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NATIONAL PENSION NEWS
Nothing beats the financial security that comes with a union-sponsored pension plan such as the IUPAT Industry Pension Fund. In this portion of the website, we are providing information about trends and issues in national pension and retirement news. Check back here often for the latest news. For more in-depth information, be sure to read your bi-monthly copy of the Pensions & Retirement section of the IUPAT Journal.
While Workers Sacrifice, Executives Squirrel Away Their Retirement
While workers are forced to sacrifice their retirement security, an increasing number of large companies are choosing to contribute to special pensions for executives, while not contributing to regular pensions, according to the April 24, 2003, issue of The Wall Street Journal.
Ellen E. Schultz and Theo Francis reported on this stunning trend, making the case that this practice is another example of the gap in retirement secu-rity between most employees and senior executives. According to the article, As senior executives rely more on their special pensions, they have less incentive to ensure that the regular plan offers adequate benefitsor is adequately funded. In addition, because these special supplemental pensions for executives remain separate from the general assets of the company, these pensions will not be affected in the case of bankruptcy. This further separates the future security of the senior executive from that of the average worker, who depends on the continued business of their company for their future.
As reported in the last issue of The IUPAT Journals pension and retirement section, a new Congressional study shows that more than half of workers ages 25 to 64 dont own any retirement savings accounts. The combination of the lack of retirement savings, as well as the flagrant preferential treatment shown to executives in creating and maintaining pension funds, spells trouble for the working men and women of America.
According to the May issue of The American Prospect, two-thirds of pension benefits currently go to the 15 percent of households with more than $100,000 per year income. While those households can count on a secure retirement, working men and women are depending increasingly on Social Security. In fact, at least 64 percent of the elderly depend on Social Security for at least half of their income. If this alarming trend continues, that number will only continue to grow.
According to the Economic Policy Institute, rates of pension coverage are highest among union workers. In 2001, 70 percent of workers under contract were covered. The findings in The Wall Street Journal illustrate how essential having a union-sponsored pension fund can be for your future, says Gary Meyers, IUPAT Industry Pension Fund Administrator. The men and women affected by this trend will be left without the security that IUPAT Fund participants have in knowing they will be provided for in their retirement. IUPAT participants can rest assured, knowing that this Pension Fund looks out for the interests of the hardworking men and women of the union.
Whats wrong with 401ks?
Critics are charging that 401(k) plans no longer meet the needs of todays workforce, where people often change jobs. With recent stock market declines and corporate scandals, they say that 401(k)s dont provide the security workers need in the long run. Many want to replace them with defined-benefit pensions that provide monthly retirement payments based on previous earnings and length of service of each employee. But is that the answer? "The question in the post-Enron era," said Michael S. Gordon, a Washington attorney who was one of the framers of the Employee Retirement Income Security Act (ERISA) in 1974, "is whether employer-based private pensions have become so untrustworthy and inefficient that they should be replaced by something less problematic."
Cash Balance Plans
Many companies are considering converting traditional pension benefits to cash-balance plans, where an employer credits to a worker a percentage of the workers wages and decides what interest rate it will earn. When a worker leaves that employment, the credited amounts are turned over to the worker. With cash balance programs, employer savings are huge.
The possibility of switching to these complicated and controversial types of pensions was facilitated recently when the Treasury Department proposed rules that would end a three-year moratorium on conversion.
The IRS stopped approving cash-balance plan conversions in 1999 as a result of dozens of lawsuits claiming the conversions are discriminatory. The newly proposed rules interpret pension law so that cash-balance plan conversions would not be in violation of age discrimination laws, as long as they meet certain requirements.
There will be a public hearing about the proposed rules in April, after which the IRS will decide whether to finalize the existing proposal or submit a revision. Check back in the coming months for results of the hearing.
Congressional Study Shows Most Americans Have No Retirement Savings
Americans are living longer than ever before, but many will be left in a financial lurch without any savings when they reach retirement age.
Thats the scary news from a recently released congressional study that shows more than half of workers ages 25 to 64 dont own any retirement savings accounts. This picture becomes even bleaker when you consider that about a third work for employers who dont offer retirement benefits. Just more than half those workers with access to employer-sponsored plans participated in 2001, according to the Congressional Research Service analysis of Census Bureau data. The study looked at 113 million people between the ages of 25 and 64 who earned money, including full-time, part-time, private, public and self-employed workers.
"This is really a wake up call for American workers and employers," said IUPAT Industry Pension Fund Administrator, Gary Meyers. "But it reinforces the benefit of union-sponsored pension plans. This should give all IUPAT Fund participants a real feeling of security knowing they will be protected and provided for in their retirement."