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Pension Security

June 22, 1986

Jonathon Peterson's June 8 article about the problems of the Pension Benefit Guarantee Corp. ("Promise of U.S. Pension Agency Dims") was excellent, but it didn't deal with the needs of the employees who believe they are earning credits for retirement.

More than 900 corporations have cancelled their pension programs in the last few years. Many others have "raided" their pension funds, declaring that there was more money in the fund than was needed. Other plans were modified or drastically changed as the result of corporate mergers or bankruptcy.

Employees who believed that they were accumulating a pension that would suffice to care for them were suddenly faced with a cash payout and the need to find different employment. In most cases, they would have to be employed in their new job for 10 years before their new pension benefits would be vested.

Peterson points out that the obligations of the Pension Benefit Guarantee Corp. have reached astronomical levels, due to bankruptcies and underfunding of individual corporation contributions.

This has led to a continual rise in the payments that each pension plan is required to make, in order to provide enough money to pay the obligations of the defunct plans.

He correctly points out that this amounts to a heavy financial penalty being placed on solvent plans to pay for improperly financed plans.

One solution would be the establishment of a quasi-official pension fund open to any group that wanted to join.

Such a fund could act as a supplement to our present inadequate Social Security system. Contributions would be credited to each individual on an actuarially sound basis, so that there would be no unfunded liability and no need to pay a fee to ensure the pension benefits of the employee.

This same fund would relieve each pension plan of the necessity of having trustees to invest the money and keep records of each employee's pension credits. It might also relieve the stock market of the effects of billions of dollars being moved around by pension plan administrators as they vie to maximize their earning record.

Employees working for organizations that were part of the plan would have the security of knowing that their pension accumulations were safe, even if their employer went out of business or was taken over in a hostile merger.

In addition, employees who had to change jobs could have their pension contributions continue uninterrupted, and could be relieved of the necessity of working 10 years for a new employer before their benefits would be vested.

This new system would require that the laws controlling contributions to pension plans by those companies that decide not to join the quasi-official plan should be adequate to cover the liabilities built into the plan.

It is hard to justify allowing a corporation to underfund a pension plan that is a part of the earnings of each employee. Such funds should be considered as trust funds that cannot be tampered with, and should have the same lien rights as wages that are owed to an employee.


Santa Monica

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