Workers' Pensions Under Attack

April 11, 2004

On April 8, the Senate passed a bill which will allow corporations to slash payments to employee pension funds by $80 billion over the next two years. The bill has been approved by the House and Bush is expected to sign it into law.

This law will put the retirement of millions of workers further at risk.

Today, 44 million private-sector workers have company-sponsored pension plans. These pensions, 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 income from these funds to pay workers' pensions later on.

The new law will allow corporations to use a higher interest rate to calculate the future value of monies presently in their pension funds. Corporations will immediately take billions of dollars out of their pension funds and cut back on their annual contributions, reaping billions in extra profits. An additional provision of the law grants even more relief to airline and steel companies, whose pension funds are severely underfunded.

Right now U.S. corporate pension funds are underfunded by $300 billion. Many companies have already defaulted on their pension obligations to millions of workers. The new legislation passed this week legalizes this underfunding and put workers' pensions at greater risk.

Yet more, last year, the government's Pension Benefit Guaranty Corporation (PBGC), created to protect workers' pensions when a company defaults, began refusing to honor its obligations to tens of thousands of retired workers.

After a lifetime of labor, workers are being robbed of their pensions by the corporations and the government.