pensions redux; Britain
Pensions insurance attacked Scrupulous companies to foot bill for negligent rivals Rupert Jones and Phillip Inman Thursday February 12, 2004 The Guardian The government is today likely to face the wrath of employers' groups, trade unions and opposition politicians over its measure aimed at protecting company pension scheme members if their employer goes bust. Today sees the publication of the pensions bill - the government's response to the crisis in retirement saving - and ministers are likely to confirm that a crucial element of the safety net they are planning has in effect been put on ice for the time being. Andrew Smith, the work and pensions secretary, will give more details about the new pensions protection fund, a compensation scheme which will protect millions of members of final salary company schemes if their employer goes bankrupt. The fund, similar to an American scheme, will guarantee that people who have already retired will receive 100% of their pension while those still working will receive 90%. This will be paid for by a levy imposed on all companies that offer final salary pensions and is aimed at ending what the government says is the scandal of workers being denied pensions built up over many years. Under the original plans, companies at greater risk of going bust would have had to pay more than employers with well-funded schemes. But devising a levy that would work in this way has proved tricky, and the department for work and pensions is today set to announce that it will be starting off with a flat-rate levy where all firms pay the same. The pensions protection fund was controversial, even before this latest apparent backtracking, and critics were quick to attack the plan yesterday, saying that well-run companies should not have to bail out irresponsible employers in this way. Steve Webb MP, the Liberal Democrat work and pensions spokesman, said the pensions bill was half baked. He said: The pensions protection fund is an insurance scheme not based on risk. It's like asking a careful driver to pay the same as a boy racer. To ask all companies to pay the same punishes the good guys. It is understood the department of work and pensions decided to put off imposing a risk-based levy on occupational schemes after advice that the complex arrangements could delay the rescue scheme's start in 2005. The department yesterday insisted that a levy based on risk was still absolutely fundamental to the protection fund, but it appears it could be a few years before this system is fully up and running. It seems certain that the department has rejected trade union calls for the new rules to be applied retrospectively. That means they will not help the tens of thousands of workers who have lost some or all of their occupational pension after their companies went bust. Workers from failed steel firm ASW and other defunct companies intend to keep up the pressure on the government by staging a protest at the Royal Courts of Justice.
US: pensions redux
washingtonpost.com Senate Approves Pension Bill By Jim Abrams Associated Press Writer Wednesday, January 28, 2004; 12:40 PM The Senate on Wednesday passed legislation that could save employers tens of billions of dollars in pension payments and help protect the pensions of American workers. The retirement security of millions of workers hangs in the balance, Sen Max Baucus, D-Mont., said before the Senate voted 86-9 to approve legislation to reconfigure how employers must fund their defined benefit pension plans. The bill, the first major act of this legislative session, enjoyed wide bipartisan support in an election year when congressional harmony is expected to be rare. This is about protecting American workers and their pension benefits, said Sen. Norm Coleman, R-Minn. The bill still must be reconciled with the House version and ironed out with the administration, which is balking at a provision giving special treatment to airlines and steelmakers with chronic pension underfunding problems. The legislation is a short-term, two-year fix to protect employers from what could become artificially inflated pension contributions and allow Congress time to work on more lasting solutions to pension funding and the problems of companies that underfund or abandon their defined benefit plans. Congress must move before April, when companies will again have to determine payments based on the 30-year Treasury bond rate. Because the Treasury Department no longer issues the bond, its interest rate has fallen precipitously. That in turn, under an inverse relationship, causes required pension contributions to increase. Our members are already making investment plans, job-hiring retention plans and without this fix they are going to have to divert in some cases hundreds of millions of dollars into their pension plans unnecessarily, said Dorothy Coleman, vice president for tax policy at the National Association of Manufacturers. For the next two years, the formula would be based on a composite of investment-grade corporate bonds. Companies will save about $80 billion over two years under the new formula, says the Pension Benefit Guaranty Corp., which insures the pensions of 44 million people in more than 30,000 single and multi-employer defined benefit plans. The Senate bill separately would allow airlines, steelmakers and others with underfunded plans who must make catch-up deficit reduction contributions to waive large parts of their catch-up pay over the next two years. They could waive 80 percent of those payments the first year and 60 percent the second year. The three Cabinet secretaries who comprise the PBGC board, Elaine Chao of Labor, John Snow of Treasury and Donald Evans of Commerce, said they would advise President Bush to veto the bill if it should contain this provision because they said it would worsen pension plan underfunding, now estimated at $350 billion nationwide. The PGGC said those who qualify for the deficit reduction contribution waiver would save another $16 billion. Currently, underfunded plans must make catch-up payments, including their normal contributions, to ensure their plans return quickly to financial viability. Business groups support the bill as do unions, even though it would produce smaller corporate contributions to pension plans. Organized labor fears that many financially pressed companies will otherwise opt to dissolve their plans or declare bankruptcy and turn the plans over to the PBGC, which may not pay the full pension that was promised. The measure is particularly important to mature industries such as automobiles, where retirees at some companies outnumber current employees. General Motors Corp., for example, has 25 retirees for every 10 active employees and will have to pay out $6 billion in pension benefits this year. Sen. Jon Kyl, R-Ariz., proposed an amendment that he said would make the bill more acceptable to the administration by making taxpayers less vulnerable if companies that get special breaks become insolvent, transferring the pension payment to the PBGC, which last year the PBGC had a record deficit of $11.2 billion. But is was defeated Tuesday, 67-25.
