Pension Agency Tripled Its Losses in 6 Months;
New Bankruptcies Can Affect Retirement Income

The Pension Benefit Guarantee Corporation, the agency that guarantees the pensions of 44 million Americans, saw its deficit triple in the past six months to a record high of $33.5 billion, mainly as a result of bankruptcies of insured companies, whose pension funds the agency is obligated to take over.

The agency, with assets of $56 billion, can continue its payments to retirees for many years, it says, but it eventually will need more capital, especially if the rate of bankruptcies keeps rising. At present, employers, with traditionally-defined company pension plans, pay stipulated fees to PBGC in return for a promise that it will take over a pension fund if the company fails.

A Defined Benefit pension plan pays a guaranteed pension based on a worker’s wages and years of service. A Defined Contribution plan, such as a 401(k) plan is a retirement savings plan to which the employee makes contributions, usually matched by the employer. The number of pension plans has declined in the past 20 years from 100,000 to 33,000, as employers have become more reluctant about continuing their plans.

In the last six months, 93 companies, whose pension funds are covered by the agency, have filed for bankruptcy, including Chrysler, whose bankruptcy alone could cost $2 billion. If General Motors goes into bankruptcy, its 670,000 employees covered by the pension system would cost the agency an estimated $6 billion.

With even more hard-pressed companies seeking government bailouts or relying on bankruptcy proceedings to salvage their firms, the strain on PBGC can become overwhelming. The agency has three options to maintain solvency at comfortable levels: (1) to request a government bailout; (2) increase the premiums by member companies, and (3) increase the return on investments. Its best bet is a rescue package by the government.

The agency has come under increasing critical scrutiny, stirred by a developing scandal involving the agency’s director, Charles E. F. Millard, who resigned in January. Millard is accused by the agency’s inspector general of having inappropriate contact with companies like Black Rock, J.P. Morgan Chase and Goldman Sachs, all of which won contracts to help manage $2.5 billion of the agency’s funds.

Retirees Face a Series of Problems on Their Economic Outlook

Because of substantial losses in bad investments by pension fund managers, large numbers of senior citizens suffered a drop in their retirement income. People living on fixed incomes find it difficult to absorb the increase in the price of food, shelter, fuel and other necessities. In a few industries, unions have been forced to make concessions during collective bargaining and sometimes those “give backs” impinge on retiree benefits.

It was a blow to low-income retirees when President Obama canceled the “cost of living allowances “ (2 to 3 percent of their Social Security checks), which the agency had been sending recipients for the past 30 years.

The Republicans are planning to launch attacks on Social Security and Medicare, with the aim of undermining the benefits of these two most important programs for senior citizens. Unions are determined to prevent this from happening.

Senior citizens in the United States are a vulnerable specie. In our fast-paced society, they are regarded as expendable, particularly if they are poor or sick. They are generally at the bottom of the line when Congress or state legislatures consider economic priorities.

What all seniors want is to be treated with respect in their communities and with compassionate consideration of their circumstances — the dignity they seldom receive.

Fortunately, there is an organization that has defended senior citizens since 1978. The Alliance for Retired Americans has a membership of more than 3,000.000 in cities and counties across the nation.

In judging the character and moral values of a nation, one criterion is how it treats old people.

Article 40 of “Labor’s Voice for Change” will have an important announcement. It will be posted on June 2.