The PBGC is the “government corporation that insures the pensions of 44 million workers and retirees.” You get one guess who is going to have to pay the piper on this one. The fund takes over private-sector defined-benefit plans when they are terminated. As the AP reports, nine of the 10 biggest pension terminations guaranteed by the PBGC have occurred since 2001.
If GM or Chrysler tank, guess who guarantees those fat union pensions? The PBGC, which like the FDIC is a taxpayer-funded “corporation.”
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Just to clarify – they’re not entirely (100%) taxpayer funded. Similar to the FDIC (for banks), pensions pay into the PBGC with a fee similar to an insurance policy I’d bet – term insurance.
There was an article in the WSJ last week (week before?) about how the FDIC will have to increase their fees charged to banks this year (or soon) due to all the closures/seizures they’ve done in the recent past. This has some banks concerned whether they’ll be able to afford the charter-required (??) FDIC coverage.
Now, when they operate in a deficit scenario I’m sure that implies more federal tax dollars are needed to sustain them but that (should be) countered when there are few defaults in the “good times”.
But if the fees don’t cover the bailout, the taxpayers are on the hook.
Sorry – I wasn’t explicit with the statement.
Yes the government will need to step up if PBGC exhausts it’s fee-sourced funding.
But don’t automatically assume that any pension eventually guaranteed by PBGC is equivalent to what former employees would have received from the defaulting corporation.
For example, I remember reading something this week about auto worker pensions being capped at $54k/year regardless if they were obligated to significantly more. That was a concession from the UAW I believe and (my speculation) meant to ensure said pensions could be adequately covered by the PBGC in the event of a “Big 3″ pension default.
Don’t mean to get accusatory but why aren’t you clammoring for the heads of any bank due to poor management that ultimately is taken over by the FDIC? They’re similarly causing a continued burden on the government with their actions.
Does the fact the government backing of deposits is for typically “Maw & Paw” types and not ‘union members’?
Just a rhetorical question is all.
TinMan