The cuts involve the ailing Pension Benefit Guaranty Corporation, an independent agency of the federal government. This portion of the Wikipedia article explains how the PBGC is funded.
Excerpt from the Washington Post article Congressional leaders hammer out deal to allow pension plans to cut retiree benefits:
A measure that would for the first time allow the benefits of current retirees to be severely cut is set to be attached to a massive spending bill, part of an effort to save some of the nation’s most distressed pension plans.Note the example cited below the fold.
The rule would alter 40 years of federal law and could affect millions of workers, many of them part of a shrinking corps of middle-income employees in businesses such as trucking, construction and supermarkets....
Whitlow Wyatt, 70, retired with a $3,300-a-month pension in 2000 after working more than 33 years as a long-haul driver. He could face pension reductions of 30 percent or more if Congress permits trustees of the hard-pressed pension fund to slash benefits.Read the entire article HERE.
Just imagine what havoc these cuts would work upon the personal budgets of many already-retired, elderly retirees under the age of seventy-five! Retirees who are over age seventy-five or disabled are exempt from the cuts.
The root of the financial troubles of the Pension Benefit Guaranty Corporation is an inverted pyramid of support for the pension plans. There used to be four active workers or members for each retiree, but now the ratio is one active worker or member for every five retirees.
Meanwhile: Boehner gives $16,928 for each of the 56,000 youths, young adults and children who crossed the border during the 12 months up to October 2014.
Thanks AOW for covering this. Millions of Healthcare workers will lose their benefits. The majority of Hospitals were late in ending defined pension plans as part of contracts with workers. These are not government workers who retired after 25 years will almost full salaries as pensions. The problem is not with the ERISA, but rather the ability of Companies to borrow against the set aside funding for pensions, and then merge or sell, divesting themselves of these obligations and leaving ERISA stuck with the bill.
ReplyDeleteLooks like I will be enjoying food stamps shortly. Thanks John Boehner.
Orwell was a prophet: "Some animals are more equal than others."
DeleteI have reposted your well thought out post as I am beyond the point of even discussing it. I hope you don't mind. Not much sleep last night over this. I spent yesterday trying to get some attention on this. It is a scam that companies are using to get out of their obligations period. Stick it to others while they reap the monies out of the Pension plan.
DeleteBunkderville,
DeleteI can imagine how distressed you must be! There is no recovery from a financial hit such as cutting the benefits of those already retired.
It seems the answer is to adjust the pensions of those who are yet to retire, not the individuals who have already vacated the workforce.
ReplyDeleteBut it all comes down to the math. If the money is not there, the money is not available.
But we will deny the American worker their right, whilst handing unearned income to illegal immigrants? Never liked Boehner and I am more wary of the GOP as of late. Both parties seem like co-joined twins in many regards.
Tammy
Tammy,
DeleteIt seems the answer is to adjust the pensions of those who are yet to retire, not the individuals who have already vacated the workforce.
I'm not sure, but that may also be part of the package. I read something about the retirement pension of those actively working now being reduced to $13,000/year.
Tammy, to reduce future workers pensions does not answer the scam that Companies who are even making profits are doing. They use the Pension funds as a piggy bank. Then they merge, or sell their assets and get out from the their pension obligations. The government mandates that they fund their pension plans.I believe it is 80 percent now of future payouts. Liz Warren is starting to look good.
DeleteHoffa added that a “last minute $2 billion bailout to a $100 billion Fortune 50 company for breaking its promise to its retirees is outrageous and only adds to the list of special interest provisions in this bill.”
ReplyDelete“This disgraceful government subsidy to one of the most profitable companies in America should be stopped in its tracks,” Hoffa wrote, adding that “hiding behind a rule that prevents Members of Congress from directly voting to cut retiree benefits is a shameful act that may well be remembered at the ballot box in the future.”
Penalizing legitimate Americans in order to accord special privileges to criminals, chronic ne'er-do-wells, resident barbarians, and other assorted undesirables stinks to high heaven -- to put it mildly.
ReplyDeleteAny more wretched refuse from the teeming shores of foul foreign lands, and we will lose everything our ancestors fought to gain and maintain, the quickly join the rag tag bobtail company of Turd World Nations thereafter. UGH!
Nope, absolutely wrong.
DeleteThe source of funding isn't even identical.
Penalizing retired Americans to spiff Kapital stinks.
Playing the race war card also stinks and smacks of shallow thought.
Ducky is partially right.
