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In February, the White House released its “Annual Report on the Middle Class” containing new regulations favored by Big Labor including a bailout of critically underfunded union pension plans through “retirement security” options.

The radical solution most favored by Big Labor is the seizure of private 401(k) plans for government disbursement -- which lets them off the hook for their collapsing retirement scheme. And, of course, the Obama administration is eager to accommodate their buddies.

Source

There were reports( and here) that Tom Harkin tried to introduce this during the lame duck session but it was defeated. The link to the source document is now broken and I can find nothing about this on the library of Congress site. So I am wondering if it was fear mongering? Potentially an Overton Window moving report with no real attempt?

Was there really was an attempt to introduce the legislation that would automatically convert 401k Accounts into GSA's? There were reports that they were trying this to leverage the 4T+ in 401k accounts to deal with the debt problem.

  • Two of those reports are from a very-right-wing blog, and the third is a link to that blog. – DJClayworth Oct 21 '11 at 18:54
  • Yep... And at one point there was a link to what looked like an official Senate document but that link is broken now and I am unable to find it anywhere on the Library of Congress site. So Now I am wondering is the document that was linked was faked. I will say that Tom Harkin was asked about it in an interview and he refused to address it as it was ongoing legislation. Which is far from denying it. – Chad Oct 21 '11 at 20:15
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    If it happened in front of a C-SPAN camera, you can probably find it here: c-spanvideo.org/congress Their index includes the text as recorded by the Closed Captioning system, which is nice because Congressmen (or Senators as the case may be) can't edit it later :) – dtanders Oct 21 '11 at 20:45
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    I do not understand the downvotes. – Chad Mar 25 '13 at 17:46
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    What do we mean by 'let the unions off the hook'. My understanding is that underfunded pension plans are caused by *employers failing to make the contributions they committed to. – DJClayworth May 20 '16 at 16:10
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There are two distinct items mentioned in the claim, both of which are correct individually but which are incorrect taken together.

  1. Yes, there was a bill (actually a couple) to grant taxpayer-backed guarantee to PBGC. The last one I found was Casey's "Create Jobs & Save Benefits Act of 2010".

    While the bill didn't explicitly use the "bail out unions" language, it is quite obviously disproportionately beneficial to unions considering that one of the main things union provides is extremely generous defined benefits (DB) plan.

    The bill was introduced by Casey, not Harkin, and is dissected in detail by the National Legal and Policy Center.

    Rather than raise employer premiums on sponsor participants, which Congress did four years ago as part of the Pension Protection Act, the new legislation would stick taxpayers with risk in two ways.

    First, it would create a "fifth fund" within PBGC. The language of the bill is clear: "(O)bligations of the corporation that are financed by the [fifth fund] shall be obligations of the United States." In other words, the bill would shift the burden of paying orphan fund claims from the sponsor to the general public. And benefit levels would be guaranteed to be no lower than before. The proposed per-retiree ceiling hike from $12,870 to $21,000 would create an additional incentive for individual sponsors to terminate their pensions and hand the ball over to PBGC.

    Second, the legislation would allow trustees of union-sponsored multi-employer pension funds to form alliances with trustees of plans in unrelated industries. Currently, multiemployer plans must be in the same industry group. The purpose behind allowing a broader pooling of resources is to enable unions to avoid more easily the "last man standing" rule. This regulation, based on 1980 legislation to amend ERISA, stipulates that if a sponsor pulls out of a multiemployer plan, all remaining firms must cover that employer's liabilities or pay a large exit fee. Unions and union-friendly employers like the arrangement because it gives workers an opportunity to keep their pensions if they change jobs within the same industry. Unfortunately, the rule unwittingly has encouraged plan terminations.

    Further, they quote the lead author of the Hudson Institute report, Diana Furchtgott-Roth, who several months ago explained the role of organized labor:

    Why the persistent underfunding? Some union leaders like to achieve wage increases and new benefits when they renew collective contracts, in order to make their reelection more likely. Ensuring that pension plans are kept well-funded takes more work for little visible effect - and may well work against winning more benefits by underscoring their cost to the employer.

    In other words, union officials and employers under union contract prefer to paint an overly rosy picture to members than jeopardize their confidence. Accentuating the positive keeps members in the fold and contributions coming in. In the meantime, employers continue to scrap their plans because they can't afford to keep them over the long run, especially in the automobile, steel, airline and other union-dominated industries. Given that the Pension Protection Act requires participating employers to be solvent within seven years starting in 2008, more than ever they are facing the choice of going broke or handing over operations to PBGC.

    As an additional angle of how this would FURTHER benefit unions indirectly:

    Last fall Moody's estimated that multiemployer plans were underfunded by at least $165 billion, and concluded that "The ballooning of the under funded status of these funds has substantially increased the implied liability for contributing companies in the industries affected." Some companies risk having their ratings downgraded, especially if weaker companies become bankrupt and leave the pension plans.

    So, in additional to generally helping the pension side, this bill would also provide benefits to heavily unionized companies by letting them avoid credit downgrade risk.

  • 'negatively impact' is a long way from 'seizure'. – DJClayworth Oct 22 '11 at 3:22
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    This is an interesting and detailed answer. I don't see anything in it about seizing 401ks, though. Can we give a clear an unambiguous NO to the question? – DJClayworth Oct 23 '11 at 16:11
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    @DJC - as a quick preview, ONE of the impacts proposed is losing tax-exempt status for 401(k) contributions. That basically destroys the program since competing DB plans are of course NOT taxed, not being considered "income". – user5341 Oct 24 '11 at 13:38
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    @DVK: Any progress? – Oddthinking Nov 9 '11 at 21:50
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    Removed unreferenced parts after 4 years... – Sklivvz Mar 1 '15 at 14:00

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