Show TIlE THE VOLE VOICE OF BUSINESS SINESS i How Safe Safe is Your Yourt t Pension Pennon and nd Why By ey v Arch Booth executive vie vice president president r. r dent ol of the Chamber of Com Commerce mere of 0 the United States Stat Corporate pension plans have been a n popular target for cheap shots shot lately And no nb wonder The subject Is la custom custom- made forthe muckraker or demagogue who wants to create publicity for him self by telling only carefully lly elected parts of the story It is a very complicated story and and anda a fair person will want to be sure he has all aU of the facts before making up his mind I 1 can only mention a few lew of them here FIRST LETS LET'S' put ut the issue of security sec in proper perspective A joint stud study by the US U.S. Departments of Labor and the Treasury covering the first seVen seven se se- se ven von months months' of 1972 found that pensions claimants losing benefits during the period per iod led were about percent of all workers workers work work- ers covered An earlier Department of Labor study of the ten years from 1965 1955 found that less than 01 percent of claimants claimants' lose Jose benefits d during ring an average year So we we are aro dealing with a system that h has s its flaws but can nevertheless boast a of between and 99 96 percent Of course course even one employee losing the benefits he has is one one too many But the price for still greater security may be more than most workers workers wor wor- kers would want to pay Funding For the matter of example funding is very sticky A plan that is is' i fully that funded-that is all its it's obligations can be covered out of a trust fund in the care of an Independent trustee such as asa asa asa a is bank-is a very secure pla plan I However it takes an enormous amount of money to fund a pension plan If H a a company company had enough cash on hand to todo do doit it all at once something would be dras drastically drastically wrong with its its' money manage manage management 1 ment SO COMP COMPANIES NIEs starting a pension plan build up the trust fund over overa a a number of 01 years by r steady contributions Now what happens to the employees who are are near ea retirement age ge when the plan lan starts There There wont won't be enough money available to both build up the trust fund lund and pay ay the current costs of their pensions But dont don't they deserve some kind of pension credit for for past service The b best st solution is for the company to back these pensions until the he trust fund is large enough to guarantee them Obligations of this nature are known as liabilities If the company goes out of business before covering these liabilities some pension benefits may may be lost But if such a company did it the thc safe way these employees might not have been eligible for lor any pension at all Its It's compassion both chicanery chi canery that for most insecure pension plans Portability t The existence of liabilities also complicates the issue of portability portability porta An employee who leaves can always always al al- al ways take with him what liE HE has contributed contributed contributed con con- to a pension plan If plans were fully portable the employee with pension pension pension pen pen- sion rights could also take with him what his former employer had bad contribute on his behalf That scheme might work if alt all plans were fully funded But say we have havea a aplan plan that is only half funded the theother other half being c carried as If departing employees employees' get to transfer tran tran- transfer out their b benefits they will soon deplete the trust that is being built up for the loyal employees who remain remains m making king THEIR pensions les less secure Vesting Misting Finally FinaDy there is vesting Vesting refers re re- fers to the combination of age ge and years of service service- necessary to to qualify for at least some some pension benefits benefits even If the employee leaves the the- company before f re reaching retirement age VESTING IS a worthwhile form of years year's service is summarily dismissed shortly before he would qualify for a aa retirement pension It is not without its price though and many many employees might prefer more more mori generous pension benefits ben ben- benefits benefits with less less' security Should the PIe law deny employees the right to negotiate trade off to one benefit against another Finally there theres there's s this danger to guard against in pension reform legislation Pensions are a a. a volu voluntary tary fringe benefit offered by businesses to help attract good employees If the cost and administrative admin s burden of a pension plan is unduly increased by well intentioned leg legislation the end result may be FEWER pr private va pension pensol plans rather than better ones |