Pension protection: why are private pensions not placed in a trust and insured by a portion of their earnings

Millions and millions are beginning to find out that the pensions they worked for all their lives have just vanished! Under current law, if the employer goes out of business there is no recourse; if the union mishandles the pension funds there is no recourse; if the stock market takes a dive and pension funds are lost there is no recourse. American is aging; by 2020 over half the population will be over 65 years of age. Yet we allow the pensions of America's workers to be placed in jeopardy. This makes no sense to me at all. The current set of laws allows employers and unions to play a shall game with pension funds. The employer gets a tax deduction merely for "earmarking" pension funds without having to actually part with the cash.

I think it's time this country treated pension funds as employment taxes and had employers make deposits in to secure trusts, insured by part of the earnings. No more of this paying in to the union pension fund!

Here are the facts:

Defined benefit pension plans: Most private US pension plans are ensured by a federally supported company called the Pension Benefit Guarantee Corporation (PBGC). The PBGC, by law, ensures that anyone with an accrued benefit under a private or Union pension plan has their benefit guaranteed if the plan is insolvent. This is analagous to the protection you receive from the FDIC on your bank account.

This protection does have some important limitations: it covers benefits up to a certain level only. Participants with large benefits (like the pilots at United Airlines) may lose a considerable portion of their benefit. (The union guarantee level is much lower than the private pension guarantee.) It also does not cover local government or church sponsored plans.

In a typical union arrangement, pension contributions are paid to the fund in cash. There is only a very limited opportunity for any kind of "shell game". Any misapplication of funds occurs on the union side.

Defined contribution (DC) plans (like 401ks) do not have such guarantees. Historically, these were not considered necessary since DC plan contributions are almost universally paid in cash to the trustees who then invest it for participants. Where participants have lost money, is when they were unable to move money out of a losing investment fast enough because of a "black-out" period or where a sponsor delayed making a contribution and went bankrupt in the interim.

See link below. Most union pensions are handled by professionals.. Only a few are managed directly by the union - those are the ones where you can get ripped off.

http://www.lycos.com/info/pension-funds-...