Should taxpayers pay for private-sector pensions? Before we start I have to disclose I collect two private-sector pensions. Congress is preparing to vote on a spending package. The spending package provides a $6 billion taxpayer bailout to the United Mine Workers of America pension fund.
What does the future hold if this goes through?
For the first time in history, Congress is in position to use taxpayer dollars to fund the broken pension promises of a private-sector union and private employers. If this passes you can bet this won’t be a one-and-done move. The next big pension plan in line for a bailout is a Teamsters’ Central States, Southeast and Southwest Pension Fund union plan.
Organized crime within the Teamsters union was the plot of “The Irishman.” Central to the story was the virtually unchecked control over the Teamsters’ pension fund by then-Teamsters boss Jimmy Hoffa. He was using it for mafia related loans and personal gain. It was fraud and conspiracy related to the union’s pension funds that landed Hoffa in prison.
After that, the Teamsters’ pension fund was under federal oversight for decades. Not all union-run pension plans have been plagued by illegal activities. However, nearly all have suffered from serious mismanagement. The mismanagement was made possible by the special treatment given to union-run pension plans. They were given wide latitude in lieu of more stringent funding rules required of non-union plans.
The multi-employer pension system
The result is virtually the entire multiemployer pension system is on the path toward insolvency. That is not a news flash. This is a known issue. Across the U.S., close to 1,400 multiemployer pension plans have collectively set aside only 43 cents on the dollar to pay promised pensions. In total, the Pension Benefit Guaranty Corporation estimates that multiemployer plans have $638 billion in unfunded pension liabilities.
The United Mine Workers covers less than 1% of multiemployer pension recipients. It’s roughly $6 billion in underfunding is only the tip of the iceberg. The Central States Teamsters pension plan has about $44 billion in unfunded pension promises. There are roughly five dozen other Teamsters-associated pension plans adding even more.
These two plans have drawn significant attention and consideration for taxpayer bailouts. They represent only a small fraction of all multiemployer pension plans, workers, and retirees. It’s wrong that employers and unions were allowed to make promises without properly funding them. It’s unfair that about 10.5 million union workers and retirees with private union pensions stand to lose a significant portion of their pension benefits through no fault of their own.
This is a terrible situation but why put the taxpayer on the hook?
But taxpayers had no role in these broken pension promises. Despite the United Mine Workers’ claim, the federal government did not make a promise to coal miners. The solution to the multiemployer pension crisis is not to bail out just one of more than 1,300 massively underfunded union pension plans without doing anything to improve the system. We do not have a spare trillion dollars to bail out private retirement plans.
That will create huge inequities. If the taxpayers are put on the hook so mine workers receive 100% of promised benefits how can others reasonably be asked to accept pennies on the dollar? If we bail out one how do we not bail out all? This sets the stage for a massive taxpayer bailout of numerous other private and public pensions. This at a time when we are $22 trillion in debt.
If Congress opens the door to pension bailouts the price tag could reach $52,000 for every household in the U.S. Congress needs to change the rules so that this never happens again. It needs to maintain the Pension Benefit Guaranty Corporation’s solvency as a pension safety net. It also needs to require plans to act sooner, rather than later, to minimize pension losses.
What should we consider?
Congress should not do a selective bailout for just one union pension plan. It should not be something which should be done as an add on to an end-of-the-year spending bill. It is too big and it is too important. Congress should provide a comprehensive solution to the multiemployer pension crisis.
It needs to do its job and give the matter serious consideration. The solution isn’t to simply to shift the bill to taxpayers. And it surely should not be one that doesn’t leave 99 out of 100 pensioners in the lurch. Should taxpayers pay for private sector pensions? Absolutely not. Further it should adjust public sector pensions down to reflect the actual financial situation.