With all the attention President Bush is focusing on Social Security, a different retirement concern is being overshadowed, even though it creates much greater, and much more immediate, problems for those affected. I'm referring to pension defaults. Current law enables many major corporations to inadequately fund their pensions, and these companies' employees are left with a fraction of what they counted on if the companies default on their obligations.
Recently in bankruptcy court, United Airlines defaulted on its pension obligations, turning them over to the Pension Benefit Guaranty Corporation (PBGC), which is the insurance plan for pensions. United became the largest default in history, and followed fellow airline US Airways in taking that course. Delta and Northwest are threatening to do the same (though they are urging changes in the law that would, inter alia, enable them to make up their underfunding over a longer period of time), and it's no surprise, given the competitive pressures placed on them by companies that are now freed from their pension obligations. They aren't the only companies threatening to default on their pensions, and as a consequence of defaults over the past three years, PBGC has gone from a $7 billion surplus to a $23 billion deficit. Thus, PBGC is itself in danger of becoming insolvent.
But even if it weren't insolvent, there'd still be a significant problem. When a company defaults on a pension, PBGC only covers a part of what the company would owe, and thus in many instances employees' plans for retirement are abruptly destroyed.
It sounds like both Congress and the administration, are finally turning their attention to this important matter. I just hope they'll focus on it with the urgency it demands, and get something passed in the next few months that will require companies to adequately fund both their pensions and PBGC. Otherwise, more people's futures will be ruined through no fault of their own.