Who Will Bail Out Insolvent Union Pension Funds?

Forbes ^ | August 5, 2016 | George Leef

[reaganaut1]

Bernie Sanders isn’t going to be the next president, but one of the bills he has sponsored, the Keep Our Pension Promises Act (KOPPA)could become law during the next president’s term. That ought to worry anyone who knows that the collectivistic instincts of Bernie Sanders mean spreading the costs of bad policies to the entire population.

Here’s the background.

The Central States Pension Fund (CSPF) of the International Brotherhood of Teamsters has a troubled history going back to its founding in 1955 by long-time Teamsters president Jimmy Hoffa. (Carl Horowitz of the Organized Labor Accountability Project looks into that history in this Capital Research study.) It is a multi-employer pension fund. Some 1,500 companies with Teamster contracts from states mostly but not exclusively in the Midwest pay into the fund, which in turn pays defined pension amounts to a huge number of retirees.

For years, however, the fund has been paying out money at a much faster rate than it comes in. Currently, $3.46 goes out for every $1.00 paid in, and that ratio is certain to worsen. It has less than half of the money needed for financial stability, underfunded by some $18 billion. Projections are that the fund will be insolvent in ten to fifteen years.

At that point, as this CNN Money article notes, 407,000 Teamsters pensioners will find their pensions reduced to “virtually nothing.”

Congress has known about the problem of underfunded pension plans for a long time, but has never been able to resist the urge to meddle in a problem that properly belongs to “the states or the people” under the Tenth Amendment. (I would say that pensions are not a matter for government at any level, but entirely a private concern subject to general common law principles.)

[Brilliant]

This is the article I found that best explains it.

http://www.bloomberg.com/news/articles/2016-08-03/muni-money-market-funds-decimated-by-rules-intended-to-save-them

What it all means is that you need a money market fund that invests only in short term government bonds. But there aren’t enough of those bonds to meet the demand.

[headstamp 2]

Thanks for that.