US pensions redux
A System Going Under? Projected Pension Shortfalls Turn Focus to Reform By Albert B. Crenshaw Washington Post Staff Writer Sunday, October 19, 2003; Page F01 During his 35-plus working years at Bethlehem Steel in Baltimore, Melvin Schmeizer endured blazing heat and freezing cold, layoffs and odd shifts. But by volunteering for tough jobs and overtime, he boosted his income and, ultimately, his pension, to $2,850 a month when he retired in 2001. But Schmeizer's retirement plans were knocked out cold last year, when Bethlehem went into bankruptcy and the Pension Benefit Guaranty Corp. (PBGC), the government pension insurance arm, took over the company's pension plans. And while that means Schmeizer's pension will not vanish, it will be cut to $1,700 a month. Schmeizer, 56, observed wryly to a Senate committee last week that company and union officials had assured Bethlehem workers that the sky would have to fall for them not to get their full pensions. Well, the sky did fall, he said. In fact, the sky is falling for a good number of American workers. Or the ship is sinking. Or any number of other metaphors for looming disaster, all of them applicable to the state of America's private pension system. The country's entire retirement income structure is being battered by an unprecedented wave of demographic and economic changes. Just as Social Security's pay-as-you-go arrangement is being pressured by the rising number of retirees and the shrinking number of active workers, so established companies that sponsor traditional pensions are increasingly paying huge retiree costs when newer competitors have none. In addition, the stock market plunge that began in 2000 has combined with falling interest rates to reduce asset values and boost liabilities for traditional pension plans. In many cases, this has triggered painful new funding requirements for employers. General Motors, for example, said last week that it has poured $13.5 billion into its pension funds recently and may kick in as much as $6 billion more in the coming months. At the same time, many workers today have changed jobs repeatedly during their careers, so that those who do have traditional pensions -- and only a shrinking minority do -- will get less benefit from them than those who have worked decades at the same employer. Partly in response to these pressures, and partly because they are cheaper and more predictable than traditional pensions, companies are increasingly shifting to 401(k) and similar plans in which workers and/or employers contribute to an investment account. Theoretically, such plans work better for mobile employees, but they assume that the workers will make good investment decisions and contribute faithfully over many years. How many workers will manage to harvest adequate retirement assets from such plans remains to be seen, but many experts worry, especially about lower-paid workers. As baby boomers near retirement, the pension system is wobbling, Peter R. Orszag of the Brookings Institution concluded at a pension conference there this year. The private system today is complicated and costly in terms of tax revenue, Orszag added in a recent conversation, and it covers only about half the workforce at any one time. The increasingly popular 401(k) and other such plans offer generous tax benefits for saving, but those breaks go disproportionately to high-income households that would save anyway, he said. At the same time, Orszag said, the system allocates too much risk to workers individually instead of spreading it across a company's workforce, or the workforce in general. Congress, employers and workers, union and nonunion, have been trying for years to come up with a set of policies that would provide adequate and secure retirement for more people. But retiree security has often taken a back seat to revenue considerations, leaving what the Treasury Department's benefits tax counsel, William F. Sweetnam Jr., last week called a crazy quilt of rules that don't serve anyone well. The collapse of Enron Corp. two years ago focused new attention on the risks of 401(k)s, and the recent fears expressed by employers and the PBGC about the funding of traditional plans, often called defined benefit plans, put them on the front burner. So far, it is only those at each extreme of the debate who think there are easy answers. Some in Congress and the administration seem to feel that everyone ought to save for his own retirement, while others want to lock employers into certain types of traditional pensions. But if the pension ship is sinking, bills currently being considered in Congress, critics say, amount to little more than rearranging the deck chairs on the Titanic. Most seek only to patch up problems in the present system. The Bush administration has called for fundamental reform of defined-benefit pensions but hasn't specified exactly what that would look like. The House recently approved a measure calling for reform
