Nov 27, 2006
We’re told that our pensions are guaranteed – that is, that they are covered by the Pension Benefit Guarantee Corporation (PBGC) if the company we work for ever defaults on them.
That much is true. But when a company defaults, its workers get a lot less than the full amount of their pensions.
To begin with, all retiree medical coverage is cancelled – every last bit. So are company-covered life insurance and death benefits for spouses.
In addition, any worker who retires before age 65 is hit even harder. For every month before 65 that a worker was when they retired, their pension payment is lowered. For example, if workers retire at age 60, their pension can be reduced by as much as 40%. This includes anyone who took early retirement under special deals offered by the company. Finally, current workers earn no more new pension credits, no matter how many more years they work for the company.
This is a guarantee in name only. All it guarantees is that companies can dump their pensions, leaving workers holding the bag.