Feeling frustrated after the stimulus and Obama Care? Not sure where your tax dollars are going? In another case of the Government picking winner and losers, taxpayers and business owners should keep a close eye on a new bill that Senator Bob Casey (our very own from Pennsylvania) is suggesting, the “Create Jobs and Save Benefits Act.” The bill would require taxpayers to pick up the tab for poorly managed union pension plans.
The issue arises with multi-employer pension plans. Unions are seeking out multi-employer plans because they let workers keep their retirement benefits even if they switch jobs to another participating company. This encourages lifelong union membership. When a company in an industry goes out of business, the remaining companies are still held responsible for all costs of the multi-employer plan. With Senator Casey’s new bill, pensions where the employer has stopped contributing or withdrawn from a multi-employer fund would go in a separate account.
Although Senator Casey feels that the pension bailout would only cost $8 billion, many feel that is a low estimate (Moody's estimated that multi-employer plans are $165 billion underfunded) and that the bill would cause much more of a hazard than just money. The bill could potentially create a vicious cycle. Once some plans were bailed out other employers would want to declare bankruptcy and unload plans. There would be tremendous incentives to do this.
The new plan is something for all business owners and taxpayers to keep an eye on. If you are a business owner and have been able to keep your pension plan afloat, the new bill is something to keep in mind while making your financial decisions. The bill has not been passed, but it is important to be aware of some of the potential changes.