Private Workers Forced Into Underfunded Union Plans

By Kevin Mooney

Labor unions market themselves to prospective members by promising an array of benefits that include generous, well-funded pension funds guaranteed to endure through retirement. However, the most recent government data available show that union negotiated plans are severely underfunded and perform quite poorly in comparison with non-union plans.

Among the larger pensions, those with 100 or more participants, 35 percent of non-union plans were fully funded as opposed to just 17 percent of their collectively-bargained counterparts, according to a Hudson Institute analysis of U.S. Labor Department records. While 86 percent of non-union funds had 80 percent or more of funds needed to cover costs, only 59 percent of union funds could cover the necessary financial threshold, the Hudson scholars concluded.

Although there is no requirement that says retirement plans must be fully funded at a given moment to be considered stable, the Pension Protection Act of 2006 spells out specific criteria.

Pensions with less than 80 percent of the assets needed to cover present and projected liabilities are considered “endangered,” while those that fall below a 65 percent threshold are classified as “critical” under the legislation.

Union workers who have been promised substantial payouts upon retirements should become acquainted with these figures and with government records that point to disconcerting financial trends. Plan managers are required to file a document known as Form 5500 that highlights the ratio of assets to liabilities with the Labor Department. There is normally a one to two year delay in submitting these documents, which means the full effects of the financial collapse that begin in late 2008 are not reflected in the reports now available.

Nevertheless they are instructive.

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