Retirement Security?

December 15, 2013

In recent years there have been increasing attempts at all levels of government as well as in private enterprise to lessen the expense of extending an adequate standard of living to those who have left the workforce via retirement. Whereas private pension funds have been largely replaced by individual 401k accounts and their counterparts for non-profit enterprises, along with the increased risks attendant upon the vagaries of the stock market, even pensions for public employees have recently come under pressure. Events in Detroit and Illinois are among the most recent endangering the incomes of large numbers of public sector retirees.

Years of mismanagement and failure to keep up with employer contributions to worker pension funds have left many cities unable to live up to their obligations in paying their retired employees their full pensions as promised. The latest federal budget agreement, still pending Congressional approval, even goes so far as to extend retirement cost savings by cutting the way the cost of living adjustments are made to military veterans eligible for pensions. This is similar to the chained CPI proposal being touted by some in Washington, including the President, as a way cut Social Security costs by reducing COLAs

For years, both public and private sector employers have sought to decrease their contribution to these funds and increase the burden on the employees. These issues become major points of contention during labor union/management contract talks for unionized workers, along with the cost sharing involved in providing other benefits, the largest being health insurance. The worker contributions are made out of their paychecks, usually tax free at the time of the deduction. The employer contribution is a means by which compensation for the employee may be deferred until they retire. A form of enforced saving that isn’t really missed by the employee because they never see the money until they retire – similar to the way Social Security gets paid, though the percentages of wages paid by each differs by employer and changes over time differently than Social Security, where the tax is set by Congress.

There may be various reasons to explain how the situation for public workers has grown to the point where city, county and state governments feel the need to fail to honor their pension commitments and/or cut other post-retirement benefits that they promised their workers. Perhaps taxes were held too low for long periods of time for the pension funds to be adequately funded. Raising taxes is rarely politically popular. Blaming public employees and their unions is a popular pastime among politicians looking to bash public sector employers and break up their unions. In the private sector, pensions have often been underfunded to make the bottom line look better to stock holders or raided to further enrich executives. While reasons for the underfunding may be easy to ascertain, the fact that workers are expected to take the fall in a bankruptcy proceeding for mistakes made in promising their compensation by their elected or appointed bosses ( Dare we call it fiscal malfeasance?) is unacceptable.

People work at these jobs expecting to be paid. Part of their compensation includes being able to maintain an adequate standard of living after they retire. They are working for a certain level of pay with the understanding, in writing, that a certain amount of their pay is being put towards retirement security, and that their employer is also contributing towards that pension. Now they are being told that they were basically lied to all that time. If the powers that be get away with such conduct in Detroit or some corporation in the private sector, a precedent is set for other local governments and private sector employers to do likewise, placing the workers’ compensation in a lower class of financial obligation than other creditors when it comes time to settle any bankruptcy filing in court. In other words, they lose out on their hard-earned money so banks and others don’t lose as much as they might otherwise.

The demise of both public and private pension plans, as well as the inability of most 401k type plans to provide a reasonably secure retirement in the face of the volatility of the stock market and the economy as a whole in recent years demonstrates the need to devote more resources to insuring that all members of our society maintain an adequate income upon retirement from the workforce. The current system seems to enrich the administrators of 401k plans, IRAs, etc. at the expense of the workers they are supposed to benefit. Allowing pension funds to be mismanaged on such a large scale is merely an attempt to delude workers as to the economic value being placed upon their work – in short, to underpay people drastically. If Social Security were being run that way, people would be screaming from the mountaintops and demanding retribution. Darrell Issa would be holding public Congressional hearings demanding impeachment and resignations at the highest levels of government.

Social Security, like it or not, has become the main and even sole source of retirement income in this country for increasing numbers of Americans.It is earned and needs to be strengthened and expanded to make up for the uneven hodgepodge of pension and retirement plans currently in existence which have become totally.unworkable in many locations and companies. By expanding Social Security’s scope and benefits, many of the problems experienced by individual retirement accounts, be they IRA’s, 401k’s or some other variant, could be eliminated. More uniformity in the treatment of all workers nationwide, irrespective of their specific company, organization or type of employment could be established nationwide. Contributions by employers and employees would also be uniform. This flies in the face of those insisting that Social Security itself is unsustainable and must be cut, but those naysayers of the program do not have the facts to back up their claims. Sufficient money exists and can be made available to accomplish this with a few simple adjustments to the current system.

The current climate, where municipalities are filing bankruptcy individually and attacking not only the jobs of current workers, but also the livelihoods of people no longer in the workforce, is a recipe for disaster, especially for those closest to the bottom of the economic ladder. Further privatization of the retirement system would only make matters worse. Retirement, like education and national defense, can be better handled at the national, rather than the local level. Providing enough resources to cover the continued economic viability of our elders as well as our youth is an important function of a humane and just society. Enough of throwing grandma and grandpa under the bus once they retire. Reversing the trickle up economics which have prevailed in this country for decades will require a comprehensive approach such as this to ensure that far fewer fall through the holes in the social safety net which have become unacceptably large of late.