Last year, liberal lawmakers wanted to bail out the United Mine Workers of America’s pension plan to the tune of roughly $6 billion.
This year, they’re at it again, except on a larger scale. Under pressure from a few very large and politically powerful plans—including the United Mine Workers of America and the Central States Trucking Union—liberal lawmakers are seeking up to a hundred-fold increase in taxpayer bailouts for private, union-run pension plans.
Across the U.S., there are more than 1,300 union-run, or “multiemployer” pension plans. More than 90 percent of them have set aside less than 60 percent of what they promised to pay.
Private pension plans are a part of workers’ compensation. In the case of union-run or multiemployer pension plans, unions and employers together negotiate and manage pension plan contributions and investments.
Typically, workers receive lower paychecks in exchange for the promise of future pension benefits—i.e., a “secure retirement.”
Unfunded pension promises resulted, in large part, from reckless mismanagement. That mismanagement will leave workers more than $600 billion short of their promised benefits. Essentially, unions and employers have cheated their members and workers out of hundreds of billions of dollars in contracted compensation.
Instead of putting the unions and employers on the hook for their failure to make adequate pension contributions, many lawmakers seem willing to rob taxpayers to furnish those broken promises.
That would set a horrible precedent. Not only would it prop up failing industries that made reckless promises while penalizing those who have not—it would also cost taxpayers hundreds of billions, if not trillions of dollars.
It is absolutely unfair and reprehensible that unions negotiated and promised benefits that they did not then provide for, but taxpayers never had a seat at those negotiating tables. They should not be held liable for those unmet promises.
If they are, there will be little to stop current and future union-run plans from continuing to promise unrealistic benefits and then failing to fund those promises.
Unfair as it is for workers to receive less than their promised pension benefits, it is not unprecedented. That’s one reason the government created the Pension Benefit Guaranty Corporation (PBGC)—to provide insurance so that workers don’t lose all of their promised pension benefits.
When a private pension plan becomes insolvent, the PBGC pays out insured benefits—up to about $13,000 a year in the case of union-run pension plans.
But the PBGC itself is on tap to become insolvent within eight years. If that happens, it would be able to pay less than 10 percent of insured benefits.
Politicians that support bailing out insolvent plans argue that doing so will actually save taxpayers money, because it will prevent the plans from requiring PBGC assistance.
But that’s impossible. For starters, the PBGC is not taxpayer-funded, so taxpayers cannot be on the hook for its unfunded liabilities. And second, even if taxpayers were required to bail out the PBGC, it cannot be more expensive to provide a portion of promised benefits (the PBGC only insures benefits up to a maximum of about $13,000 per year) than it would be to provide 100 percent of plans’ promised benefits.
Instead of bailing out 100 percent of private union pension plans’ unfunded pension promises, lawmakers should focus on reforming the PBGC so that it can continue to provide pension insurance to workers’ and retirees whose pension plans have become insolvent—and to do so without a taxpayer bailout.
The magnitude of unfunded pension promises across the U.S. is enormous. There are over $600 billion in unfunded private union promises and more than $6 trillion in unfunded state and local government promises..
Lawmakers must not open the door to private and potentially public sector pension bailouts. Taxpayers who have their own retirements to save for cannot afford to pay for these broken promises.
This piece originally appeared in The Daily Signal