Synopses & Reviews
America’s insurance system for single-employer pension plans, operated by the Pension Benefit Guaranty Corporation (PBGC), is under serious financial strain. Although PBGC’s worsening deficit reflects, in part, current financial market conditions, it also reflects built-in inadequacies in our pension insurance system that predate the recent economic recession. In addition to the technical flaws of existing pension law, the current political process gives elected officials substantial incentives to prioritize the near-term financial considerations of employers and pension beneficiaries over the long-term fiscal health of the pension insurance system. There is a direct and predictable relationship between these problematic incentives and the failure of existing law to provide for adequately funded pensions.
In Pension Wise: Confronting Employer Pension Underfunding—And Sparing Taxpayers the Next Bailout, Charles Blahous explains the origins and dangers of the current underfunding of our single-employer defined-benefit pension system and offers a range of options to improve the pension insurance system’s operation and to resolve its projected shortfall. Blahous, one of the nation’s foremost retirement security experts, examines the whys behind existing underfunding, which, he reveals, lie in the incentives facing both pension plan sponsors and the political actors who determine contribution requirements, premium levels, and the circumscribed powers of the PBGC. He begins with the basics: how we quantify the assets of pension plans, how we quantify their obligations, and how plan sponsors are required to make up any negative gap between the two. After describing the nuts and bolts of the obligations and incentives facing plan sponsors, he then reviews the recent history that led to the PBGC’s current predicament. From there, he explores the processes underlying the determination of all of these factors, with special attention to the incentives facing all the actors in the process. He concludes with a summary of his recommended principles for pension insurance system reform.
The deficit facing the PBGC, the author shows, has now grown to a size and exists in an economic environment such that it will almost certainly impose a significant cost on us all, no matter what we do. We must earnestly begin the work of determining how to limit those costs and, where we cannot limit them, how they can be fairly and transparently borne.
Synopsis
America’s insurance system for single-employer pension plans, operated by the Pension Benefit Guaranty Corporation (PBGC), is under serious financial strain. In Pension Wise: Confronting Employer Pension Underfunding—And Sparing Taxpayers the Next Bailout, Charles Blahous—one of the nation’s foremost retirement security experts—explains the origins and dangers of current underfunding in our single-employer defined-benefit pension system and offers principles to underlie a solution.
Blahous details both the technical reasons behind pension plan underfunding and the political considerations that prioritize the near-term financial demands of employers and pension beneficiaries over the long-term fiscal health of the pension insurance system. The author also presents the fundamental value judgments concerning who should bear the cost of filling the PBGC shortfall and to what extent the risk of financing pension benefits should continue to be shifted away from plan sponsors, either to other employers or to taxpayers at large. Although acknowledging that there are no obviously correct answers, he suggests a range of reforms to improve the pension insurance system’s operation and to resolve its projected shortfall.
Synopsis
America's insurance system for single-employer pension plans, operated by the Pension Benefit Guaranty Corporation (PBGC), is under serious financial strain. In Pension Wise: Confronting Employer Pension Underfunding--And Sparing Taxpayers the Next Bailout, Charles Blahous--one of the nation's foremost retirement security experts--explains the origins and dangers of current underfunding in our single-employer defined-benefit pension system and offers principles to underlie a solution.
Blahous details both the technical reasons behind pension plan underfunding and the political considerations that prioritize the near-term financial demands of employers and pension beneficiaries over the long-term fiscal health of the pension insurance system. The author also presents the fundamental value judgments concerning who should bear the cost of filling the PBGC shortfall and to what extent the risk of financing pension benefits should continue to be shifted away from plan sponsors, either to other employers or to taxpayers at large. Although acknowledging that there are no obviously correct answers, he suggests a range of reforms to improve the pension insurance system's operation and to resolve its projected shortfall.
Synopsis
Charles Blahous, one of the nation's foremost retirement security experts, explains the origins and dangers of current underfunding in our single-employer defined-benefit pension system and outlines the options for solving the problem and preventing the next taxpayer-financed bailout. He provides a tutorial on the basic workings of pension law, reviews the recent history that led to the worsening condition of the pension insurance system, and suggests a range of reforms to improve the system's operation and to resolve the projected shortfall.
Synopsis
One of the nation’s foremost retirement security experts explains the origins and dangers of underfunding in our pension system and outlines the options for solving the problem and preventing the next taxpayer-financed bailout.
Synopsis
The crisis in America’s single-employer defined benefit pension plans
Underfunding in our pension system: a growing systemic risk
Saving the Pension Benefit Guaranty Corporation from the political process
By late 2009, the deficit in the pension insurance programs of the Pension Benefit Guaranty Corporation (PBGC) had roughly doubled over the course of a single year, from less than $11 billion to more than $22 billion, marking the eighth consecutive year that PBGC’s outlook remained firmly in the red. The currently projected deficit of the PBGC, as well as underfunding in the pension system generally, embodies a significant national fiscal problem, with no clear path to allocating the costs of its resolution.
Pension Wise: Confronting Employer Pension Underfunding—And Sparing Taxpayers the Next Bailout examines the current crisis in our single-employer defined benefit pension plans and outlines principles to undergird a solution. Charles Blahous details both the technical reasons behind pension plan underfunding—in particular, persistent and often deliberate inaccuracy in measurement—and the political considerations that prioritize the near-term financial demands of employers and pension beneficiaries over the long-term fiscal health of the pension insurance system. The author also presents the fundamental value judgments concerning who should bear the cost of filling the PBGC shortfall and to what extent the risk of financing pension benefits should continue to be shifted away from plan sponsors, either to other employers or to taxpayers at large. Although acknowledging that there are no obviously correct answers, he suggests a range of reforms to improve the pension insurance system’s operation and to resolve its projected shortfall.
Charles Blahous, one of the nation’s foremost retirement security experts, serves as one of two public trustees for the Social Security and Medicare programs. Blahous served as deputy director of President George W. Bush’s National Economic Council and, before that, as executive director of president’s bipartisan Social Security Commission and special assistant for economic policy.
About the Author
One of the nation’s foremost retirement policy experts, Chuck Blahous serves as one of two public trustees for the Social Security and Medicare programs. Blahous served as deputy director of President George W. Bush’s National Economic Council, and before that as executive director of the president’s bipartisan Social Security Commission and as Special Assistant for Economic Policy. Blahous previously served as legislative and policy director for U.S. Senators Alan Simpson and Judd Gregg. Blahous’s career in public ser vice began when he was named the American Physical Society’s 1989–90 Congressional Science Fellow. He lives in Rockville, Maryland, with his wife and daughter.
Table of Contents
List of Figures and TablesAcknowledgmentsAbstract IntroductionThe Nature of Single-Employer Defined-Benefit PensionsThe Nation’s Pension Insurance System: The Condition of the PBGCThe Magnitude of Pension Underfunding NationwideTechnical Reasons for Pension UnderfundingPension Plan AssetsPension Plan LiabilitiesAddressing Underfunding: Statutory Contribution RequirementsOther Funding Safeguards Established by the PPAPremiumsRecent Developments: Legislation and the Financial Markets’ PlungeAdditional Reasons for Underfunding: Structural Issues Facing the PBGCPolitical Economy FactorsPension Funding Policy Principles: Separating Measurement Accuracy from Value JudgmentsCan the Hole be Filled? Separating Fairness from Risk IssuesGoing Forward: General Principles for Pension Insurance System ReformConclusions and Recommendations
NotesBibliographyAbout the AuthorIndex