“Companies that fail to fully fund their pension plans aren’t punished…”
I’ve been poking around the web, trying to figure out why news reports are ignoring that eight of the top 10 creditors in the Hostess case are pension funds. I’ve also been trying to figure out which government agency has oversight and why the company has been allowed to ignore its contractual obligation to its employees.
Then I found this piece from McClatchy, March 2011:
The little-known federal Pension Benefit Guaranty Corp. insures roughly 27,500 corporate defined-benefit pensions, covering 44 million U.S. workers…
The PBGC insures both single-employer plans offered by, say, a large manufacturer, and multi-employer plans, where many companies in a given industry collectively sponsor retirement plans. As of Sept. 30, single-employer plans insured by the PBGC collectively had a deficit of $21.6 billion, and multi-employer plans were in the red by about $1.4 billion.
At least one of the union pension funds in the Hostess case is a multi-employer plan.
When a corporation fails, the PBGC takes over its defined-benefit pension plan. The cost of paying the plan’s beneficiaries is supposed to be covered by premiums collected from businesses insured under the federal program…
The GAO, the investigative arm of Congress, said the PBGC can’t adequately manage its risks because it “cannot decline to provide insurance coverage or adjust premiums in response to actual or expected claims exposure.”
…current PBGC premiums spread the cost among all participants, but effectively allow irresponsible companies to be subsidized by responsible ones.
Since companies that fail to fully fund their pension plans aren’t punished, they enjoy an implicit government backstop.
Imagine for a moment that you’re an insurance company. You can’t charge variable rates based on risk. And you can’t terminate a policy for lack of compliance. That’s what the PBGC sounds like.
According to a 2010 GAO report, “U.S. multiemployer plans have not been fully funded in aggregate since 2000.” In 2009, 68 percent were less than 80 percent funded.
It sounds as though the U.S. Department of Labor should have some oversight. If any of this failed-to-pay-into-pension-fund commitment was money withheld from employee paychecks (ie, self-funded) … then Hostess should be strung up because it is “criminal” to “misapply employee contributions to cover business expenses.” There is at least one Hostess employee who has asserted publicly that this is the case – that self-funded pension payments were not forwarded on to the union pension.Click here for reuse options!
Copyright 2012 The Moderate Voice