Posted on Oct 27, 2008
John M Grau
I hate to add to the pile of bad financial news, but have you checked your local defined benefit pension plan lately? If it wasn’t underwater before this current stock market crisis, it is now. At least in terms of the funding standards under the new pension regulations established a couple years ago.
Add private and public pension plans to the list of institutions that Congress needs to save from technical bankruptcy. I say “technical bankruptcy” because in most cases the plans themselves are not bankrupt. They just don’t meet the funding standards established by the government. While funding standards are good and necessary, in times like these strict interpretation of the regulations can lead to even more disastrous results.
To my way of thinking the solution is fairly simple. Allow pension plans to spread their liabilities out over a longer period of time. That way, they work their way out of the hole as their investments recover over time. (Right now, it looks like that might be a long time).
This isn’t a bailout. It shouldn’t cost the government or the taxpayer anything. The alternative would. If plans ultimately fail, they fall back on the Pension Benefit Guaranty Corporation (PBGC) to pick up the pension liability and payments. Then it does become a bailout, and we all pay the tab.
The problem is, Congress seldom does it the easy way. There is already talk of finding ways to make 401(k) participants whole for their losses. This has lead to more talk about re-engineering the whole pension system in our country, including a government take-over of all pension and 401(k) plans. Private pensions and savings plans would cease to exist. A government-mandated plan, skewed toward lower-income participants, would be substituted.
So far this it just talk. But some kind of Congressional action will be required in the months ahead, which opens the door to all kinds of ideas.
NECA has already moved pension issues to the top of its government affairs agenda. We will not only be actively monitoring the situation, but proactively working with other like-minded organizations in coalitions to promote sensible solutions while fighting off harmful alternatives.
Small businesses, like all citizens, have a big stake in how the government addresses our current financial mess. NECA won’t hesitate to jump into the fray to represent the interests of electrical contractors. Your support, advice, and guidance will be needed as with deal with some issues we have never had to confront before.