pensions, redux
Pension age to rise in Italy and Germany Sophie Arie in Rome and Ben Aris in Berlin Wednesday August 27, 2003 The Guardian The Italian and German governments risked a public outcry yesterday by proposing that people should work, and make pension contributions, for up to five years longer to help pay for their ever-growing number of pensioners. The proposals come as countries across Europe struggle to defuse the demographic timebomb of falling birthrates and rising life expectancy. The Italian prime minister, Silvio Berlusconi, said Italians should retire at 62, five years later than the average. Under the current system, he said, Italy began each year with a ?36bn (£25bn) pension deficit. In Italy people retire on average at 57. It means unsustainable costs and an annoying loss of talent, which could end up sinking us, he told the rightwing newspaper Libero. He proposed that the retirement age should be gradually raised to 60 by 2010, and after that to 62. The welfare minister, Roberto Maroni, tried to sweeten the pill yesterday by suggesting that rather than being forced to keep working, Italians should be enticed with a 30% cut in pension contributions over the last five years. But the idea has not gone down well. Savino Pezzotta, secretary general of the Italian Confederation of Workers' Trade Unions, said: If they tear apart our pensions system, we'll fight them. And Mr Berlusconi's rightwing coalition allies Gianfranco Fini and Umberto Bossi have expressed concern about the plan. In Germany a government commission has recommended raising the average retirement age to 67 and increasing pension contributions by 2.5%. It also suggested that no one should be allowed to retire before the age of 64. Italy and Germany are under growing pressure to overhaul their pensions systems in an effort to meet EU budget deficit regulations. Both had more deaths than births in 2002, and their national workforces are unable to pay for the growing numbers of pensioners. Italy has one of the oldest populations in the world, together with Greece and Japan, and one of the lowest birthrates, second only to Spain's. Pensions cost Italy about 15% of its GDP and have been a growing strain on the struggling economy for the past decade. But when Mr Berlusconi last tried to talk Italians into working longer - during his fleeting first government in 1994 - it was met by a million protesters on the streets, and it contributed to the collapse of his coalition government after less than eight months. The German recommendations put further pressure on the government, implying that its attempt to reform the pension scheme in 2001 has been a flop. But having watched France being brought to a halt by huge strikes against similar pension reform proposals earlier this year, German politicians are wary. Both the Social Democrat government party and conservative Christian Democrats opposition have criticised the commission's proposals, without offering alternatives. Germany's problem is exacerbated by the fact that school hours are so short that mothers are forced to stay at home rather than work. German children spend four and half hours a day at school. Last year, Chancellor Gerhard Schröder introduced a five-year, ?4bn package to fund all-day schools, as well as providing money for creches and tax breaks for young parents, but it has yet to have any impact. The dwindling number of children has led schools to cut the number of classes, and some will be closed because of the lack of pupils. The Italian welfare undersecretary, Grazia Sestini, suggested in an interview with the newspaper La Repubblica yesterday that Italians must be encouraged to make more babies as well as work longer. On top of an ?800 baby bonus for every newborn child, she said, the state should follow France and offer child benefits of ?140 a month for the first three years.
