Reason #58: The Corporate Pension Scam

Rate cuts aren’t the only way corporate America milks Washington DC for bigger profits. It constantly dumps its biggest costs onto the taxpayers. Wal-Mart’s low paid workers clog our public emergency rooms because the company refuses to offer them health insurance. And when manufacturers close their factories to move offshore, scores of laid off laborers sign onto public assistance programs like food stamps and welfare. But the biggest corporate welfare program right now might be pension guarantees.

Most of our largest corporations’ pension plans are insured by a federal agency called the Pension Benefit Guaranty Corporation (PBGC). Originally, the PBGC was only supposed to step in as a last resort. But now, large firms like United Airlines are using it as a pension piggy bank. Instead of setting aside funds to cover their future obligations, they raid their worker’s contributions and go into massive debt. And when they can’t cover that shortfall, they simply hand the mess over to the government to clean up. In 2006 alone, PBGC took over the retirement obligations of more than 100 companies. And thousands of other companies claim to offer pension plans that are in fact vastly under-funded.

For now, most of that massive debt is still looming in the background. But as tens of millions of Baby Boomers begin to fall off the job rolls, the reckoning draws ever closer. PBGC itself is already more than $13 billion short of what it needs. So far, it’s absorbed the retirement accounts of over a million workers and that number is only getting bigger. So how long until the taxpayers have to bailout the bailout agency? 

NEXT: Reason #59: Over a Barrel