Pension Problems a Vision for Privatizing Social Security

Everything on the business page in the times is filtered through ideology. This story is worth reading with the thoughts of privatizing Social Security in mind.

The bottom line is "Who's on the Risk?" For a defined benefit pension plan, the employer is on the risk for investments going sour. For a defined contribution pension, the benefits would be reduced. For a 401 (k), the pensioner is totally on the risk because when it's gone, it's gone. For Social Security, society has made a promise to retirees, but if the fund is unable to pay the promised benefits, Congress and the President will have to agree on whether and where to come up with extra money, otherwise benefits will be cout.

The article notes that United's investment portfolio was not especially risky, compared to most pension plans. The problem was compounded because management used the positive years in the market to reduce contributions and claim better cash flow for the main business.

BrooklynDodger must also note the quotes from the Mechanics Union. These are people who dumped the IAM to pay lower dues. BrooklynDodger wonders if maybe their pension negotiations would be better with a real international union behind them.

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How Wall Street Wrecked United's Pension

Bob Stone, who retired last year as a mechanic at United Airlines, belongs to a union that wants details about the failure of the pension plan. "We have to learn what went wrong," he said.

HAD anyone listened to Doug Wilsman, tens of thousands of United Airlines employees would not be facing big cuts in their pensions. And the federal agency that guarantees pensions might not be struggling with its biggest losses ever.

So who is Doug Wilsman? He is a retired pilot and a former fiduciary of United's pension plan for pilots, and in 1987 he discovered that the company had abandoned its older, tried-and-true approach of investing retirees' money in bonds timed to pay when the pensions came due. Instead, it had bought into the promises of Wall Street that it could put less money into the plan - and take out more later - if it just put most of the assets into the stock market.