ENGLISH
FOR
SENATE POSITION PAPER (Revised January 2012)
The problem of insuring the security of pensions
has become a major issue that has been highlighted by the past
bankruptcy filings of United Airlines and the past financial
problems of General Motors and Ford. Twenty Five
years ago, if anyone had said that the bonds issued by Ford and
General Motors would ever be considered junk bonds, no one would
have believed that situation would ever have been
possible. Thanks to the Earned Income Retirement Security
Act (ERISA), pensions are partially guaranteed with usually a
much reduced level of benefits to retirees in the event of the
bankruptcy or default by their sponsors. The Pension
Benefit Guaranty Trust Fund incurred major expenditures by
taking over the defaulted pension obligations of bankrupt
corporations. Even profitable corporations are now attempting to
transfer their pension obligations to the Trust Fund. The
present pension guaranty system is unsustainable and is becoming
a major funding problem for the Treasury that the Congress must
address if pensions are to be protected.
The only viable long-term solution is to establish industry-wide
Federally-supervised and guaranteed secondary pension programs
similar to but not the same as the Federal Railroad Retirement
program. For examples, there might be a Motor Vehicle
Industry Retirement Fund, a Utility Industry Retirement Fund, a
Grocery Industry Retirement Fund, a Dry Goods Retail Consumer
Industry Retirement Fund, a Financial Services Industry
Retirement Fund, an Aviation Services Industry Retirement Fund,
a Mining/Resource Extraction Industry Retirement Fund,
etc. All companies included in each industry fund would
pay a designated percentage of their payrolls in addition
to present Social Security contributions (including executive
compensation and benefits) into their industry's fund, which
would be a source of additional retirement income for their
retired employees supplementing each retiree's basic Social
Security pension earnments. These industry funds would relieve
corporations from current pension obligations and simultaneously
guarantee the pensions of their employees with the same level of
assurance that Social Security pensions now have. The
advantage of these Federally-chartered, supervised, and
guaranteed industry-wide funds is that all employees in that
industry would be covered and have their pensions protected
regardless of the fate of the companies in which they were
employed. Individual employees would have their pensions
vested in each industry retirement fund, with inter-industry
credits earned transferred to the final industry pension fund in
which they participated prior to their retirement. The
payroll contributions paid into each industry's retirement trust
fund must be invested only in special FHA and VA insured
20 year fixed interest rate mortgages (with restrictive clauses
prohibiting second mortgage liens) that would made available
only to first-time home buyers starting their employment careers
in that designated industry. By investing pension funds
only into mortgages for current and employees buying their first
homes, the management of each specific industry's
retirement fund would benefit all employees in that industry
throughout their working careers and subsequent retirement years
as well (also, please read the Saving Social Security Issue paper).