Pension Security

The problem of insuring the security of pensions has become a major issue that has been highlighted by the past bankruptcy filings of United Airlines and the past financial problems of General Motors and Ford.   Twenty Five years ago, if anyone had said that the bonds issued by Ford and General Motors would ever be considered junk bonds, no one would have believed that situation would ever have been possible.  Thanks to the Earned Income Retirement Security Act (ERISA), pensions are partially guaranteed with usually a much reduced level of benefits to retirees in the event of the bankruptcy or default by their sponsors.  In the case of one retired steel worker, his monthly payment from the trust fund was less than half of what he had been collecting from the steel company before it declared bankruptcy. The Pension Benefit Guaranty Trust Fund has incurred major expenditures by taking over the defaulted pension obligations of bankrupt corporations .Even profitable corporations are now attempting to transfer their pension obligations to the Trust Fund.  The present pension guaranty system is unsustainable and is becoming a major funding problem for the Treasury that the Congress must address if pensions are to be protected.

The only viable long-term solution is to establish industry-wide Federally-supervised and guaranteed secondary pension programs similar to but not the same as the Federal Railroad Retirement program.  For examples, there might be a Motor Vehicle Industry Retirement Fund, a Utility Industry Retirement Fund, a Grocery Industry Retirement Fund, a Dry Goods Retail Consumer Industry Retirement Fund, a Financial Services Industry Retirement Fund, an Aviation Services Industry Retirement Fund, a Mining/Resource Extraction Industry Retirement Fund, etc.  All companies included in each industry fund would pay a designated percentage of their payrolls in addition to present Social Security contributions (including executive compensation and benefits) into their industry's fund, which would be a source of additional retirement income for their retired employees supplementing each retiree's basic Social Security pension contributions.  These industry funds would relieve corporations from current pension obligations and simultaneously guarantee the pensions of their employees with the same level of assurance that Social Security pensions now have.  The advantage of these Federally-chartered, supervised, and guaranteed industry-wide funds is that all employees in that industry would be covered and have their pensions protected regardless of the fate of the companies in which they were employed.  Individual employees would have their pensions vested in each industry retirement fund, with inter-industry credits earned transferred to the final industry pension fund in which they participated prior to their retirement.  The payroll contributions paid into each industry's retirement trust fund must be invested only in special FHA and VA insured 20 year fixed interest rate mortgages (with restrictive clauses prohibiting second mortgage liens) that would made available only to first-time home buyers starting their employment careers in that designated industry.  By investing pension funds only into mortgages for current and employees buying their first homes, the management of each specific industry's retirement fund would benefit all employees in that industry throughout their working careers and subsequent retirement years as well. It would also prevent the risk to losses in these funds from economic downturns, criminal behavior in the financial markets, and any Executive or Congressional budgetary manipulations.
(also, please read the Saving Social Security Issue paper)

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