Unions Are Defining Benefits Down
According to a piece by AWF executive director Brian Johnson in the National Review Online:
The Service Employees International Union (SEIU), the largest union in the
And how does the SEIU propose to “take back the economy”? As part of its economic agenda, the SEIU is advocating defined-benefit (DB) pension plans over defined-contribution (DC) plans, using promises of secure pension benefits to encourage workers to join the union. However, the financial health of many SEIU defined-benefit plans is deteriorating. That is, the health of DB plans for rank-and-file workers is deteriorating. The pension plans owned by SEIU staff members and executives are well funded.
Every American should be able to retire with financial security. With unionization at historic lows today, and more state employee retirement plans shifting from the DB to the DC formula, the “American Dream” is more easily attainable than ever before. However, union-controlled DB pensions, and specifically the SEIU worker pensions, are putting union members at an economic disadvantage to the rest of the working populace.
Workers who own DC pension plans — such as 401(k)s — can achieve financial stability in retirement through consistent, simple investing. For example, a $200 per month 401(k) contribution invested in a basic S&P 500 index fund over the last thirty years would be worth just under $700,000 today. At double that monthly investment, the return would be around $1.4 million. Based on these returns, workers drawing 5 percent of their nest eggs each year in retirement would have annual pensions of about $35,000 and $69,000 respectively. DC plans also remain with workers as they move from job to job — a critical variable that places DC plans at a significant advantage to DB plans.
Unions often champion themselves as protecting rank-and-file workers from corporate greed and malfeasance. Yet DB pension plans, managed by union officers, are often plagued by insolvency, threatening to leave members with little in retirement....click to continue.