Re: US pensions redux
A wage-slave has no security, even less so as they allow the employing class to play the stock markets with the part of the social wealth they create which has been 'set aside' for their future income. I notice that not much is being mentioned about dumping Social Security funds into the stock market these days. Mike B) --- Eubulides [EMAIL PROTECTED] wrote: [New York times] July 28, 2003 New Rules Urged to Avert Looming Pension Crisis By MARY WILLIAMS WALSH 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. The high number of pension funds that have defaulted has already severely weakened the pension insurance agency, raising fears of a bailout. The agency finances its operations by charging companies premiums, and it still has enough cash flow to make all of its payments to retirees for now. But its deficit has grown to record size, and it cannot keep absorbing insolvent pension plans indefinitely. It could raise premiums, an unpopular idea with
US pensions redux
[New York times] July 28, 2003 New Rules Urged to Avert Looming Pension Crisis By MARY WILLIAMS WALSH 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. The high number of pension funds that have defaulted has already severely weakened the pension insurance agency, raising fears of a bailout. The agency finances its operations by charging companies premiums, and it still has enough cash flow to make all of its payments to retirees for now. But its deficit has grown to record size, and it cannot keep absorbing insolvent pension plans indefinitely. It could raise premiums, an unpopular idea with companies, or in dire straights it could turn to the taxpayers for more money. Permitting companies to pay less into their pension plans would only increase the risk of such a bailout. Thus, the Treasury's calls for what Mr. Fisher called a comprehensive reform. Unknown to most Americans, a small group of finance specialists has been making the case for a number of years that pension funds are in danger because their managers invest heavily in stocks. These analysts were hooted at during
pensions redux
Federal Pension Provider Overwhelmed By Kirstin Downey Washington Post Staff Writer Wednesday, July 2, 2003; Page E01 Based on what they describe as their own rocky experiences, retirees Dale Bud Leppard and Richie Brooks view with apprehension the growing workload of the Pension Benefit Guaranty Corp., the federal agency charged with ensuring that workers from bankrupt companies get their pensions. Leppard, of Morristown, N.J., lost his pilot's job at age 54 when Eastern Air Lines Inc. failed in 1991. Because he started drawing benefits right away, he learned he would get only one-fourth of the $6,000-a-month pension he was expecting at age 60. Then, three years ago, the PBGC told him it had overpaid him for nine years and wanted $36,000 back. So he reluctantly agreed to fork over $140 a month from his $16,661 annual pension -- a payment he will make until he turns 80 in 2017. Brooks, 59, of Lake Worth, Fla., a machinist at Pan American World Airways Inc., which stopped flying in 1991, is part of a group of Pan Am employees suing the agency to get more pension money. We're not trying to get rid of the PBGC, Brooks said. I wouldn't get my $263 a month if they weren't there. He thinks he and other beneficiaries are getting shortchanged because the agency is acting too much like a business trying to control costs rather than a government protector of retirees. The PBGC serves as financial trustee for nearly 1 million individual pensioners -- up from 346,000 in 1993 -- and pays out $2.5 billion a year. It expects more customers by next year and has already inherited more than 100,000 new customers in the past six months, including 95,000 from Bethlehem Steel Corp., 20,000 of whom are in the Washington-Baltimore region; 7,000 pilots from US Airways Inc.; and 1,004 health care workers from Columbia Hospital for Women in the District. Some are already disappointed by administrative delays and rules that limit their pensions. Advocates for retirees and agency officials defend the PBGC, saying the agency is performing admirably overall at a time when the nation's pension corporate system is under severe stress amid a sagging stock market, with underfunding now about $35 billion. Forced to take over a record number of bankrupt pension plans, most notably in the steel and aviation industries, the agency now faces a $5.4 billion deficit, the largest in its history. The PBGC by and large is a good system, and it saves people for the most part, said John Hotz, deputy director of the nonprofit Pension Rights Center. But like everything in pension law, it's incredibly complicated, and there are lots of little wrinkles that can have a negative effect on folks. Set up in 1974 after Studebaker's failure left some retirees destitute, the agency operates under complex guidelines designed to maximize the number of people covered when their employers' plans go broke. The pension insurer has about 850 employees and even more contract workers and is supported by fees paid by companies that operate pension plans. Generally speaking, workers who retire at age 60 face a statutory pension limit of $28,600 a year, while those who retire at 65 are limited to pensions of about $44,000. The average 65-year-old retiree in the United States gets a pension of about $12,000 a year. According to the PBGC, which covers about 44 million Americans, working and retired, 90 percent of its recipients, including everyone at Columbia Hospital for Women, will get the full amount they were promised. Meanwhile, workers who have only 401(k)s, or other plans that require them to invest on their own behalf, are not insured by the government program and thus have no guarantee of benefits at all -- as chagrined workers from Enron Corp. and other corporate giants discovered. Airline veterans Leppard and Brooks aren't the only ones asking for more from the PBGC. Hundreds of LTV Corp.'s steelworkers in