Bolstering Call to Expand Social Security, New Reporting Reveals How Corporations Are Offloading Pensions
New reporting showing companies’ scrapping of pension plans has gone into overdrive means that Social Security must be expanded, an advocacy group said Wednesday.
“Expanding Social Security is important for today’s retirees,” Social Security Works said in a tweet, “but even more important for tomorrow’s.
The shift from traditional pensions to 401(k) or similar retirement plans—a change panned as an inequality-fueling disaster—isn’t new. “But lately,” reported Axios, “those changes are happening even faster.”
The outlet attributed the development to a “perfect storm of circumstances, from lower interest rates to higher longevity rates,” which “is prompting corporations to offload their pension plans—by selling them to insurance companies and offering lump-sum payments to some workers.”
Click Here: NRL Telstra Premiership
This offloading is known as a “pension risk transfer” (PRT).
As Reuters reported in May,
This PRT business “was the biggest ever in 2018,” according to Axios. And a surge was expected, with Bloomberg Law reporting in December: “Pension Buyouts Likely to Be Bolder, if Not Bigger, in 2019.”
Axios reported on evidence of the trend.
As Social Security Works noted in its tweet, the new reporting included a graphic showing a particularly bleak pension outlook for those aged 35 and under:
Whether they’re unable to have any retirement plan, are forced to relying on a 401(k) or IRA, or have a pension that gets transferred, workers will likely be shortchanged. They would have no safeguard under the federal Pension Benefit Guaranty Corporation (PBGC), and while a lump sum option may seem attractive, it may not be an economically-wise move.
“Often retirees think that if they exchange their pension for a huge chunk of money— sometimes as large as $300,000 or even $400,000—they can do a better job investing it themselves in the stock market,” Karen Friedman, executive vice president and policy director of the Pension Rights Center, told AARP earlier this year. “But economists warn that rarely, if ever, can people replicate the security of a pension.”
In March, the Trump administration’s Treasury Department said it would not impose a rule banning lump sums to people already retired. From CNN:
Adding to the bleak retirement scenario is the fact that 37 percent of Americans have no retirement savings at all, according to the 2013 report “A Tale of Two Retirements.”
“The 401(k) revolution has been a disaster,” said report co-author Monique Morrissey, “yet some policymakers are calling for cuts to Social Security, which will be the only significant source of retirement income for most Americans—if they are able to retire in the first place.”