Pensions

During the past eight years, the Bush administration and GOP congressional leaders pushed policies that undermined defined-benefit (DB) pension plans. This included the onerous Pension Protection Act of 2006 (PPA), which imposed limits on benefits and overly stringent funding rules on DB pension plans. At the same time, Bush and his allies in Congress championed individual savings vehicles that pushed more investment risk on individuals while offering handsome profits to the financial services industry. Many observers believed that the long-term objective was to hasten the exodus of companies from the DB pension system, leaving workers to rely on 401(k) plans or individual savings vehicles.

Because of the severe economic downturn and stock market collapse in 2008, the funded status of many DB pension plans has dropped sharply. The long-term deficit of the Pension Benefit Guaranty Corporation (PBGC) has also increased. And 401(k) balances have also declined sharply.

With businesses already struggling to deal with the economic and financial crises, many pension experts became concerned that the stringent funding rules in the PPA would deprive companies of funds that they need for investments and operations. This in turn could aggravate the downward economic spiral, resulting in more job loss. To prevent these negative consequences, at the end of the last year Congress approved a pension bill making technical corrections in the PPA to allow greater smoothing of pension contributions by employers. The UAW and our major employers applauded this sensible correction as an initial step in easing the effects of the PPA.

During the coming year, we will be monitoring the impact of the PPA on pension plan funding and the commitment of employers to the DB pension system, as well as the financial condition of the PBGC. We will continue to support a balanced approach that maintains adequate funding for pension plans and financial support for the PBGC, while avoiding overly harsh impacts on employers that would undermine the entire DB pension system.

Meanwhile, there is growing interest in legislation to address abuses associated with the management of 401(k) plans. Too often, fund managers charge excessive fees that reduce the returns to workers and retirees. During the past year legislation was introduced in Congress to curb these abuses and to increase transparency in 401(k) plans. But opposition from business groups blocked action on these measures. During 2009 the UAW will be working with the Obama administration and our allies in Congress to pass legislation that curbs 401(k) plan abuses, without imposing unnecessary paperwork and regulations on these plans.

The UAW and the rest of the labor movement will also be calling for debate on our national retirement income policies. We need new policies that will expand coverage under employer-sponsored pension plans, require employers to provide an adequate level of retirement income, facilitate portability of benefits and the payment of benefits in annuity form, pool investment risk, minimize costs, and give workers a role in the management of pension plans. We look forward to working with the Obama administration and expanded Democratic majorities in Congress to develop retirement income policies that will further these objectives.

At the same time, the UAW will continue to oppose GOP proposals to expand the amounts that wealthy individuals can contribute to tax-favored individual savings accounts. The tax benefits associated with these proposals would flow overwhelmingly to the rich. These proposals also would undermine the commitment of employers to DB pension plans.

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