Wednesday, December 17, 2014

A Brief History of Pensions


Some members have inquired about new legislation out of Washington that impacts multi-employer pension plans (these are of the Taft-Hartley variety, of which the Motion Picture Industry Pension Plan is one.)

The short answers:

Yes, some multi-employer plans, particularly manufacturing pension plans centered in the mid-west, could see some payout reductions to current participants under 75.

But no, this new legislation shouldn't affect the MPIPP, because our plan has 85-90% funding. (Those mid-west plans are drastically under-funded, unlike the MPIPP.)

But let's dig a little deeper into this pension thing. ...

Bloomberg has a succinct summary about pensions in the U.S. of A.:

... The U.S. is almost unique in its reliance on private, company-sponsored pensions instead of comprehensive, government-sponsored benefits.

Private pensions emerged in the late 19th century in what was then the most important U.S. industry: railroads. In 1877, striking railroad workers protesting wage cuts brought the country to a standstill. Workers clashed with state militias; dozens died in the ensuing violence. ... And in 1880, the Baltimore and Ohio Railroad instituted a private pension plan for its employees; it eventually would cover 77,000 workers. ...

In the succeeding decades, corporations in other industries followed suit. Invoking the spirit of welfare capitalism, they unilaterally introduced pensions, health and disability insurance, and other perks in a rather overt attempt to woo workers away from unions. The programs became so widespread that in the 1920s, many unions protested against such benefits. ...

Private pensions flourished until the Great Depression, when many corporations went bankrupt, as did their benefit programs. But they soon revived, along with the economy. Between 1939 and 1946, the number of U.S. private pension plans went from 659 to 9,370. ...

The growth of private pensions in the postwar era also reflected a shrewd triangulation on the part of the business community. Business leaders wanted to check the further expansion of what is now derided as "big government." They also wanted to curb the power of unions. Pensions and other benefits such as health insurance enabled employers to achieve both goals. ...

Private pensions are now a vestigial presence in American work life, replaced by defined-contribution plans such as the 401(k). In the last 15 years, the portion of the U.S.’s largest companies offering defined-benefit pensions to new workers has fallen to 24 percent from 60 percent. ...

The changes in the spending bill, which could permit cuts to multiemployer private pensions for about 10 percent to 15 percent of the 10 million workers in such plans, are framed as a necessary measure to preserve the solvency of the PBGC. But on a deeper level, this step is a harbinger of the ultimate demise of a private pension system that has outlived its usefulness to the business community.

The drumbeat today is to demonize employees who still have livable pensions ("Hey now, aren't those people greed-heads? Why should they have nice monthly checks while you don't?") so that other working stiffs are angry about it.

I look forward to the day when few have any kind of significant retirement and everyone works into their eighties ... because that's when Social Security kicks in.


0 comments:

Site Meter