The death of pensions; is there a link in union membership decline? Those who have a defined benefit plan should consider yourselves very lucky. According to the Bureau of Labor Statistics, 18% of private businesses in the United States offer defined plans. This is down from 35% in 1990. In concert with the pension decline, union membership in 2011 reached its lowest level in 70 years, falling to 11.6%. In the private sector the numbers are far lower with only 6.9% of workers in a union.
The Republicans who blame unions for business failures regularly have tagged pensions/social security with the word “entitlements” which in their vocabulary means EVIL. We should recall this was especially a loud lie when General Motors and Chrysler were seeking a bailout from the Treasury. Yes, they owed billions of dollars to pensions but this was also thanks to the roulette wheel of Wall-Street and cheap money. As well as underfunding their plans in boom markets. Pension obligations of states around the country have also been a huge political issue and also underfunded by their respective governments. New Jersey and Philadelphia great examples of not paying as you go (and the stock market roller coaster).
Cheap money> Low interest rates and the effect on pensions. The lower the rates are normally the higher required pension contribution. So how does Washington respond to the issues of funding pensions? Allow them to contribute LESS! Last June Congress passed (YES ACTUALLY PASSED A BILL!) that will allow employers to contribute less. As part of the transportation bill, Moving Ahead for Progress in the 21st Century (MAP-21) employers will now be allowed to use a 25 year average of interest rates when figuring contributions, instead of current rates which are lower, requiring more funding. Using the 25 year average which is 2-3% higher than current rates, employers will contribute less.
Killing the pension? Congress who agrees on very little passed legislation that allows employers to contribute less to pension plans. Underfunded pensions are the issue in the public and private sector. So to pass new rules that would allow for less money to go in seems a bit contrary. Congress in passage of this legislation is essentially defunding , which will kill what remains of pensions. Will business wait for the next Wall-Street meltdown to occur? Or simply get out of the defined benefit plan and send the rest of us off on our own to the ever volatile 401-k?
The screams we hear if any have and will continue to be few. Union membership is low and Washington politicians have successfully pitted those who have against those who do not. (public versus private sector). And as unions continue to embrace the Democratic party do they realize that Map-21 was a bi-partisan effort? http://t4america.org/blog/2012/03/27/graphic-a-closer-look-at-the-senate-map-21-vote-by-state/
Killing your future and mine, Washington and their love for business and the Top 1%.