the Cleveland area took early retirement in early 2002 under company pension rules when the steel plant shut down, and then they learned their pensions would be reduced by the agency. In the Washington area, pilots at US Airways, which emerged from bankruptcy protection this spring, have protested reductions in their retirement benefits and the loss of lump-sum retirement packages they had counted on receiving. One common complaint by PBGC-covered workers is a delay in learning what their payments will be. Recipients usually start receiving checks from the agency right away, but the amounts are based on an estimate. As Leppard found out after nine years of receiving checks, he ended up owing the government money. Some other recipients discover they have been underpaid for years and get bonus payments -- though the pleasant surprise can be tempered by a large tax bill. In fiscal 2002, 10 percent of recipients learned they were underpaid and got checks, and about 6 percent found out they owed the government money. An agency inspector general's
pensions redux
Monday, January 27, 2003 Losses may mean fewer pension funds Problems threaten to accelerate move away from plans By PAUL NYHAN SEATTLE POST-INTELLIGENCER REPORTER Corporate pensions are swimming in red ink, but the tens of billions of dollars in losses may mask another problem: that the shortfalls could alter, and possibly erode, retirement benefits. Over the last three years, many corporate pension plans came up short as sagging financial markets and low interest rates conspired to strip money from funds. The potential losses are staggering, on paper. General Motors Corp.'s defined-pension plan could have lost up to $16.8 billion last year, IBM's plan may have shed $13.95 billion and The Boeing Co. could have lost nearly $8 billion, according to estimates that Credit Suisse/First Boston prepared in September. But the real impact may come in the reaction to the losses as companies, Congress and regulators debate changes. The problems already threaten to accelerate the movement of companies away from defined-benefit plans, which promise set payments in retirement, to 401(k) and other defined-contribution plans, according to University of Washington business school professor Jonathan Karpoff. My impression is that many firms are actually trying to get out of the business of (being) long-term providers of guaranteed incomes to their employees, Karpoff said. The losses simply give companies one more reason to stop offering defined-benefit pensions. Complaints that pension rules are too strict and complex may lead some companies to stop offering voluntary defined pensions, according to Watson Wyatt Worldwide. Companies may also invest in lower-yielding instruments, Watson added. A recurring complaint among businesses is that companies are forced to replenish underfunded pensions too quickly, while hitting limits on contributions when plans are flush, pension experts say. The bottom line is that if employers aren't given more flexibility in terms of when they can or can't make pension-plan contributions, they won't sponsor these plans, Kevin Wagner, a retirement practice director at Watson Wyatt, reported last November. And ultimately, this hurts employees most. And executives may bring their complaints to Congress and the White House. This year, lawmakers should consider the less controversial move of stretching out payments to underfunded plans, said David Foster, an official with the United Steelworkers of America. Otherwise, the rule is going to break the backs of dozens of companies, he added. Others worry business lobbyists may push too hard. The business community is going to use this opportunity as significant leverage to loosen regulations, to free up the ability to move into plans that really result in fewer benefits for people, warns John Hotz, deputy director of the Pension Rights Center in Washington, D.C. Pension plans suffered along with the rest of Wall Street in recent years as retirement funds fell along with stock prices. The plans are also struggling with low interest rates, which may reward homeowners but force corporations to keep more money in the bank to meet future obligations. Simply put, low interest rates mean actuaries assume assets will grow slowly, forcing companies to maintain higher balances. You have company after company with pension underfunding issues, said Foster. They are having to come up with huge amounts of cash in a downturn. The underfunding is creating headaches, but not a crisis, in corporate America, experts say. For the first time in a decade, some companies are contributing to pension funds, while others record billions of dollars in charges tied to the plummeting value of the accounts. This is sort of a normal cycle that the market is going through, said Hotz. It is certainly not a time to go running and jumping ship. For example, Credit Suisse may predict Boeing's defined-pension plan could be $6.8 billion underfunded in 2002, but the company isn't in danger of halting retirement checks, said Stan Sorscher, a labor representative at the Society of Professional Engineering Employees in Aerospace. In October, Boeing expected to take up to $4 billion in non-cash charges in the fourth quarter tied to its pension plan, though those charges won't affect reported earnings. I think Boeing can meet the obligation as far into the future as I can see, said Sorscher, who tracks pension issues for the second-largest union at Boeing. What you are really counting on is future performance of the investments. As legislators, regulators and companies debate any changes, Jim Isbell, a Seattle-based actuary, has a relatively straightforward suggestion: clear away the tangle of regulations that discourage firms from offering the voluntary plans. Since 1985 the number of federally backed pension plans sank from 114,000 to 35,000, according to the Pension Benefit Guaranty Corp. Lots more employers would be willing to provide pension benefits if the
