Right-wing media cling to $165 billion pension "bailout" falsehood

››› ››› JUSTIN BERRIER

The right-wing media is clinging to the falsehood that Sen. Bob Casey's Create Jobs & Save Benefits Act is a "$165 billion bailout" of union pensions. In fact, the legislation proposes the "partition" of specific types of union pensions that are deemed to be insolvent,and its sponsor reportedly said it would cost between $8 and $10 billion.

Right-wing media cling to $165 billion union bailout falsehood

Varney: "[T]here is serious consideration to this $165 billion union pension bailout." On the May 25 edition of Fox News' Fox & Friends, co-host Gretchen Carlson claimed "you may be soon on the line to fund your neighbor's retirement, that is, if your neighbor happens to be in a union." Fox Business Network's Stuart Varney claimed that unions "have enormous political power. That's why there is serious consideration to this $165 billion union pension bailout." Varney said "it has been decades since you've seen an administration so prone to the influence of unions as this one is. I'm not going to say this is owned by the unions, but their influence on this administration is simply enormous." After co-host Steve Doocy asked Varney, "Let's say that you work for a big company that is not unionized, and the pension fund goes belly up. Is the government obligated to bail out that pension?" Varney replied, "Yes, it is, because you've got the Pension Benefit Guaranty Corporation, PBGC, which ultimately is the taxpayer, which steps in to back up private pensions as well as union pensions."

FoxBusiness.com: "[T]he bill could put another $165 billion in liabilities on the shoulders of American taxpayers." From a May 24 FoxBusiness.com article:

A Democratic senator is introducing legislation for a bailout of troubled union pension funds. If passed, the bill could put another $165 billion in liabilities on the shoulders of American taxpayers.

[...]

Although right now taxpayers could possibly be on the hook for $165 billion, the liability could essentially be unlimited because these pensions have to be paid out until the workers die.

Fox Nation: "Really? Now a $165 Billion Bailout for Unions?" The Fox Nation linked to the Fox Business article under theheadline "Really? Now a $165 Billion Bailout for Unions?" From The Fox Nation:

Fox Nation:

Gateway Pundit: "Up Next...Dems Propose Union Pension Bailout." In a May 24 Gateway Pundit post, Jim Hoft wrote "The unions blew billions working to get democrats elected. Now it's payback time. Senator Bob Casey (D-PA) wants taxpayers to fork over $165 billion to bailout the troubled union pension funds." Hoft linked to and posted an excerpt of the Fox Business article.

In fact, the bill is estimated to cost $8 to $10 billion and restricts the type of eligible pensions

Casey: Bill would cost federal government $8 billion to $10 billion. A March 24 Journal of Commerce article reported that "Casey said the bill could cost the federal government between $8 billion and $10 billion."

$165 billion figure represents total underfunding of all multi-employer pension funds. The $165 billion figure is an estimate made in a September 2009 report by Moody's Investor Service of the total underfunding of multi-employer pension funds, not the underfunding of such funds related to former employees of defunct companies. As the Capital Research Center summarized:

Last September Moody's Investor Services seconded [the Hudson Institute's Diana] Furchtgott-Roth in warning about the perilous funding condition of multiemployer defined benefit plans. Its report, Growing Multiemployer Pension Funding Shortfall is an Increasing Credit Concern looked at the Labor Department's Form 5500 for 126 multiemployer plans in 2007. With 2008 information yet unavailable, the data represented the best look at the majority of assets and obligations for all multiemployer plan. Moody's remarked, "despite the limitations in the data a very stark picture emerges." The 2007 data showed the plans overall were only 77 percent funded and had a total underfunding of $87 billion. By contrast, comparable single employer defined benefit plans were funded at 101 percent.

But what about the condition of defined benefit pension plans after the financial meltdown at the end of 2008? Moody's estimated that funding levels for the single employer plans it examined had fallen and now were only at 75 percent. As for multiemployer plans, Moody's warned that "when data for year end 2008 is finally released, it will probably show substantial deterioration in asset values during 2008." It estimated that the multiemployer plans surveyed from 2007 would be only 56 percent funded. In other words, they would be underfunded by about $165 billion dollars.

Indeed, the bill restricts the type of pension eligible for "partition" to plans that are in "critical status," not simply underfunded. Casey's legislation restricts plans from "partition" unless they are "critical" or on the verge of insolvency. From theCreate Jobs & Save Benefits Act of 2010:

`(2) ELIGIBLE MULTIEMPLOYER PLAN- An eligible multiemployer plan is a multiemployer plan as to which--

`(A) the plan actuary has certified pursuant to section 305(b) that the plan is in critical status (within the meaning of section 305(b)(2)) for the plan year in which the notice described in paragraph (1) is provided to the corporation, and the plan sponsor has certified, consistent with projections provided by the plan actuary, that--

`(i) a substantial reduction in the amount of aggregate contributions under the plan has resulted or will result--

`(I) from cases or proceedings under title 11, United States Code, with respect to employers which were participating in the plan, or

`(II) from the complete withdrawal of employers from the plan without payment of the full amount of such employers' allocable amount of unfunded vested benefits under section 4211,

as compared to the amount of aggregate contributions that would have been made under the plan but for such cases or proceedings,

`(ii) the plan is likely to become insolvent,

`(iii) contributions under the plan will have to be significantly increased to prevent the plan from becoming insolvent,

`(iv) as of the last day of each of the 2 plan years immediately preceding the plan year in which the notice described in paragraph (1) is provided to the corporation--

`(I) the ratio of the number of retirees, beneficiaries of deceased participants, and terminated vested participants in the plan to the number of the active participants in the plan for each such year was not less than 2 to 1, and

`(II) the ratio of benefit payments made by the plan for each such year to contributions required to be made to the plan under section 304 or 305(e), whichever is applicable, for each such year was not less than 2 to 1, and

`(v) partition would significantly reduce the likelihood that the plan will become insolvent, or

`(B) the plan actuary has certified pursuant to section 305(b) that the plan is in endangered status (within the meaning of section 305(b)(1)) for the plan year in which the notice described in paragraph (1) is provided to the corporation, and the plan sponsor has certified, consistent with projections provided by the plan actuary, that--

`(i) clauses (i), (ii), (iii), and (v) of subparagraph (A) apply to the plan,

`(ii) as of the last day of each of the 2 plan years immediately preceding the plan year in which the notice described in paragraph (1) is provided to the corporation--

`(I) the ratio of the number of retirees, beneficiaries of deceased participants, and terminated vested participants in the plan to the number of the active participants in the plan for each such year was not less than 10 to 1, and

`(II) the ratio of benefit payments made by the plan for each such year to contributions required to be made to the plan under section 304 for each such year was not less than 2 to 1, and

`(iii) the plan suffered a substantial reduction in the amount of contribution base units under the plan as a result of declining employment within the industry of employers covered by the plan.

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