Wednesday, June 08, 2005
Tweet[IWS] CBO: Defined-Benefit Pension Plans: Current Problems and Future Challenges [7 June 2005]
IWS Documented News Service
_______________________________
Institute for Workplace Studies Professor Samuel B. Bacharach
School of Industrial & Labor Relations Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor Stuart Basefsky
New York, NY 10016 Director, IWS News Bureau
________________________________________________________________________
Congressional Budget Office (CBO)
CBO Testimony
Statement of Douglas Holtz-Eakin, Director
Defined-Benefit Pension Plans: Current Problems and Future Challenges
before the Committee on Finance United States Senate June 7, 2005
http://www.cbo.gov/ftpdocs/64xx/doc6414/06-07-PBGC.pdf
[full-text, 14 pages]
[excerpt]
Chairman Grassley, Senator Baucus, and Members of the Committee, I appreciate
the opportunity to appear before you today to discuss questions that the termination
of United Airlines pension plans raises about private defined-benefit
pensions in the United States and the issues confronting the Pension Benefit
Guaranty Corporation (PBGC). Defined-benefit pensions are an important aspect
of labor compensation for millions of people in the United States today, as they
will continue to be for decades to come. Recent experience suggests three key
observations:
# In structuring future policy, it is important to distinguish between the
portion of pension underfunding and resultant PBGC liabilities that is an
unchangeable legacy of the past and the portion of underfundingand the
attendant claims to be assumed by PBGC in the futurethat may be
reduced over time by changes in policy.
# With regard to legacy underfunding, the essential policy question is how to
distribute the costs of the shortfall among shareholders, workers, and,
perhaps ultimately, taxpayers.
# With regard to the future of the defined-benefit pension system, the key
challenge is to design the appropriate mix of incentives for self-insurance
(such as appropriate standards for funding) and for purchased insurance
(such as that provided by PBGC) to ensure that workers will receive the
portion of their compensation promised in the form of a defined-benefit
pensiondespite changes in a firms fortunes, the growth or decline of an
industry, and the overall performance of the economy.
For workers employed by a company that provides a defined-benefit plan, the
promised annuity is often a substantial part of their compensation and an
important aspect of their planned retirement income. However, the long period
between when the compensation is earned and when the annuity is paid increases
the potential for adverse economic events in the interim. Therefore, in the absence
of a system of insurance, the availability of benefits from defined-benefit plans
depends on the adequate funding of those benefits.
AND MUCH MORE....including GRAPH....
_____________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky *
Director, IWS News Bureau *
Institute for Workplace Studies *
Cornell/ILR School *
16 E. 34th Street, 4th Floor *
New York, NY 10016 *
*
Telephone: (607) 255-2703 *
Fax: (607) 255-9641 *
E-mail: smb6@cornell.edu *
****************************************
_______________________________
Institute for Workplace Studies
School of Industrial & Labor Relations
Cornell University
16 East 34th Street, 4th floor
New York, NY 10016
________________________________________________________________________
Congressional Budget Office (CBO)
CBO Testimony
Statement of Douglas Holtz-Eakin, Director
Defined-Benefit Pension Plans: Current Problems and Future Challenges
before the Committee on Finance United States Senate June 7, 2005
http://www.cbo.gov/ftpdocs/64xx/doc6414/06-07-PBGC.pdf
[full-text, 14 pages]
[excerpt]
Chairman Grassley, Senator Baucus, and Members of the Committee, I appreciate
the opportunity to appear before you today to discuss questions that the termination
of United Airlines pension plans raises about private defined-benefit
pensions in the United States and the issues confronting the Pension Benefit
Guaranty Corporation (PBGC). Defined-benefit pensions are an important aspect
of labor compensation for millions of people in the United States today, as they
will continue to be for decades to come. Recent experience suggests three key
observations:
# In structuring future policy, it is important to distinguish between the
portion of pension underfunding and resultant PBGC liabilities that is an
unchangeable legacy of the past and the portion of underfundingand the
attendant claims to be assumed by PBGC in the futurethat may be
reduced over time by changes in policy.
# With regard to legacy underfunding, the essential policy question is how to
distribute the costs of the shortfall among shareholders, workers, and,
perhaps ultimately, taxpayers.
# With regard to the future of the defined-benefit pension system, the key
challenge is to design the appropriate mix of incentives for self-insurance
(such as appropriate standards for funding) and for purchased insurance
(such as that provided by PBGC) to ensure that workers will receive the
portion of their compensation promised in the form of a defined-benefit
pensiondespite changes in a firms fortunes, the growth or decline of an
industry, and the overall performance of the economy.
For workers employed by a company that provides a defined-benefit plan, the
promised annuity is often a substantial part of their compensation and an
important aspect of their planned retirement income. However, the long period
between when the compensation is earned and when the annuity is paid increases
the potential for adverse economic events in the interim. Therefore, in the absence
of a system of insurance, the availability of benefits from defined-benefit plans
depends on the adequate funding of those benefits.
AND MUCH MORE....including GRAPH....
_____________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky
Director, IWS News Bureau
Institute for Workplace Studies
Cornell/ILR School
16 E. 34th Street, 4th Floor
New York, NY 10016
Telephone: (607) 255-2703
Fax: (607) 255-9641
E-mail: smb6@cornell.edu
****************************************
# posted by SBasefsky : 8:41 AM
