Pension Funds Get Ready To Risk Payouts

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It used to be a pretty good deal to work at a large US company for several decades and then retire with a pension and health benefits. A lot of that part of the American dream is heading out the window. The Big Three may not be able to fund the VEBA which they set up with the UAW. That would mean tens of thousands of retired auto employees might have to pay their own doctor bills.

A large number of companies are trying to get Congress to give them relief from putting money into their retirement programs. According to The New York Times, "The total value of company pension funds is thought to have fallen by more than $250 billion since last winter." Under normal circumstance, the firms would have to put that money back. With earnings down and access to capital nonexistent, the checks to cover those deficits are not likely to be written.

The trouble with forsaking these contributions today is that there is no reason to think that the money can be found to make up these payments later, at least in the case of companies which may be badly damaged by the recession.

Corporate pensions are not the only ones at risk. Tens of thousands of municipal and state retirees are beginning to find out that their pensions are underfunded as well. With the tax base shrinking in most regions, solving the problem will be remarkably difficult.

The system which was developed to reward longtime workers as they moved into their golden years is now breaking apart. Some government entities will default on their obligations. Many companies will. And, one of two things will happen. Either the federal government will step into another financial mess with boatloads of capital or a huge number of people over 65 will be flooding emergency rooms and drive-in clinics.

Being old just got less attractive.

Douglas A. McIntyre