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Ellen Belcher is the Dayton Daily News opinion pages editor. She writes about state government, education, the environment, higher education and all things Dayton.
Martin Gottlieb is an editorial writer and columnist for the Dayton Daily News opinion pages. He focuses on the political process itself and does such national issues as war, the economy, taxes and Social Security, as well as a hodge-podge of local and state issues.Home > Blogs > A Matter of Opinion > Archives > 2009 > July > 28 > Entry
Editorial: U.S. pension insurance crucial to Delphi retirees
As recently as the 1970s, horror stories abounded about pension plans. Some pensions were offered on an all-or-nothing basis, rather than graduated according to the number of years an employee worked. That made employees vulnerable to be being fired or laid off just before becoming eligible, which did, in fact, happen.
There was also the matter of companies going bankrupt and not fulfilling their promises to pensioners.
In the mid-70s, Congress reformed pension rules, passing what’s known as ERISA, for the Employee Retirement Income Security Act. ERISA required, for example, that pension programs were reasonably well funded, in an attempt to make sure employees weren’t left high and dry.
One of ERISA’s arms has long been in play for 67,000 retirees from Delphi, many of whom are in the Dayton area.
The Pension Benefit Guaranty Corporation (PBGC) — having pressed Delphi and General Motors (from which Delphi was spun off) to keep assets to pay for pensions — is now taking responsibility for paying Delphi pensions.
When Delphi went bankrupt, the PBGC got GM to take some responsibility for the pensions and to promise to eventually take all responsibility. That plan died with GM’s bankruptcy. The PBGC backed off from a fight, deferring to President Barack Obama’s desire to get GM through bankruptcy quickly.
The PBGC already has responsibility for more than 3,800 pension plans that have been terminated for one reason or another.
It isn’t promising Delphi retirees the moon. It won’t pay out more than $54,000 a year per person; and to get that much, you have to retire at 65. It doesn’t necessarily cover special incentives that companies have offered to encourage early retirement or survivor benefits. It doesn’t cover health care.
Over the years, though, says a PBGC spokesman, about 85 percent of retirees have received from PBGC the pension benefits they had been promised by their companies. The percentage has been lower in highly paid businesses, such as airlines and steel. In a useful FAQ (frequently asked questions) feature about Delphi, the agency offers fairly plain language about what people in particular circumstances can expect and not expect. (Go to www.pbgc.gov/ and look for the reference to Delphi.)
If you’re wondering where the money comes from, it’s not taxpayers. The company imposes a fee on companies with the 29,000 pension programs it insures. It also takes in money from the plans it takes over.
In Delphi’s case, the plans — for union and salaried workers — already have about half the money the agency will need.
You might also be wondering if the PBGC has its own money problems these days. Of course. It took over 91 pension plans in the six months before May. It’s running a short-term deficit.
But the agency says it has $63 billion, plenty to handle its needs for a long a time.
What the PBGC does now will not satisfy everybody. There are always disputes. And the absence of health coverage is a huge gap that needs filling.
But the existence of the agency itself is one of the good efforts of “big government.”
The PBGC deals with “defined benefit” pensions, wherein employees are promised something specific. That type is widely seen as going out of style as more companies look to 401(k)s in an effort to avoid long-term obligations. But 44 million people are now in defined benefit plans.
One downside of such plans is that they do need government insurance. The 44 million employees — nearly all of whom must be feeling some degree of uncertainty about the future prosperity of their companies — should take some comfort that they came along in these times and not 35 years ago.
Permalink | Comments (1) | Post your comment | Categories: Auto industry, Editorials, Martin Gottlieb
Comments
By Marcia Laning
July 29, 2009 5:31 PM | Link to this
It would be nice if the Dayton Daily News staff would fully investigate what retirees will really get. We will be lucky to get 40% of our current pension which we contributed to and never had the option of taking a lumpsum instead of the defined amount as promised. This will certainly have a big effect on Dayton area economics.