DeleteThe real culprits here are the all-powerful, all-corrupt troika of Big Business-Big Labor-Big Government.
They conspired to allow the pension funds to promise the rubes unrealistic pensions. These funds, in accordance with federal law, assumed pie-in-the-sky annual returns in perpetuity.
The trend continued until it no longer could. Every ponzi scheme comes crashing down at some point.
The Feral Government should apologize to Bernie Madoff and set him free. He's a candy story shoplifter compared to the crooked swindlers in the feral government and their big biz and big labor co-conspirators.
As usual, here's where it goes south. We both agree that the idea of s government of, for and by the people is long gone. Hell, even kid knows he's getting a plank slammed up his butt.
DeleteBut I say we have to manage the financial sector first if we ever want even a modicum of influence on our own government.
No, you don't set Madoff free. You put a lot more like him inside.
Ducky, I agree with you. The Wall Street Whizz Kids blew up our economy in 2008 with their magical money making stink bombs, and not one damned pirate of high finance went to jail. Not one. That is an indictment against our corrupt government, and both parties have their hands in the cookie jar.
DeleteToo big to fail is too big. If you're so big that government must bail you out if you crash, then you are too big.
Remove the taxpayer-funded safety net, and the Wall Street gamblers will make the little old lady who only drives her car to church on Sunday look like a daredevil. They will not be so reckless with their own money (and others) if the law makes them eat their losses.
As long as Wall St. is writing the checks with impunity there is no way yu halt Wall St. influence.
DeleteUness you maybe swallow and listen to Liz Warren.
Ducky,
DeleteI agree with Warren's assessment of the situation. She makes sense. I do cringe at some of her more big government 'remedies,' but, like Bernie Sanders, at least she is calling BS on this corrupt system (which is separate and distinct from free market capitalism).
Unlike you and your fellow political team sport fanboys and fangirls, I don't reflexively froth at the mouth and fly into a rage when someone flashes a picture of a liberal for the Two Minutes Hate.
Ducky,
Deletebtw... You and your fellow lefties' pavlovian snarling and baying at the mere mention of Louie Gohmert or Ted Cruz is funny and sad all at once.
Once again, our government rates an A+ in promises, but an F in keeping its promises. I posted a three-part series about this problem toward the end of November, and while there may be some disagreement with my conclusions, the sad fact is that there is no way out of this bubble that won’t hurt someone, either as the result of decreases in benefits, or as substantial increases in taxation. Some even argue that both are necessary. What we are talking about here is, according to some, $205 Trillion in unfunded liabilities. Who is going to pay for this?
ReplyDeleteIt seems to me that our government is getting worse by the hour. This may be simply a result of the fact that the American people are learning more about what has been going on behind the scenes. Nevertheless, what I think we are observing is an enormous failure of liberal social policy that actually has no benefit beyond helping to secure the election or reelection of snakes and rascals to the US Congress. These are promises made that cannot possibly be kept, exacerbated by voters who never quite get around to holding elected officials accountable until it is already too late to avoid catastrophe.
Businesses exist as moneymaking entities, not to provide social services to their workers, to whom they pay a wage or salary in exchange for their labors. What has happened here is that in putting together the ERISA, government informed businesses that it is okay if they do not provide pensions for their workers —government will do this for them, through the Pension Benefit Guaranty Corporation. Note: we should become nervous Nellies whenever we hear of a government corporation. Looking at this from the perspective of businesses, they are already paying out a good sum of money in payroll taxes; avoiding pension responsibility is a plum handed to them by government, whose intention (it seems) is to federalize everything. This is the result of incompetent government meddling with market forces. Add to this far too many shenanigans by those greedy municipal managers, who have committed taxpayers to far more obligations than they can possibly afford. Personally, I think government should require that all employers provide pensions to their workers and that such pensions take into account the present values of future benefits so that when retirement comes around, there is no startling revelation about insufficient pension funds. Thanks to our inadequate educational system, much of this is far over the heads of most Americans, which is how we ended up where we are today; that and idiotic liberal social policy.
It is not over my head, A contract was entered into that had nothing to do with the government. It is now the government who wishes to change the law and let these companies off the hook. Private industries need to be held responsible for their contracts. It is the public entities that are causing Billions in shortfalls for the most part. Check out Breitbart and what Hoffa had to say. I agree it is the government intrusion that has caused much of this. However considering we are giving away Billions to illegals, how can anyone justify removing a portion of a retiree's income that had nothing to do with the government?
