Pensions of millions of Americans Threatened

Thought Secure, Pooled Pensions Teeter and Fall

12 April 2014  Mary Williams Walsh  New York Times

The pensions of millions of Americans are being threatened because of trouble in a part of the retirement world long considered so safe that no one gave it a second thought.

The pensions belong to people in multiemployer plans — big pooled investment funds with many sponsoring companies and a union. Multiemployer pensions are not only backed by federal insurance, but they also were thought to be even more secure than single-company pensions because when one company in a multiemployer pool failed, the others were required to pick up its “orphaned” retirees.

Today, however, the aging of the work force, the decline of unions, deregulation and two big stock crashes have taken a grievous toll on multiemployer pensions, which cover 10 million Americans. Dozens of multiemployer plans have already failed, and some giant ones are teetering — including, notably, the Teamsters’ Central States pension plan, with more than 400,000 members.

In February, the Congressional Budget Office projected that the federal multiemployer insurer would run out of money in seven years, which would leave retirees in failed plans with nothing.

“Unless Congress acts — and acts very soon — many plans will fail, more than one million people will lose their pensions, and thousands of small businesses will be handed bills they can’t pay,” said Joshua Gotbaum, executive director of the Pension Benefit Guaranty Corporation, the federal insurer that pays benefits to people whose company pension plans fail.

Wall Street’s Secret Pension Swindle

By David Sirota, Salon  27 April 14

A lack of transparency is allowing financial firms to make high-risk investments with your retirement funds.

n the national debate over what to do about public pension shortfalls, here’s something you may not know: The texts of the agreements signed between those pension funds and financial firms are almost always secret. Although they are public pensions that taxpayers contribute to and  public officials oversee, the exact terms of the financial deals being engineered in the public’s name and with public money are typically not available to you, the taxpayer.

To understand why that should be cause for concern, ponder some possibilities as they relate to pension deals with hedge funds, private equity partnerships and other so-called “alternative investments.”

  1. It’s possible the secret terms of these agreements could allow private individuals in the same investments to negotiate preferential terms for themselves — public employees’ pension money would enrich private investors.
  2. Or these secret terms create the heads-Wall-Street-wins, tails-pensions-lose effect — the one whereby retirees’ money is subjected to huge risks, yet financial firms’ profits are guaranteed regardless of returns.

Wall Street also sucks off pension money with high fees — at a North Carolina pension fund “Fees have skyrocketed over 1,000 percent since 2000 and have almost doubled since (2008) from $217 million to $416 million. Annual fees and expenses will amount to approximately $1 billion in the near future.”

North Carolina is not an isolated incident. In state after state, the financial industry is citing modest public pension shortfalls to justify pushing those pensions to invest more money in riskier and riskier high-fee investments — and to do so in secret.

It is a story that isn’t some minor issue. On the contrary, the fight over that $3 trillion is fast becoming one of the most important economic, business and political stories of modern times. The only question is whether the story can even be told — or whether those profiting off secrecy can continue hiding their schemes from the public.

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