How Congress and Obama Robbed U.S. Pension Plans with Map-21

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We found yet another reason why the U.S. retirement crisis will be uglier than many retirees are prepared for…

You see, while retirees were napping last year, Congress and President Barack Obama were quietly stealing from their pension plans by enacting a little-known law called MAP-21.

Hidden in the wording of a new transportation bill, the act allows big companies to slash their contributions to pension funds.

The upshot?

The number of companies defaulting on their pension plans could balloon and bankrupt the Pension Benefit Guarantee Corp. (PBGC) insurance program – leaving retirees out in the cold.

"That smell of sulfur is what MAP-21 gives off," Jeremy Gold, a pension consultant, told The Fiscal Times. "It's got a smell about it of a deal made with devils."

That's bad news for retirees — or those about to retire – who are counting on a lifetime of payments from a pension plan.

Here's why…

MAP-21: A Wolf in Sheep's Clothing

In 2012, the government faced a shortfall between current gas taxes and projected highway spending.

So how to raise the money?

Let corporations cut funding on their pension plans and generate taxes from higher wages.
The bill – titled Moving Ahead for Progress in the 21st Century or MAP-21 – lets companies change how they calculate how much they need to fund pension plans.

MAP-21 lets employers put less money in their pension plans by allowing them to value their liabilities – what they have to pay in to fund pensions – using higher interest rates instead of current, low rates.

You see, pension plan liabilities are higher when interest rates are low because returns from bonds and other investments are expected to return less. When rates are high, the returns are expected to be higher and the liabilities are reduced.

Allowing companies to contribute less to their plans raises revenue for the federal government.

The government is assuming MAP-21 will raise $9.5 billion over 10 years because it will get more tax revenues from higher wages of current workers.

Defined Benefit Plans Targeted

MAP-21 is squarely targeted at traditional defined benefit (DB) pension plans. These are plans funded by the companies to provide employees with a source of income after retirement.

But the number of workers with DB pensions has been in steep decline for years. Fewer and fewer workers outside of the government sector have them.

Join the conversation. Click here to jump to comments…

  1. H. Craig Bradley | July 4, 2013

    RETIREMENT WITHOUT PENSIONS IS QUITE DOUBTFUL

    Private pensions are likely to have to reduce their payouts to current retirees in the next 10 years or so. So, retirees could face drastic income and lifestyle changes if they are too dependent on these so-called DB pension plans. As you say, many plans are currently underfunded. Its really theft or dishonesty to promise a pension you can not deliver because why would a average employee stay in the same job for 30 years except for the pension. Most people don't like their jobs that much. There are few exceptions if you are an employee.

    The incentive to stay in the same job for 25-30 years without a defined benefit pension would be significantly less. Employee quality would suffer at large companies without good pension plans. Salaries would have to greatly increase to make up or compensate for the risk of providing for your own retirement. Companies don't want to pay any more than the minimum the market will bare.

  2. Oscar Hardaway | July 5, 2013

    I retired from GE in 1993, twenty years ago, and GE has never missed or threatend reduction, and has even added one extra month's remittal. However, the purchasing power of the value reduces each month. What was a very high retirement value at retirement, just short of full payroll amount has now been reduced to a value of only 32%. That along with SS and spouse's retirement we get along quite well. However, during my employment years I made small investments in land, timber, rental properties, and stock issues which exceed all of our fixed income retirement income. My advice is to join a company in the top 1% of product, income, and employee relations, and make solid small investments, or start your own company in a field of personal enjoyment.

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