DeleteOf course, you are correct. Making empty promises with no intention of keeping them seems criminal to me and your point about illegals is spot on. More in the way of liberal social policy that has a direct and hurtful impact on the American worker.
DeleteIt was not an empty promise. I am not talking about future benefits. As you know doubt know, upon retirement one has various options usually on how one wants to take their retirement.In my case, I chose an annuity for my pension that had nothing to do with the government. It was a contract I had with my employer and John Hancock. What right does the government have in limiting my annuity? The more I think about it, how legal is this from what I have read. Interesting legal questions and will be interesting how this turns out.
DeleteBunkerville,
DeleteHere's the problem...What the government giveth, the government taketh away. Long ago, an estate attorney -- my father's attorney -- made that point in a conference all of us were having. He ended by saying, "Grab ahold of that law -- while you can. Congress is likely to do anything at any time."
In your case, you entered into a contract on your good faith. Now look at what's happening!
The federal government is not a good guarantor now. The federal government has, in effect, become a scammer.
A former student of mine is a high-level financial adviser. Over on Facebook, he commented as follows:
This is not surprising. With the increased longevity of retirees and increased risked taken by companies on their pension, and VERY low yields on investments within the fund the problem is only beginning. A guarantee is only as good as the guarantor.
You almost have it, AOW but for some reason can't take the next step.
DeleteTake a look at the bill under consideration.
Cuts to worker benefits, removal of banking regulations and increases in political contribution limits.
The government is owned but we will still read defenses of Kapital.
There will still be a defense of supply side, trickle down economics.
And what is worse is that the standard maneuver of turning the middle class against the poor is working in spades.
But when it hits the middle class the railing against "the nanny state" stops. Let's celebrate a Republican senate. Any vestige of the social welfare state should continue to be whittled away as the middle class sows the seeds of its own destruction.
This comment has been removed by a blog administrator.
DeleteDuck and JMJ,
DeleteKeep this in mind -- regardless of regulation or the lack of regulation: something will continue as long as it can, then stop.
Ivory towers fall.
JMJ,
DeleteInsult me or my friend Mustang one more time, and you're gone from this blog.
That's true, AOW but this isn't an ivory tower.
DeleteIt's crony Kapitalism and this is how it works. It MUST continue to extract.
Now, when we can differentiate between market economies and Kapital we may make some progress but if you analyze the militarized police, you realize someone is way ahead of you in the game.
Duck,
DeleteI won't argue that it is not crony capitalism. Crony capitalism, not exclusively the practice of one political party, has run wild -- on steroids.
Integrity appears to be a thing of the past -- on many levels.
Ducky waxes nostalgic for the days of command economies directed by politburos and government "experts."
DeleteAnd crony capitalism is still better than the puke city of socialist mediocrity living in a cage.
DeleteAs far as crony capitalism, look to the Big banks. They're the problem. I have no problem with opposing them to the point of reducing their influence to zero. Unfortunately, they run everything so good luck with that.
And to the people who hate the rich who take advantage of our society, the middle class, et al, where is you brain when it comes to the politicians who fleece you by the second, apparently with your blessing. And these people are mostly those who can truly be called failures. Failed lawyers. Failed this Failed that. Got elected and now have it set for life. What about those POS's ? You have no problem serving morons like pelosi who has to pass a bill that destroys healthcare so she can find out what's in it?? A clue as to why my respect for you is in negative numbers.
Mustang,
DeletePolitical promises have a long history of being broken.
Nevertheless, voters continue to believe that promises will be kept. Why?
What is the next "pool of money" that will suffer? Private IRA's and 401K's?
ReplyDeleteSorry to clutter your blog, but there apparently this plight of retirees has little interest for the most part. I have the feeling that I have not been as articulate as I could be, or wished to be. I agree that there is/was not sure thing that when I retired that I would have a pension, and I understood that pensions were vastly underfunded. My sole issue is with "Current" retirees. And I am willing to accept the loss, but what I cannot abide by is that it is the government intrusion that lets and will let my company off the hook. I never planned that there would be any pension in my retirement planning. Having said that, an appropriate time to retire appeared since I could avail myself of the previous mentioned annuity which my accountant/tax attorney said would be secure. Today he is not so sure.
DeleteOh they will come for the IRA's.
Bunkerville,
DeleteYou are not cluttering this blog!
You know what I've learned the past few years? Very few people are concerned about the plight of others. Those who are not concerned about the kind of plight you may be facing will squawk like scalded cats when something similar touches them.
