ENGLISH FOR SENATE POSITION PAPER ON:

Pension Security

The problem of insuring the security of pensions has become a major issue that has been highlighted by the recent bankruptcy filing of United Airlines and the financial problems of General Motors and Ford.   Twenty years ago, if anyone had said that the bonds issued by Ford and General Motors would be considered junk bonds today, no one would have believed that situation would ever be 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  is now incurring major expenditures by taking over the defaulted pension obligations of bankrupt corporations and has a $23 Billion funding deficit currently.  Even profitable coporations 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/Resouce 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 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 industry.  By investing pension funds only into mortgages for current and employees buying their first homes,  the management of each 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)

Return to home page
________________________
Designed by Imad-ad-Dean, Inc.