Underfunded union pension plans shouldn’t get a federal bailout

This Labor Day, some labor union officials should be concerned.  The Financial Accounting Standards Board, a private organization that sets the rules for financial auditing, is considering a proposal that would require companies to disclose their potential liability from collectively bargained multiemployer pension plans.  

With the liability on view for all to see, it would be difficult for unions to assert to potential new members that failing pension plans are solvent.  Unions would lose a valuable tool to recruit new members.

What are multiemployer plans, and why does FASB want their liabilities reflected on companies’ books?

Multiemployer pension plans are created and sponsored by unions to generate retirement income for employees of different companies. These plans allow workers to take their pensions with them if they move to another participating company.

Multiemployer pension plans have lower levels of funding than do plans sponsored for nonunion labor. This disparity is evident in Labor Department data for 2007. The plans are likely in worse shape today.

Congress considers funds with less than 80 percent of needed assets to be in endangered status, and those with less than 65 percent to be in critical status. The Labor Department lists critical and endangered plans at www.dol.gov/ebsa/criticalstatusnotices.html.

In a study published Wednesday, my associates and I examined the funding status of all 2007 pension plans. Among all large plans, only 18 percent of union-negotiated plans were fully funded in 2007, compared to 39 percent of non-union plans.

Twenty-four percent of union plans were in endangered status, compared to 9 percent of non-union plans.

Meanwhile, a few members of Congress have introduced bills that would have the government — that is, the taxpayers — rescue some plans.

If the federal government were to bail out the pension funds, taxpayers would take a substantial hit.

Reps. Earl Pomeroy, D-N.D., and Patrick Tiberi, R-Ohio, would rescue multiemployer pension plans with their proposed Preserve Benefits and Jobs Act. It would set up a “fifth fund” that would give the Pension Benefit Guaranty Corporation unlimited funds to bail out the plans.

With deficits stifling the economy, it’s unfair to make taxpayers, already in trouble themselves, pay for underfunded union pensions.

FASB is to be congratulated for shining a light on underfunded union pensions.  But spending billions of taxpayer dollars on their rescue would swell the deficit still further, harming the economy and destroying jobs rather than creating them.

Examiner columnist Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute.

Op Edsop-edOpinion

Just Posted

A large crack winds its way up a sidewalk along China Basin Street in Mission Bay on Friday, Sept. 24, 2021. (Kevin N. Hume/The Examiner)
San Francisco’s sinking sidewalks: Is climate change to blame?

‘In the last couple months, it’s been a noticeable change’

For years, Facebook employees have identified serious harms and proposed potential fixes. CEO Mark Zuckerberg and COO Sheryl Sandberg have rejected the remedies, causing whisteblowers to multiple. (Eric Thayer/The New York Times)
Facebook’s problems at the top: Social media giant is not listening to whistleblowers

Whistleblowers multiply, but Zuckerberg and Sandberg don’t heed their warnings

Maria Jimenez swabs her 7-year-old daughter Glendy Perez for a COVID-19 test at Canal Alliance in San Rafael on Sept. 25. (Penni Gladstone/CalMatters)
Rapid COVID-19 tests in short supply in California

‘The U.S. gets a D- when it comes to testing’

Niners quarterback Jimmy Garoppolo led a late-game comeback against the Packers, but San Francisco lost, 30-28, on a late field goal. (Courtesy of San Francisco 49ers)
The Packers beat the Niners in a heartbreaker: Don’t panic

San Francisco is no better and no worse than you thought they were.

A new ruling will thwart the growth of solar installation companies like Luminalt, which was founded in an Outer Sunset garage and is majority woman owned. (Philip Cheung, New York Times)
A threat to California’s solar future and diverse employment pathways

A new ruling creates barriers to entering the clean energy workforce

Most Read