I hear you when you say: what I cannot abide by is that it is the government intrusion that lets and will let my company off the hook. The government as guarantor has seemed secure for a long, long time.
Apparently, the government as guarantor is no longer reliable. This has ramifications for many, but the many haven't yet figured out that fact.
Current retirees will suffer a terrible financial blow that will put them into serfdom. So much for the middle class!
I want to mention something else....A few years ago, those heavily invested in Wall Street took a financial hit of 30%. Of course, the difference is that "high rollers" can afford that 30% hit. Those whom we have been discussing today do not have that luxury.
I am no high roller at all, but I recently suffered a terrible financial blow when a company in which I invested went belly up because of something involving real estate values. In my case, however, the blow doesn't technically involve my pension, but it does take away the money I have been using to pay my monthly health-insurance premium.
I have to wonder this, too....What's going to happen down the line to the federal employee pension plan? The local governments' pension plans?
Since our unfunded liabilities exceed our annual Gross Domestic Product by>12X, sooner or later we will all be up $#!t Creek!
ReplyDeleteJon,
DeleteExactly!
PBGC lost 23% of their equity investments in 2008. Wall Street banks were bailed out and treated to QE and ZIRP for the last six years. PBGC got zip! Pensioners don't rate like the VIP's on Wall Street.
ReplyDeleteAbsolutely.
DeleteYou're getting close to the bottom of this.
Possibly of interest:
ReplyDeleteHistory of pension plans in the United States. Note what happened with Studebaker in 1963.
This is also of interest...History of Pensions: Why Were They Started? Note the following:
In the 19th century, public pensions were implemented for two reasons:
1. To give non-military federal employees an incentive to convert from patron to a permanent civil servant
2. To succumb to workers’ groups demands for creating a more extensive welfare state like that of Europe
Thanks for the info. Interesting background.
Delete"To succumb to workers’ groups demands for creating a more extensive welfare state like that of Europe" - one of many bad ideas of Bismarck's doing.
ReplyDeleteHe was the proto-progressive, wasn't he?
DeleteAnd the horrible effects echo down to this day.
If progressives here in the US coul learn to make our government as efficient as the Germans', it would probably be game over for conservatives.
This just out gives us an insight which few of us ever get to know about but I guess not surprised. Yes, it is worse than we thought. What this means is there will be more sucking off the government. Just what the government wants.
ReplyDeleteCongress’ backroom pension-cutting deal is even worse than expected
http://www.latimes.com/business/hiltzik/la-fi-mh-congress-expected-20141210-column.html
Bunkerville,
DeleteYE, GODS!
I just read that link.
Note this portion:
Deletemany retirees would face benefit cuts of as much as two-thirds of what they were promised during their working lives
More information at the link that Bunkerville provided @ 4:39 PM EST.
Which people CLEARLY can't survive on...so what are they thinking?
DeleteMeanwhile, we give so much money to foreign countries, to illegals, to every non American thing we can think of.
And, meanwhile, the left still thinks Wall St's all Republicans and moans and groans in blame instead of THINKING of THEIR futures, too.
There is no end; America as we know it is quite finished....impossible that it happened so quickly...but let a president run us into debt of TRILLIONS of dollars, almost 3 times what Bush left us with, is it? Let him promise expensive goodies, and let him start a medical program that is going to cost our government dearly, and what do we EXPECT?
Obviously, by "which people clearly can';t survive on.." i was referring to 2/3 of what they thought they'd get from their pension.
DeleteSorry for not making that clearer!
From the link I listed above. These are people already retired.Just to be clear. (Thanks AOW for letting me lt off steam today!)
Delete"For one thing, full protection is available only for those aged 80 or older; those aged 75-80 are only partially protected -- the benefits of a 76-year-old, for instance, could still be slashed by 80% of the maximum allowed by the bill."
Bunkerville,
DeleteKeep hammering away at what you just stated:
These are people already retired.
Once again:
THESE ARE PEOPLE ALREADY RETIRED!
And we know that some of them are unable to work physically as they once did.
So, what will happen to some of these retirees? Will they be forced onto the Medicaid rolls and other welfare programs (government-subsidized housing, for example)? Will they be forced into the homes of their children and grandchildren? And what of those without children or grandchildren?
Z,
DeleteSee my comment above @ 8:07 PM EST.
What are these people going to do? What will happen to their homes? What will happen to whatever nooks of the economy that they were stimulating when they had sufficient income to do so?
You are absolutely correct:
America as we know it is quite finished.
