The Teamsters union’s Central States pension fund faces insolvency within 10 to 15 years unless Congress acts to stabilize the fund, its executive director said this week.
It doesn't hurt to have academic backing for the bailout argument:
"Orphaned" retirees from companies that went out of business shouldn't have their pension benefits cut if they are "partitioned" from the original plan, said Norman Stein, a University of Alabama professor who testified for the Pension Rights Center.
IMHO that's a weak argument. Employers with sense should point to the nonpartitioned nature of current plans as a mitigating factor against burdening themselves with higher contributions to subsidize "orphaned" employees of bankrupt former employers. Partitioning employees places another unfundable burden on the federal government's balance sheet. The PBGC is already feeling the effect of partitioning:
A Chicago-area pension fund that faced insolvency by 2013 will be split in two, with workers from bankrupt firms receiving benefits from the Pension Benefit Guaranty Corp.
That "partition" means companies contributing to the plan will no longer cover the benefits of "orphaned" retirees or workers from companies that went out of business.
Partitioning is good for businesses in the short run but bad for taxpayers in the long run as it increases the likelihood that the PGBC will need a taxpayer bailout. Union leaders are doubtless emboldened by the administration's bailout of GM and Chrysler, which handed much of the post-bankruptcy value of those firms to their union workers. Is it any wonder that unions feel entitled to bailouts? Unfortunately, the growing insolvency of the federal government will bring the entitlement era to a close. The only question is when, not if, this occurs.
