Workers' Pensions Under Attacks

April 29, 2003

Congress is considering new legislation which would allow corporations to slash their contributions to employee pension funds. This would put the retirement benefits of millions of workers at risk.

Today, 44 million private-sector workers have company-sponsored pension plans. These pensions, generally won through sharp contract struggles, are part of the workers' compensation - a form of wages which is set aside for future use, i.e. upon retirement.

But the corporations do not fully fund the pension plans. Instead, they set aside only a small portion of the monies they are contractually obligated to pay workers upon retirement. The corporations count on receiving interest or investment income from these funds in order to pay workers' pensions later on.

The new legislation being introduced in Congress with the bipartisan support of Republicans and Democrats, would allow corporations to use a higher interest rate to calculate the future value of monies presently in their pension funds. This would immediately allow corporations to take billions of dollars out of the pension funds and to cut their annual contributions. The corporations would reap billions in profits. Under the proposed legislation, General Motors, for example, would see its pension liabilities reduced by $7 billion.

Right now U.S. corporate pension funds are underfunded by $300 billion. Many companies, such as the airlines and steel corporations, are already defaulting on their pension obligations to workers and millions more workers, especially in such industries as public utilities, auto, rubber and tire, and telecommunications, are at risk. The new rules would legalize this underfunding and put workers' pensions at greater risk.

All this boils down to government sanctioned robbery.

And these attacks on private pensions come at time when Social Security payments keep falling behind the inflation rate and Medicare benefits pay for less than 50% of the medical costs of most seniors.

In sum, more and more senior citizens are being thrown into poverty and facing extreme financial insecurity, after a lifetime of labor.