Pension crisis—another corporate swindle
Published Jul 18, 2006 9:23 PM
You walk into your bank to withdraw cash. The
teller says: “You have nothing in your account.” You thought you had
money in there. But you don’t. The bank took your money to invest or to
pay debts. Or they just wanted it for themselves. That’s what is happening
to millions of workers who won pensions (deferred wages), sometimes in contract
negotiations, many times through hard struggle on the picket lines and hard
times on strikes.
Giant corporations—United Airlines, US Airways,
Bethlehem Steel, Northwest, Delta, Delphi—and hundreds of other companies
have declared bankruptcy and defaulted on pension benefits won under legal and
binding contracts. Millionaires who became billionaires—and of course
enjoy fully funded pensions and health care in addition to their exorbitant
salaries, obscene bonuses and stock options—are robbing the
A headline on the cover of the Oct. 31, 2005, Time magazine read:
“The Great Retirement Ripoff.” Subheads said: “Millions of
Americans who think they will retire with benefits are in for a nasty surprise.
How corporations are picking people’s pockets with the help of
The Time article was a major exposé that related
heartbreaking stories of workers and retirees who lost their pensions.
“From 2001 to 2004,” it said, “nearly 200 corporations in the
Fortune 1000 killed or froze their defined-benefit plans and since 1985 over 5
million workers are no longer covered in the private sector.”
pension crisis is crystallized in a graph—“Pensions in
Peril”—showing that since 1985 the number of company-sponsored
pension plans has dropped from 112,200 to 29,700. As of 2004 company plans were
underfunded by a total of over $450 billion, with the amount steadily climbing.
When multi-employer pension funds are added, the figure rises to over $600
billion. For the public sector, employee pension funds in the U.S. are short
The capitalist government was supposed to guarantee these
benefits, which were won by the blood and sweat of workers who created the value
and profits of the giant corporations. In 1974, following corporate abuses of
workers’ pensions in the 1960s and 1970s, Congress passed the Employee
Retirement Income Security Act (ERISA). Coupled with the formation of the
Pension Benefit Guaranty Corp. (PBGC), a quasi-governmental agency, ERISA was
supposed to provide oversight as well as assurance to the millions of diverse
workers here that their retirement pensions would be secure.
Gerald Ford, who signed the legislation on Labor Day 1974, promised, “This
legislation will alleviate the fears and the anxiety of people who are on the
production lines or in the mines or elsewhere, in that they now know that their
investment in private pension funds will be better
However, Congress wrote ERISA so broadly that, during
the 1980s, top management was able to dip into pension funds and remove the
equity set aside for the workers’ retirement. This was a bonanza for
corporate raiders, speculators and Wall Street conglomerates, which were able to
skim millions and billions from pension funds to buy up distressed corporations.
Even though Congress has imposed an excise tax on money removed from the
pensions and rewritten some of the rules, this was a slap on the wrist. The
ripoff goes on.
After three decades under ERISA, pension plans that
companies are dumping are so short of assets that the financial status of the
PBGC, the body responsible for protecting the pensions, is rapidly
deteriorating. In 2000, the agency operated with a $10 billion surplus. By 2004,
this became a $23 billion deficit. By the end of this year, the shortfall could
top $30 billion.
According to PBGC Executive Director Bradley D. Belt, who
recently announced his resignation, “The agency has on record 350 active
bankruptcy cases.” Belt told Congress, which is currently discussing
ERISA, “37 have underfunding claims of $100 million or more, including six
in excess of $500 million.”
In reality, the deficits are worse than
the public data suggests. The Government Accountability Office stated earlier
this year: “PBGC’s accumulated deficit is too big, and plans simply
do not have enough money in the system to back up the long-term promises many
employers have made to their workers.”
A Wall Street Journal
editorial on June 27, headlined “Pension Crash Landing,” criticized
Congress, whose House and Senate conferees are “busy negotiating another
pension fix.” This mouthpiece of finance capital—no friend of
labor—is warning the government: “On present trends, this could
become a fiasco on the order of the saving and loans collapse.”
were referring to the bailout—which cost tens of billions in
taxpayers’ and workers’ money—in the 1980s and 1990s when
another government insurer, the Federal Savings and Loan Insurance Corporation,
went belly up during a real estate crisis. Whether the government will pick up
the tab if the PBGC collapses remains to be seen. Without a broad-based
struggle, pensions could go the way of the dinosaur.
break up unity
The center of a potential class struggle is emerging in
the auto industry.
On Oct. 8, 1995, Delphi, the largest auto supplier in
the U.S., filed for bankruptcy protection with an $11-billion pension shortfall.
In 1999, General Motors spun off Delphi, its main supplier. The shortage in
GM’s own pension fund is estimated by the PBGC at a whopping $31 billion.
Ford Motor Co. has a $12.3 billion pension deficit. Daimler-Chrysler is
pitting local unions against each other to achieve deep concessions.
Big Three and Delphi have plans to shut down or sell plants to restructure their
corporations, lay off thousands of workers, downsize wages and benefits, and
hire temporary workers. Delphi is demanding a wage cut from $27 to $12 an hour
for the remaining unionized workers. These transnational corporations are
whipsawing the union workforce and girding for a showdown in 2007 when the
contract with the United Auto Workers, the primary union,
Recently General Motors announced the results of a massive buyout
plan that included Delphi. Of 131,000 workers at GM and Delphi who were offered
them, approximately 35,000 accepted some sort of buyout. Of those, around two
thirds were GM workers.
Corporate strategy was to divide the retirees
from the active production-line workforce. The buyouts were a way to weaken the
resolve expressed by the Delphi workers when they voted by over 95 percent to
authorize a strike.
Divide to conquer will be met with resistance.
Retirees have a major stake in the outcome of 2007 contract negotiations:
enforcing the pension promises that GM made in the buyouts. They are rightfully
concerned and they will join production line workers to turn the pension crisis
into a general struggle.
There are rank and file groups coming together to
take on these monumental challenges. Soldiers of Solidarity is one that has a
splendid record in the formative stage of this epic crisis. Their name is an
eloquent expression of what is needed: an army of workers prepared to do battle
in independent, class-wide solidarity with workers, organized and unorganized,
and their communities across the spectrum of the pension crisis, which at its
roots is a capitalist crisis. The empire of high finance is counting on
never-ending war to solve these problems, further aggravating, not alleviating,
the many crises here.
It was rank and file auto workers who seized the
General Motors empire in the late 1930s. The UAW was born out of the Flint
sit-ins. The organized resistance began with the few and grew into an army of
the many. Are we in for a rerun?
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