Pensions: A quick guide to the issue behind the strike
News blogs, sports blogs, entertainment blogs, and more from Philly.com, The Philadelphia Inquirer and the Philadelphia Daily News.
Pensions: A quick guide to the issue behind the strike
If you've been following the SEPTA strike, you've probably heard that pensions are the key issue. According to union president Willie Brown, workers will stay on the picket line until management agrees to fully fund their pension plan. SEPTA says it simply can't afford to spend the money.
Is this realistic? Is it reasonable? Unfortunately, in addition to being controversial, pensions are incredibly complicated. Below is a basic guide to pensions and why the TWU pension is causing so much trouble for unions, management, and taxpayers.
What is a pension?
Remember that Johnny Cash song where an autoworker steals one piece of a car at a time over the course of a career? That basic idea -- setting aside a small amount of money regularly throughout a long employment -- is pensions in a nutshell (minus the stealing!). Typically, a worker sets aside a portion of her paycheck each week. That amount is matched by her employer and put into a separate fund. That money is invested, usually in the stock market.
Once an employee has reached a certain length of service she is eligible to collect her pension. The money is paid out over a period of time based on the contract between the worker and the company.
Are there different types of pensions?
Yes. Defined benefit plans always provide a certain amount of income no matter the performance of the pension fund. Defined contribution plans only guarantee the same financial contribution from an employer over the course of a pension.
I want a pension. Who gets these things?
Only about 50% of American workers have pensions. Demographically, they skew wealthy, white and male. Pensions are usually awarded by companies with 1,000+ employees. Small companies, like family businesses or independent contractors, typically do not offer pension plans. Unionized companies are also more likely to have pension plans. Some pension funds are run by union locals.
Oh. That's a bummer. Is it like this everywhere?
No. Other countries, most notably Canada and Great Britain, have national pension programs administered by the government. The US relies on the employer to finance, invest, and administer the pension.
How are pensions connected to the current economic crisis?
At a basic level, the dramatic decline in the stock market has hammered the earnings of pension funds. If you are invested in the stock market for retirement, it's best to not look at your account for a few months. State and local governments have to, though, and are required to make up the difference for their retirees. So pensions have become a financial problem for many municipalities.
Also on IOM today: Nutter gets out ahead next year's pension crisis; Council asks for a do-over.
How does the TWU deal on offer compare with City Council's pension plans (with or without the DROP)? How does the TWU deal compare with the pensions to be collected by the Governor, the Mayor, and SEPTA's leadership? Does (will) the SEPTA board collect a pension from SEPTA? And how does TWU's complaint about their pensions compare with the challenges for Daily News and Inquirer employees while the papers are in financial turmoil?— MB6- How does the TWU deal compare to the taxpayers pension plan? The people subsidizing the TWU.— iamsue
- Great questions MB6. Dumb question iamsue. Waxman...how about telling us something we don't know? What do the union employees contribute to their pensions? Anything? What is the management position on this? What is the union asking? Get off your arse and do some investigation.— riverhealer
- I'd also really like to know how the pension, health care and salary increases of Septa union members compare to police officers and fire fighters.— jelana
Dear Mr. Waxman, I would love to see the facts that prove your claim that pensions "demographically...skew wealthy, white and male" I don't think it exists, except in your imagination. Also, you claim the US doesn't offer a nationalized pension plan. How is is possible that you have never heard of the Social Security System? That system makes payment to retired workers. In your article you define a pension as " a worker sets aside a portion of her paycheck each week. That amount is matched by her employer and put into a separate fund." How do you think Social Security is funded?— hopster- Nice article. Hopster - 1) the US govt doesn't match what it takes from you for Social Security, 2) you can't choose how much to contribute to Social Security 3) you are required to get money back from your pension, while the Social Security Board of Trustees already claims future insolvency. Those are the reasons why SS is not a pension.— pencilchair
- pencilchair, try reading article. The definition of a pension, as written in the article states "That amount is matched by her employer" It didn't say anything about being matched by the government. The amount of money that gets paid to S.S. by an employer is 12%. 6% is paid by the employee and 6% by the employer. Thus meeting the definition of pension in the article. No, an employee can't choose how much is contributed to SS, the government does that for you. And in a defined contribution plan, like SEPTA's union workers have, they don't choose how much they contribute either, its written into the contract. And as far as future insovency goes, you can't use that as a reason to exclude SS from the definition of a pension just to try to make your argument. Nice try though.— hopster
