The so-called Create Jobs and Save Benefits Act of 2010, introduced by Sen. Robert Casey (D-Pa.), got a huge boost when Senate Majority Whip Dick Durbin (D-Ill.) signed on a as a cosponsor, just before Congress’ August Recess. With the support of such a high-ranking member of the Senate Democratic leadership, Casey’s bill threatens to gain momentum. That would be very bad news. Casey’s bill is a micro-targeted bailout for underfunded union pensions that could cost taxpayers billions.
The bill would create a special fund in the Pension Benefit Guarantee Corporation(PBGC), an agency chartered by Congress that insured private sector pensions. PBGC is funded through premiums paid by private companies to insure retirees if a plan sponsor were to become insolvent. Casey’s bill would direct taxpayer dollars to shore up some underfunded union pension plans. The use of public funds to insure private pension plans is a first for PBGC and stark departure from the way it has operated since its creation in 1974.
Casey’s bill would create a new fund to the PBGC called the “fifth” fund. The legislation states that the new fund’s obligations would be “obligations of the United States.” In other words, taxpayers, not just by PBGC premium payers, would be on the hook. Money in the “fifth” fund would go to “orphans”—employees whose employers have stopped contributing to their plan—of certain existing pensions.
Phyllis Borzi, the Assistant Secretary of Labor for the agency in charge of pension plans, acknowledged in testimony to the Senate Committee on Health, Education, Labor and Pensions that Casey’s legislation “ultimately makes the taxpayers liable for paying the benefits of [particular union pension] plan[s]. Currently, no other benefit obligations assumed by PBGC are subject to the full faith and credit of the U.S. government.”
Borzi, who was nominated by President Obama, is skeptical that the legislation will fix the current situation. She commented that the root of the problem is a sharp decline in the number of new employers joining union pension plans and a dramatic drop in the ratio of employees to retirees. She stated that, “these larger problems facing plan’s troubled industries won’t be solved by the kind of short term temporary funding relief Congress is currently working on.”