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News Briefs

Date Posted: December 24 2004

Lawmakers warn of pension problems
WASHINGTON (PAI) – The federal agency that guarantees at least partial payment of traditional pensions when workers’ firms go broke is heading for the financial rocks unless Congress does something about it, two lawmakers warn.

And the situation could get worse very fast, if two major airlines – US Airways and United – convince federal bankruptcy judges to let them dump their unionized workers’ pension plans on the agency, the Pension Benefit Guaranty Corp.

Sen. Tom Harkin (D-Iowa) and Rep. George Miller (D-Calif.) issued their warnings last month after PBGC reported the deficit suffered by its fund covering single-employer pensions rose from $11.2 billion in fiscal 2003 to $23.3 billion in fiscal 2004.

PBGC insures “defined benefit” pension plans, the traditional plan that guarantees payments. “Defined contribution” plans, which are newer and now more prevalent in private industry, do not guarantee payment if the plan fails.

But when a firm with a defined benefit plan goes belly-up, PBGC steps in, using money gathered from prior assessments on all firms with such traditional pensions. PBGC’s payments substitute for some, but not all, of a worker’s pension payouts.

But PBGC can’t cover them if it’s short of cash, Miller and Harkin say. “It is deeply disappointing that we have not taken this long-term problem seriously,” Harkin said. “Public policy has not encouraged companies to prepare for the rainy day. Congress must establish tax and accounting policies that create positive incentives for companies to keep their pensions well-funded and healthy.”

Miller warned: “PBGC is living on borrowed time,” “The deficit again highlights the failure of the administration and Congress to address growing retirement insecurity of millions.”

Labor on board new workforce panel
LANSING – Gov. Jennifer Granholm this month announced an executive order creating the Council for Labor and Economic Growth (CLEG). The council’s work will focus on developing strategies to prepare Michigan’s workers for the 21st century.

“The Council for Labor and Economic Growth will be our guide as we strive to meet Michigan’s job needs of today while fostering the skilled and flexible workforce that Michigan businesses need to compete successfully in the future,” said Granholm. “This talented body will help us challenge the status quo on how best to develop and invest effectively in Michigan’s 21st century workforce.”

The Executive Order creates a business-led council and replaces the current Michigan Workforce Investment Board. The council’s members include key leaders from business, labor, community colleges, universities, community-based organizations, local workforce boards, the K-12 educational community, and government. The council will recommend strategies to encourage and stimulate innovative responses to Michigan’s workforce challenges.