Who Let The Money Flee The PBGC?

(And I also posted here.)

This tells us the following…

Some executives have received huge compensation packages even as their firms eliminated worker pensions. Ten large U.S. companies paid senior executives a total of $350 million in the 5 years leading up to terminating traditional pension plans for employees, a new Government Accountability Office analysis found.

Each company in the study, which does not name the 10 publicly traded companies that filed for bankruptcy in the last decade, had underfunded its pension plan by at least $100 million and had over 5,000 workers whose pensions would be affected. The Pension Benefit Guaranty Corporation, the government agency that insures private sector pensions, then became responsible for the shortfall. Some employees who were promised retirement benefits above the PBGC's limits, such as airline pilots, say their pensions were reduced. The PBGC insures pensions up to certain limits, which is $54,000 for a person who retires at age 65 in 2010. The pension insurer had a deficit of $22 billion in fiscal year 2009.

To learn more of how we have arrived at this sorry state, read here to find out how Goldman Sachs managed to wrap its tentacles, as it were, around the PBGC (along with BlackRock and J.P. Morgan) to change the Corporation’s asset allocation into equities and real estate, at which time the stock market meltdown was well underway (some speculation on this move is offered by blogger emptywheel here).

The person responsible for this genius move was PBGC Director Charles E.F. Millard, who said, "Our strategic relationships will be long-term in nature, and will add tremendous value for the PBGC going forward."

Heckuva job…

The PBGC has been a favorite target of the investor class for some time, actually, since, until the ruinous Bushco reign, it actually functioned as a successful federal corporation created by the Employee Retirement Income Security Act of 1974. This mentality is typified by this Murdoch Street Journal editorial, which basically alleges that it made UAW pensions “whole” while sacrificing the workers at auto parts maker Delphi, though, as noted here, “in a side arrangement, G.M. (agreed) to pay special supplements, called top-ups, so that Delphi’s union retirees get everything they were promised” (besides, the PBGC was tasked to ensure solvency of defined benefit plans, which usually pay out more than defined contribution plans; concerning the latter, there is no guaranteed return for the individual who invests in the plan, as opposed to defined benefit plans, which rely on precise calculations to - in a perfect world - guarantee a defined return over time).

And under Bushco, it should be noted that Dem U.S. House Rep George Miller of California led an effort to keep the PBGC from eliminating the pensions of United Airlines’ workers (and as also noted here, Miller assited the Association of Flight Attendants (AFA) which sought to impose a six-month moratorium on plan terminations by the PBGC; like everything else in the foul Bushco universe, the PBGC served the opposite function of what it was chartered to do – in this case, eliminating pensions instead of protecting them.)

It should also be noted, though, that a bill sponsored by Dem Senator Herb Kohl of Wisconsin has been introduced to correct what currently ills the PBGC, which, were it to become law, would provide for better communication between the board members as well as on behalf of the general public, as well as form an audit committee and establish a risk management function within the corporation, among other changes.

Given the recent upheaval at the PBGC, I would say that it is long past time to act on Kohl’s bill.