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Monday, August 2, 2004
Pensions 'R' Us
Every young person is -- or ought to be -- skeptical about the future of Social Security. Some years hence, the current system will not support itself because of a demographic imbalance between workers and retirees. That very fact means that folks will have to retire later, receive smaller benefits or pay more in payroll tax.
Sigh. When we think about the significant challenges ahead, it's comforting to recall in our minds a golden era when people worked for one company, retired with a gold watch and defined benefits.
But don't hold that thought too long because corporate pensions are in lousy shape.
Just last week, the federal Pension Benefit Guaranty Corp. assumed coverage for nearly 3,000 retired steelworkers (many in Washington state) from now-closed Kaiser Aluminum plants. Kaiser punted its plan -- some $49 million in assets and $96 million in liabilities -- to the government because it says pensions are a financial barrier keeping the company in bankruptcy.
United Airlines said something similar last week, too. Although that company hasn't yet given up on its pension obligations, it said it could not afford to make a $72 million payment. Both United's unions -- and the government -- say it's unacceptable for the company to abandon its pension obligations. United has said its creditors are demanding they be paid first, leaving no money for pensions. If the entire plan is cast off, it could cost the new owner about $7.5 billion.
That's us, because the federal government is a pension-funder of last resort (although benefits to the retirees are limited). But the question looms large: Can the government afford these pension obligations? Not when we're hit with another demographic "oh, no!"
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