The End of Pensions, Roger Lowenstein, NY Times Magazine

[Coastie for Truth]

When I caught up with Robert S. Miller, the chief executive of Delphi Corporation, last summer, he was still pitching the fantasy that his company, a huge auto-parts maker, would be able to cut a deal with its workers and avoid filing for bankruptcy protection. But he acknowledged that Delphi faced one perhaps insuperable hurdle - not the current conditions in the auto business so much as the legacy of the pension promises that Delphi committed to many decades ago, when it was part of General Motors. This was the same fear that had obsessed Alfred P. Sloan Jr., the storied president of G.M., who warned way back in the 1940's that pensions and like benefits would be "extravagant beyond reason." But under pressure from the United Auto Workers union, he granted them. And as future auto executives would discover, pension obligations are - outside of bankruptcy, anyway - virtually impossible to unload. Unlike wages or health benefits, pension benefits cannot be cut. Unlike other contracts, which might be renegotiated as business conditions change, pension commitments are forever. And given the exigencies of the labor market, they tend to be steadily improved upon, at least when times are good.

For the U.A.W., Miller noted forlornly, "30 and Out" - 30 years to retirement - became a rallying cry. Eventually, the union got what it wanted, and workers who started on the assembly line after high school found they could retire by their early 50's. "These pensions were created when we all used to work until age 70 and then poop out at 72," Miller told me. "Now if you live past 80, a not-uncommon demographic, you're going to be taking benefits for longer than you are working. That social contract is under severe pressure."

Earlier this month, Miller and Delphi gave in to the pressure and sought protection under the bankruptcy code - the largest such filing ever in the auto industry. It followed by a few weeks the Chapter 11 filings of Delta Air Lines and Northwest Airlines, whose pension promises to workers exceeded the assets in their pension funds by an estimated $16 billion.

The three filings have blown the lid off America's latest, if long-simmering, financial debacle. It is not hedge funds or the real-estate bubble - it is the pension system, both public and private. And it is broken.

Long article - edited to comply with "Copyright Fair Use" - Well worth a read -

Further points:

* The PBGC is broken - Pension Benefit Guarantee Corporation - the Federal Insurance on Pensions (Don't expect Bush to fix it).

* The system is shrinking (number of covered employees, size of individual pensions based on fudging the formulas)

* Pensions matter because they are part of a three tier system - Social Security, Private Pensions, Provate Savings. Fiddle with one -- you have fiddled with all of them.

* The transition from a management tool to an expected benefit.

* The pliable system of pension accoutning --- a major scandal and rip-off.

* Bush "fixes":
"Enter the Bush administration: it has essentially declared the era of permissiveness over. Among other changes, it wants the funding rules tightened. To tackle moral hazard, it wants to stop companies with poor credit ratings from granting benefit hikes, or from doling out unfunded pension benefits to unions who agree to plant shutdowns. It even wants to prevent workers at some companies whose bonds are given a "junk" rating from accruing more years of service. This would be painful to employees at many industrial companies, possibly including G.M."
Basically puts a "due diligence" - "caveat emptor" burden on employees.

* Lowenstein's editorial wrap-up.

[ixion]

1. 'poop out': a cutsie way of saying

worked yourself to death. :grr:

[Skink]

2. Have a good Cristmas cause in 06 it all breaks apart.

Maybe be we should pass one more massive corporate tax break just for kicks:kick:

[sarcasmo]

3. A long read but well worth the time. Say good bye to Pensions start

putting your money into your 401k, or IRA.