The Collapse of Defined Benefit Pensions by Jonathan Tasini

We just had an amazing panel here on the crisis in retirement security (if you missed it...you had your chance...make sure you get to our future events!). Bruce Raynor, general president of UNITE-HERE, gave some very clear examples of how defined benefit pensions are crucial to his members' retirement, pointing out that pensions bind workers to unions for their entire lifetime in a moral and political way. Damon Silvers, associate general counsel of the AFL-CIO, had these facts to relate:
Only 21 percent of private sector workers have a defined benefit pension plan, 29 percent have only a defined contribution plan, 50 percent have nothing.
The median 401-k plan balance in 2003 was $18,000, the average was only $51,000. Remember, the average will be pulled up because the top ten percent of income earners have the ability to put in the extra $10-$15,000 at the end of the year, while most wage earners are deeply in debt. Translation: if you've got a 401-k, you are screwed.
Median 401-k account balances for workers between 55 and 64 was $61,000 as of 2004. Translation: if you are headed for retirement, you are in trouble.
If current trends continue, we are heading into a period when income for retired Americans falls for the first time since the Depression, just when retired Americans are becoming demographically and economically dominant. This is not a pretty picture. Tom Wotring, who represents employers in pension fund issues and is a trustee on the Upstate New York Teamsters Fund and the New England Teamsters Fund, the third and fourth largest Teamsters pension funds in the country, pointed out that defined benefit pension plans are more efficient than defined contribution plans, get higher rates of return and are a stronger attraction to workers. Lee Sheppard, a contributing editor from Tax Notes and a nationally recognized expert on the tax code issue related to pensions, explained the scandal of so-called "non-qualified plans": the pensions of CEOs that sit outside the reach of ERISA. So, why do we face a dismal picture on retirement? The same reason we face a general decline in the economic security for most Americans: the labor movement is weak, employers simply see retirement as a drag on earnings and costs that can be done away with, and we don't have political leadership willing to be aggressive about advocating for real MANDATED retirement benefits. Fact to remember: in Australia, a national retirement system mandates a 9 percent employer contribution.