Pensions
In 2006 Congress enacted far reaching pension legislation known as the Pension Protection Act of 2006. This new law included many important changes in the rules regulating defined-benefit (DB) and defined-contribution (DC) pension plans, as well as the operations of the Pension Benefit Guaranty Corporation (PBGC).
Since this legislation was enacted, the financial condition of the PBGC has improved. This has been attributable both to the increase in premiums paid by plan sponsors, and to the changes in funding rules for DB plans. At the same time, the funded status of most DB plans has improved, largely as a result of rising interest rates and high rates of return. The tougher funding rules mandated by the new pension law should continue to improve the funded status of the DB pension system.
During 2008 Congress will be considering legislation to make so-called “technical corrections” to the 2006 pension law. The UAW will be following this legislation closely, both to correct problems in the new law, and to look for opportunities to ameliorate its impact on pension plans covering UAW members.
Many observers have expressed concern that this new law could hasten the exodus of companies from the DB pension system. Already some large companies have taken steps to freeze their DB plans, frequently the first step to an eventual plan termination. During the coming year we will continue to monitor the impact of the new pension law on the DB pension system. We also will continue to urge Congress to take steps to strengthen and expand the DB pension system, and to reject proposals that would favor DC plans.
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 of workers and retirees. The UAW will be working with progressive allies during 2008 to support legislation that will curb such abuses, without burdening plans with unnecessary paperwork and regulations.
The UAW will also be working with other unions and progressive groups to further a debate on our national retirement income policies. This debate will emphasize the need for policies that will expand coverage under employer-sponsored pension plans, require employers to provide an adequate level of retirement income to participants, facilitate portability of benefits and the payment of benefits primarily in annuity form, pool investment risk, minimize costs, and give workers a role in the management of pension plans.
At the same time, we will continue to oppose proposals by the Bush administration to vastly 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 would also undermine the commitment of employers to DB plans.
Action
• Urge Congress to support initiatives that will maintain and strengthen the DB pension system, and to reject proposals that would accelerate the shift to DC plans and individual savings accounts. Tell Congress that DB plans represent the best mechanism for providing workers and their families with a stable, adequate and secure retirement income.
• Tell Congress to support legislation to crack down on excessive fees and other abuses by 401(k) plan managers.
• Urge Congress to reject proposals to provide huge new tax breaks for individual savings accounts that would mostly benefit the rich, while undermining DB plans.
• Tell Congress we need to begin a national debate on how to expand and improve coverage under employer sponsored pension plans.
