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This is the
kind of news the White House hopes goes unnoticed while Americans are
vacationing or worried about jobs. Add this to the list of issues that should be front and
center in Campaign 2004, under Economic Mismanagement of the Public Trust. The questions are Are we better off than
we were and Who do you trust? – KWC Also See GAO report on Social Security Reform:
Analysis of a Trust Fund Exhaustion Scenario Illustrates the Difficult
Choices and the Need for Early Action, by David M. Walker, comptroller general
of the United States, before the Senate Special Committee on
Aging.GAO-03-1038T, July 29. http://www.gao.gov/cgi-bin/getrpt?GAO-03-1038T
(http://www.gao.gov/highlights/d031038thigh.pdf
Highlights) New Rules Urged to Avert Looming Pension Crisis
By Mary Williams Walsh, NYT Business, July 28, 2003 @ http://www.nytimes.com/2003/07/28/business/28PENS.html?ex=1060398925&ei=1&en=8b53f3b872884c25 Top government officials have begun a calibrated campaign to
bring attention to corporate pension plans, which they say may be on a road to
collapse. But underneath their measured words are proposals that could
fundamentally change the $1.6 trillion industry, altering the way pension money
is set aside and invested. On
Wednesday, the comptroller general placed the Pension Benefit Guaranty
Corporation,
the agency that guarantees pensions, on a list of "high risk"
government operations. Elaine L. Chao, the secretary of labor, issued a
statement on the same day warning that the decades-old system in which workers
earn government-guaranteed pensions "is, unfortunately, at risk." Treasury Secretary John W. Snow, a former railroad chief
executive who had responsibility for a $1.3 billion pension fund, warned recently that a financial meltdown
similar to the savings-and-loan collapse of 1989 might be brewing. Steven Kandarian, the executive director of the Pension
Benefit Guaranty Corporation, gave a speech earlier this month in which he
foresaw a possible
"general revenue transfer" — polite words for a bailout of the
agency.
Before being named to head the agency, Mr. Kandarian was a founding partner and
managing director of the private equities firm of Orion Partners. While officials want to underscore the dangers to retirement
benefits that millions of Americans count on, they do not want to frighten consumers, roil
financial markets or anger the companies that already put billions of dollars
into the system.
But some pension analysts, reading between the lines, say they think that officials are not
only looking at calling upon companies to put more money into their ailing
pension plans — a painful prospect at a time when cash is tight — but also at
the more radical remedy of encouraging funds to reduce their heavy reliance on
the stock market. At issue are
defined-benefit pensions,
the type in which employers set aside money years in advance to pay workers a
predetermined monthly stipend from retirement until death. Today, about 44
million private-sector workers and retirees are covered by such plans. Three
years of negative market forces have wiped away billions of dollars from the
funds, triggering the defaults of some pension plans and leaving the rest an estimated
$350 billion short of what they need to fulfill their promises. Until recently, the idea that America's pension edifice was
built on a flawed foundation was preached by a tiny number of financial
specialists and considered heresy by almost everyone else. But after several
years of declines in the stock market, there is a growing argument that pension
managers, who have been investing most of their money in stocks for years,
should be in predictable bond investments that would mature when the money will
be needed, matching the retirement ages of their workers. Now
the view is gaining ground in academia, and getting a fair-minded hearing by
well-placed financial officials, who are incorporating some of its reasoning in
their pension proposals. The measures they have put forward bear
little resemblance to those considered earlier this month in a rancorous House
Ways and Means Committee session. The House pension bill is more generous to business. If enacted, it would lop tens of
billions of dollars off the amounts companies would pay into their pension
funds in each of the next three years. Businesses favor the bill's approach,
but hoped to make its changes permanent. Treasury officials say they think that this approach would put benefits
at risk, particularly at companies with older workers who will be claiming
their pensions soon. "The fact of the matter is that more money is needed in
those plans, to ensure that older workers receive the benefits they have earned
through decades of hard work," said Peter R. Fisher, under secretary for
domestic finance, in testimony to a House subcommittee panel earlier this
month. (end of excerpt) |
