Under cloak of the Republican revolution, big business is lobbying for a number of regulatory reforms which would serve no purpose other than to line the pockets of large corporations.
Among the most treacherous, pension watchdogs warn, is one which would enable large employers to siphon off retirement fund surpluses. Proceeds could then be spent on anything management pleases - from a chauffeured limousine for the boss to a corporate takeover of the competition.
It’s been done before.
Under attack are “defined” pension plans paying a specified retirement benefit. A GOP measure currently part of the budget reconciliation process would permit withdrawal of funds as long as employers leave 25 percent more than is needed to meet current liabilities.
Existing curbs on drawdowns were imposed just five years ago to reverse corporate abuses that flourished in the greedy ‘80s, when merger-mad employers raided employee pension funds to buy up other companies.
To halt the practice, reformers set the present tax rate on most withdrawals at 50 percent, a penalty which analysts tell me is close to prohibitive, as lawmakers who drafted reform obviously felt the cost needed to be.
But under the present GOP proposal, withdrawals would be taxed at simply the regular corporate income-tax rate up until July of next year, when a 6.5 percent excise tax would be added.
It has been calculated the scheme could drain tens of billions of dollars out of pension funds and produce $10 billion more in corporate taxes. To counter the perception that they are granting corporations a license to loot worker pension plans, GOP flag-wavers are endeavoring to portray the raid as a patriotic deficit-cutting duty.
But pension rights watchdogs, organized labor organizations and others fear the security of many millions of active workers and retirees in 22,000 pension funds could be placed in jeopardy.
Republicans on Capitol Hill promise they wouldn’t even think of doing anything like that. Corporate lobbyists, too, promise their clients wouldn’t revert back to their ‘80s ways. No sir.
Locally, a disturbing number of pension planners, administrators and consultants whom I contacted confessed ignorance of this issue so vital to clients.
A partial explanation may be that Spokane doesn’t have the big firms headquartered here who would be best able to exploit this promising new windfall.
Except for very large employers with thousands of workers, few would profit from this legislation, according to Jerry McFarlane, president of Pension Consultants of the Northwest.
“This certainly is not something for your average doctor or dentist,” says the Spokane consultant.
In Seattle, Valerie Stevens of Watson Wyatt Worldwide agreed. “Such withdrawals are just not feasible for moms and pops.”
Stevens, head of the Northwest Retirement Group for this global organization of actuaries and consultants, said small employers simply don’t have enough surplus in pension programs to make the whole withdrawal process very worthwhile.
“The big companies are where the money is,” she said.
A number of big pension funds are “highly overfunded,” in her expert opinion. Assuming normal market risks, if some of the additional surplus were reverted to the company, there would be no big problem, she says.
“But in today’s market,” she cautioned, “I think it would be prudent for those in a fiduciary capacity to be very, very careful.”
That said, she expressed confidence in the abilities of and reliability of pension plan fiduciaries - even under liberalized withdrawal requirements and volatile market conditions - to continue making sound and responsible decisions. “Unless clearly valid reasons exist for withdrawing surplus funds,” she assures, “they won’t do it.”
Yeah - maybe.
But McFarlane is less confident.
If the large employers want to pare back fund surpluses, he says, “They can accomplish it just as well by simply reducing their payments into the fund.”
After a computer check with others on-line in the pension industry, McFarlane reported the consensus of consultants seems to weigh against changes sought by the GOP.
He sensed widespread discomfort among colleagues with Republican efforts to reopen this can of worms. I took that to constitute a veto from the retirement industry.
Odds are President Clinton will veto it, too.
, DataTimes MEMO: Associate Editor Frank Bartel’s column appears on Monday, Wednesday and Sunday.