It’s been a while since I’ve complained about the Pension Benefit Guarantee Corporation, the federal program under which people whose pension plans have gone belly up continue to be paid some sort of pension. It’s another of those public/private hybrids I complained about recently. In a recent editorial the editors of the Wall Street Journal warn that the PBGC may need the next big federal bailout:
Labor unions like to promote their generous defined-benefit pensions. Yet when these benefits prove unsustainable, workers can lose their jobs and retirement savings. The kicker is that taxpayers may soon be tapped to perpetuate this double fraud.
That’s the main take-away from a new report by the Pension Benefit Guaranty Corporation (PBGC), which insures multi-employer pension plans for 10.4 million workers and retirees. The federal agency projects that its deficit for multi-employer plans will balloon to $49.6 billion by 2023 from $8.3 billion. Last year the PBGC forecasted a deficit of $26.2 billion in 2022, and its upward revision reflects the increasing likelihood that more plans will become insolvent and sooner.
Of all of the possible solutions for solving the PBGC’s money problems paying its shortfalls out of the general fund must surely be the worst.
I don’t think the PBGC should exist at all. It’s the rankest sort of corporate welfare, right up there with the Export-Import Bank. It enables companies that are so inclined to underfund their pensions and pay less than the legitimate cost of insuring the funds to underwrite them.
Additionally, it’s manifestly unjust. It forces people who have no pensions to pay for the pensions, largely through their payroll taxes, of those who do.
If you can’t bear to abolish the PBGC, my second proposal would be changing it into a real insurance plan in which premiums are proportion to costs and risks. That would at least be a disincentive for the corporate misbehaviors I mention above. Another possibility would be to limit payouts under the PBGC to what premiums bring in. If it’s good enough for Social Security, why isn’t it good enough for private pensions?
The very last thing we should do is continually stoke the PBGC with money.