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Relief for Retirees or Wall Street?
By
Marie Cocco, the Washington Post
The congressional effort to fix it. In an unusually rapid response to the demise of traditional defined-benefit pensions -- and the corporate dumping of pension obligations into the lap of the government insurance program that's supposed to act as an emergency safety net -- lawmakers are in the final weeks of deciding no less than this: Who will have a pension? And how much power will Wall Street have to decide this? Nobody comes right out and puts it this way. The Pension Protection Act is instead portrayed as a necessary effort to shore up the system so that workers who've already been promised retirement benefits get them -- and the Pension Benefit Guaranty Corp., the government agency that insures them, stays afloat. In truth, lawmakers have been grappling with a tough dilemma: They can force companies to pay more into their pension plans to meet their obligations to workers, keeping those plans viable so the government doesn't end up holding the bag. But they can't demand so much that employers simply decide to take their money and run -- that is, drop traditional pensions. Since the corporate end-run around pension obligations already is at a sprint, it doesn't make sense to enact a law that would speed things up. Yet the Senate version of the legislation would seem to do just that, by using a company's credit rating -- not the level of funding in its pension plan -- as the trigger for requiring a firm to pump more money into its retirement plan, and do so in a way that covers the worst of the worst-case expenses it might conceivably face. The bond market would, in effect, decide who gets a pension, and at what amount. The House alternative is less harsh on companies -- but possibly more likely to leave weak plans struggling until they finally fail, with the PBGC stepping in. When it does, retirees with generous pensions lose some promised benefits, since the government limits payments. If this all sounds like a lose-lose proposition for millions of workers, that's because it is. The big winners may turn out to be the lobbyists, who've so far pretty much gotten what they want in one version of the bill or another. Such as this one: How about letting Wall Street's hedge funds manage some pensions -- and do so without any of the current federal rules that require managers to act only in the financial interest of beneficiaries? This remarkable gift is included in the House version of the legislation. Meanwhile, lawmakers want to make it legal for companies to convert traditional pensions to less costly "cash balance" retirement plans, a switch that already has left thousands of middle-aged and older workers with reduced benefits.
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