Issues Briefing
The Retirement Crisis
We need to improve and expand Social Security
BACKGROUND
Note: This briefing is from 2008; we've added a 2009 update below.
The consensus among U.S. unions during World War II was that, as soon as the war ended, the country needed to complete the unfinished business of President Franklin D. Roosevelt’s New Deal.
Key parts of labor’s agenda were national health care and retirement security for all. But UE and the other unions of that era did not intend to negotiate pensions with employers. Labor instead proposed that Social Security be expanded to cover all workers, and increased to provide adequate retirement income for workers and their spouses.
Big business blocked labor’s legislative plan for health and retirement security, and large unionized companies instead negotiated employer-provided pensions and private health insurance, which set the pattern for the postwar decades.
But in recent years, employers have unilaterally cancelled this “social contract,” ducking out of promises to provide retirement benefits. They’ve done this by manipulating the bankruptcy laws, targeting pensions in contract negotiations, or by simply canceling benefits. Companies have herded growing numbers of workers into risky 401(k)-type investment plans, as a substitute “retirement plan.”
The result: a catastrophic drop in the number of workers covered by pensions and by employer-paid retiree health care.
CURRENT STATUS
After years of doing nothing about pensions, Congress in 2006 passed the misnamed “Pension Protection Act.” Far from “protecting” any pension, this legislation opens the door to an accelerated employer exodus from defined benefit pensions.
For the first time, this law permits the mandatory enrollment of new workers in employer-picked 401(k) savings plans. Tens of thousands of workers and retirees lose pension coverage every month. As employers walk away from pension obligations, they dump their pension liabilities on the over-extended federal Pension Benefit Guaranty Corporation (PBGC).
Meanwhile FASB and GASB accounting rules – set by private committees dominated by major banks and corporations – create added pressure on both private companies and public agencies to reduce or eliminate pension benefits.
2009 UPDATE
The ongoing financial crash has already taken an enormous toll on the existing pension system. Hardest-hit are those workers with 401(k) plan who were heavily invested in the stock market. But all pensions, both private and public sector plans, have suffered deep losses in value.
The refusal of the Bush administration to enforce any of our nation's financial and investment laws and regulations was a major contributing factor to this disaster. In view of this, the Obama administration and new Congress must take immediate action to prooperly investigate the ramapant thefts and immediately begin to recoup stolen monies for pensioners and workers hoping to have something for retirement.
(see also: UE's Information for Workers - The Attack on Pensions and Retirees Heats Up: GASB and FASB)
UE POSITION
Our union believes that the only way to fix the growing retirement crisis is with a bold plan to improve and expand Social Security. It is time for our country to recognize that both health care and a secure retirement are basic human rights.
Expanding and improving Social Security, and passage of the Expanded Medicare for All Act (HR676), would place human needs at the center of national priorities. The collapse of both the private employer-based pension system and profit-driven health insurance leave us no choice but to fight for significant change.
FAST FACTS
- The Social Security Administration projects that given current trends less than one-third of all workers will have sufficient retirement income by age 65.
- Stagnant or falling real wages for most working people translates into a mathematical impossibility of saving adequately for retirement.
- The current PBGC deficit of more than $20 billion is expected to grow as more and more companies dump their underfunded plans - raising the possibility of the necessity of a taxpayer financed bailout.
- As recently as 2000 the PBGC maintained a $10 billion surplus.
- The Department of Labor (DOL) has only 385 investigative staff to monitor and police employer conduct in more than 3.2 million different benefit plans.
- Each DOL investigator has an average of 8,000 plans to monitor, a ratio which practically invites employer fraud and theft.