Sunday, March 19, 2006

Republican shenanigans on pensions

Did you think they'd do this any differently?

With a strong directive from the Bush administration, Congress set out two years ago to fashion legislation that would protect America's private pension system, tightening the rules to make sure companies set aside enough money to make good on their promises...

As a result, according to a little-noticed analysis by the government's pension agency, the bill being completed in a House-Senate conference committee, rather than strengthening the pension system, would end up actually weakening it. The agency's report projects that the bills would lower corporate contributions to the pension system by $160 billion in the next three years. "The system as a whole is significantly underfunded, and now we're talking about reducing funding by something like $160 billion over the next three years," said Jeremy I. Bulow, an economist at Stanford University. "It takes a better economist than me to understand how reducing contributions by that much is going to protect benefits and put the system on a sounder footing."

Both pieces of legislation — one passed by the House and the other by the Senate, both by overwhelming majorities — do contain measures that would reduce some of the lapses and inaccuracies that the current pension law permits. They would also increase the premiums companies pay to the federal guarantor, the Pension Benefit Guaranty Corporation. But Congress is also on the verge of pushing big new costs and risks onto the government, according to the agency and to critics of the bills. And some companies with fully funded pensions feel unfairly penalized by having to pay higher pension contributions to make up for shortfalls of others...

In a letter to shareholders last week, Edward S. Lampert, chairman of Sears Holdings, which is responsible for the pension plans of employees at Kmart and Sears, complained that his company's pension insurance premiums were going up by 60 percent, "not in order to address any risk associated with Sears, but rather to make up for the difficulties of other companies."

Mr. Lampert also deplored the current pension law, which bars companies with richly funded pension plans from taking any of the surplus money out, except in rare instances...

[Republican and successor to DeLay] Boehner has championed the provision easing the restrictions on investment advice for a number of years. It would permit investment firms to advise participants in 401(k) retirement plans, even if the firms' own mutual funds were among the employees' investment choices.

The current pension law forbids this practice, on the thinking that it could taint investment recommendations. Mr. Boehner has argued that employees need more investment advice, however, so that they save more and earn better returns on their money. The securities industry is his top campaign contributor, providing more than $125,000 already in the 2005-2006 House election cycle.

War is peace. Freedom is slavery. Prosperity is poverty.

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