Bethlehem Steel,United Airlines and other companies,saying they could no longer afford it,have stopped paying into their pension plans,forcing the government to step in and absorb billions of dollars in costs.And now Delphi,the giant auto parts company that filed for bankruptcy in October,is threatening to do the same thing.
Meanwhile,some companies,Hewlett Packard among them,have replaced their traditional pension plans with 401(k)plans.
Many courts have ruled that cutting the pensions of current public employees-as opposed to future ones-violates the Constitution,which prohibits governments from breaching contracts.As a result,taxpayers must pay for full pensions promised to government employees.
When private companies go bankrupt and leave badly underfinanced plans,a federal agency,the Pension Benefit Guaranty Corporation,steps in to insure the workers-pensions,although many workers end up getting smaller pensions than their companies had promised.The agency is running a$23 billion deficit this year and many policy makers fear that its liabilities could mushroom if many more large corporations file for bankruptcy and dump their pension obligations on the government.
In New York's transit dispute,the transportation authority,which runs the city's subways and buses,was alarmed that the pension costs for the transit workers had tripled since 2002,to$453 million this year.
To control soaring pensions costs,the authority at first demanded raising the retirement age for future employees to 62.Workers can now retire at age 55,after 25 years on the job,and receive pensions equal to half their earnings.They average$55,000 a year,including overtime.
After the union,Local 100 of the Transport Workers Union,resisted that demand,the authority made a new proposal,that future transit workers pay 6 percent of their wages toward their pensions,compared with 2 percent for current workers.