Pension Reform Debate Leaves Out Families, Future of Pension System

August 28, 2005: The current debate in Congress over pension “reform” tends to leave out the most important issues: protection of pension benefits for families, and protection of our pension system into the future. Instead the debate is focused too narrowly on cutting benefits and allowing corporations to eliminate defined benefit plans—plans that have been crucial to eliminating old-age poverty in the U.S.

Two experts who testified earlier this year in Congress addressed these broader concerns. Teresa Ghilarducci is a professor of economics at the University of Notre Dame. Norman Stein is a professor of law at the University of Alabama who teaches and writes on labor and employee benefits.
Below are excerpts from their testimony before the House Committee on Education and the Workforce. These comments were addressed to the Bush Administration’s proposed legislation on single-employer plans (not Teamster plans), but show the kind of approach that is needed to deal with the pension issue.

The multi-employer (including Teamster plans) legislation now before Congress has the same pro-employer slant that these experts noted in the earlier bill.

Click on the links below for the for full testimony:

Teresa Ghilarducci (Associate Professor of Economics
University of Notre Dame)

Statement of Norman P. Stein On Behalf of the Pension Rights Center

On the roots of the “crisis”:

Norman Stein: “The worst of the problems of defined benefit plans are concentrated in a few industries that have undergone major structural change, partly in response to actions taken by the federal government. … If the airline industry had not been deregulated, United, Delta and U.S. Airways would have been better situated to fund their pension plans adequately.”

Norman Stein: “As a society, we need to accept some responsibility for the current financial problems in the defined benefit system. We should not lose sight of a simple fact: the current fiscal stresses on defined benefit plans and the PBGC are not the product of illegal fraud committed by mendacious corporate managers nor the selfish actions of the millions of Americans who have relied on defined benefit plans. Rather, the problems are, at least in retrospect, the results of the laws that Congress enacted and of actions taken by the Executive branch.”

On the proposed reform legislation:

Teresa Ghilarducci: “The whole idea of ERISA and pension protection was to ensure that promises made and indirectly paid for by workers weren’t reneged on. But this bill steps away from protecting accrued benefits. The bill unfairly places the losses of funding failures on workers.”

Norman Stein: “The administration proposal would require that certain underfunded plans freeze future benefit accruals and would bar benefit improvements. Such restrictions are wrong, so long as new benefits are funded and old benefit liabilities are being amortized under appropriately rigorous schedules.”

On access to information:

Teresa Ghilarducci: “Why not add a worker representative on the board of trustees? … [T]hrough their representatives they would have a genuine link and awareness of ongoing pension funding issues. A worker representative would further transparency goals.”
On what needs to be done:

Teresa Ghilarducci: “Implement funding rules that freeze benefit accruals for funds with below 60 percent funding, but don’t make 80 percent a blanket trigger. … [R]eform should help employers find ways to stay in the system and get through short-term difficulties.”

Norman Stein: “Existing employee benefit expectations should be respected. … [R]estrictions on employees’ access to certain types of benefits, or the immediate negation of certain benefit guarantees, or a mandatory freeze on new benefit accruals, should be avoided wherever possible.”

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