WE NO LONGER HAVE A REPRESENTATIVE GOVERNMENT.
WE THE PEOPLE exist only to feather the nest of the political criminals.
I'm glad that I'm as old as I am. I'm glad that I don't have children.
Addendum:
DeleteWelcome to the Dystopia of the United States of AmeriKa.
Meanwhile, we give so much money to foreign countries ...
Delete------
Not really, most of it goes to Israel and they kill plenty Muslims so that's money well spent.
Besides, it's primarily military aid which never leaves the country. The client just buys a lot of stuff and pumps up the American arms economy. Sorta like welfare for General Dynamics.
Can you think of a way to stop this pork?
And, meanwhile, the left still thinks Wall St's all Republicans and moans and groans in blame instead of THINKING of THEIR futures, too. ...
Delete--------
That's incorrect. The financial class is apolitical. They just buy whomever is in power.
Time and again you've been told this is a failure of the entire government, not parties.
Or maybe it would be different if we had elected Romney?
The Feral Government, with the Federal Reserve abetting them, has eroded the value of our dollar, making saving money in a traditional savings account a sucker's game. If you have money in a traditional savings account, you're actually losing money.
ReplyDeleteThat is the root of this problem.
In order for the dollar to hold its values, they can't print it faster than the economy is expanding, but we're caught in a trap. The federal government runs a deficit every year, so it must print more money to pay the bills.
If this were not occurring, the money you put in the bank 20 years ago would still be worth something.
A quart of motor oil 8 years ago cost around a dollar. Today, it is over $5. Look at the price of that humblest of foodstuffs, hamburger. It's price has exploded.
That is the root of this problem.
Frugal people used to be able to take care of themselves in old age with the money they saved, but not anymore. Government entered the health care market and wrecked it, driving prices to ridiculous levels.
The Wall Street vampires and the DC crooks are driving all the money to the stock market so the cronies can enrich themselves on our money.
All of this is brought to you by the progressive politicians of all parties who infest the Progressive State of America.
I'm reserving judgement on this until jersey mcjiggers can get a comment on the post that wont' be deleted. lol..
ReplyDelete"Meanwhile, we give so much money to foreign countries, to illegals," not to mention Obamacare money. That's why this makes you so angry. Where were the fiduciaries over the last 4 decades? Am I the only one who could see the demographic change coming? Of course not! Once they wrested control of the Central states plan from the crooks, the somnolent took over. But probably stuffed their wallets with big fat fees, anyway. First it was Wall Street kingpins, then Obama's union friends. Now this! I'm expected to bail them out .. again? Why don't they just come and confiscate my house and bank account and get it over with. Shhhhh. Shouldn't give the lawless ideas.
ReplyDeleteHonestly, what's double worrisome is that not only is the economy falling apart and people going to get robbed of their futures, but our society is so repulsive now...it's like all true goodness is gone. And, yes, I know liberals will ask "what's your idea of goodness?" but, you know, when people have to actually ask that, we have bigger problems than even WE think.
ReplyDeleteGad, I could write a novel on things that we have demeaned in our country which were so good, so nourishing, so right... .. even just FAMILY. Who'd have ever thought family life would be so encroached upon? People can't even dine together because one kid's got soccer till 7, one's got something else.....people get home late, both parents working. Sunday mornings are volleyball practice, Saturdays are at the baseball field. You all know friends with kids and what happens.
It never would have happened to have Sunday mornings for athletics for kids only a few years ago.
We're going to have a broke economy, a society of kids who don't know what real family life is, or know that it's better for children to marry before having them, we have kids learning about global climate change and a history of slavery instead of the Constitution........college kids don't know who the VP is, etc. They think the Civil War was fought in 1965.
ugh. I'm starting a rant here and don't want to. But I see nothing good. It's so much bigger than the financial future, isn't it.
and yes, I do have faith. We're broke financially AND morally.
And yes,I KNOW, liberals...who are conservatives to say 'what's moral?'.
WOW
Z,
Deleteour society is so repulsive now...it's like all true goodness is gone
Last night, I was watching some old movies on one of the cable channels. One of the films was Holiday Affair (1949).
I got depressed. We have lost so much goodness!
We have lost the elegance that used to be the norm -- even for those who were certainly not members of the upper class.
Right now, in 2014, the norm for me every Saturday morning has become an aggressor who frequents the public library.. She made another lunge toward me last Saturday! That kind of behavior would not have been allowed -- in the America of the not-so-dim past.