Congress' Plans for your Pension

By the time you read this, the problem I'm going to discuss will probably already be enacted into law. This will make it impossible to change but, nevertheless, you need to know what your Congress is doing to you.

In the 1980's, corporate raiders took over companies with the sole purpose of removing the company's "surplus pension" benefits. This left employees, retirees and the government at real risk. The trick was that the raiders simply had to estimate what 125% of expected need would be for the pension funds and siphon off the rest. All they had to do was forecast a hugely healthy economy and higher than expected interest rates while assuming that the retirees will only live a year or so more after retirement and, viola, most of the funds were thus considered "surplus" and the looting began.

The risk to employees and retirees is obvious. The risk to the government, and by extension to you as a taxpayer, is that the government, in the form of the Pension Benefit Guaranty Corporation, insures those plans. Still, some retirees were at risk since those government benefits were limited to about $2574 per month. Does the term "S&L debacle" ring a bell?

In the late 1980's Congress moved to protect workers and their hard earned retirement funds. They enacted legislation to force companies to pay not only corporate income and excise taxes on the amount withdrawn, similar to the taxes and penalties we pay for withdrawing funds early from an IRA, but they also imposed corporate penalties of between 20% to 50% on top of it. A company withdrawing money from its pension fund would pay about 80% to 85% in taxes. Suddenly, raiders and company executives looked elsewhere for money to steal.

Your Congress is the process of not only reversing those laws by cutting the penalties from the 20% to 50% down to 6.5% (they still pay corporate taxes on the amount taken) but they are also waiving the penalties if the money is taken before July 1, 1996. Not only are they giving the corporations free rein in the candy store, the law also stipulates that the employees need not be notified when the funds are removed.

Last year, pension regulators were given stronger authority to decide what the pension fund's surplus actually was and, thus, forced much more conservative numbers. That authority, however, doesn't apply under the new law. Whatever the company deems surplus is simply surplus.

This isn't some small problem pertaining to just a few companies. The PBGC lists one hundred firms they expect to take advantage of the new law including BellSouth Corp., Northrup, GTE, Citibank and 96 others. We are discussing the futures of literally 100's of thousands of American workers. If you are a government employee (county, city, or state) you are just as much at risk as business employees. More so, if you consider the awful state of nearly all the government's finances.

Why would our elected representatives put our working men and women in such danger, you ask? Simply for the billions in taxes they expect to receive during the looting process. They want to gain your favor with the tax cuts they are promising and they have to find revenue to make up for it, somewhere. It's also the reason they are gutting Medicare, Medicaid, Welfare and many other programs which don't greatly benefit the wealthy. Finally, just like their attack on all the above programs, they are proceeding without any Congressional hearings on the subject. The actual problems Congress are creating won't be felt for years, long after they are out of office. It appears to many that they are afraid of airing their plans in front of the very people they claim to represent and whom they will hurt the most.

Think about it, folks. A small tax cut now and no retirement guarantee later. Gee, sounds fair to me. I plan on spending the approximately $33 I'll save every two weeks to invest in the very companies that raid their pension funds. That way I should get a very small percentage of my pension fund's losses back. You gotta think these things through and plan for the future, folks.

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