%.) Sounds good, right? Not so fast. Sixty percent of corporations have said if this bill passed, they’d either freeze or get rid of their plans entirely, which could leave up to 34 million employees in jeopardy. [Washington Post]
FOUR – SHIFTING TO A 401(k)
The legislation makes it easier for employers to shift retirement burden onto employees via 401(K) plans. First, the legislation will now allow employers to automatically put employees into a 401(K), whereby employees can then opt out (instead of having the employee choose to “opt in,” which is how it works now). Traditional pension plans put the burden and risk of post-retirement income on the employer; they’re responsible for providing benefits for life. The 401(K) is different. The employers usually donate a certain percentage, then wash their hands. After you retire, when the funds run out, tough – you’re on your own.
FIVE – HELPS THE WEALTHY
The new legislation also bumps up the contribution limits, even though only 4% of employees currently contribute to the maximum levels. For everyone else, pension plans traditionally do better in the marketplace (better management, lower overhead). And keep this in mind: CEOs and other execs are keeping their traditional pension plans and not relying solely on 401(K)s for their retirement. Just something to think about. [Newsweek]
RSS headlines feed