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pensions
Bernie Sanders Calls for Major Overhaul to Solve US Retirement Crisis
"If Congress can bail out the crooks on Wall Street," said the senator, "please do not tell me that Congress can't support a secure retirement for working Americans."
Mar 04, 2024
Days after hearing the testimony of a fourth-generation autoworker whose family has experienced first-hand the shredding of the social contract over the course of several decades, U.S. Sen. Bernie Sanders demanded on Monday that Congress swiftly pass legislation to cut the "unacceptable" rate of poverty among senior citizens and ensure that American workers can once again "retire with the dignity and the respect that they deserve."
In an op-ed for Fox News, Vermont independent senator wrote about the hearing he held last week as chairman of the Senate Health, Education, Labor, and Pensions (HELP) Committee about the country's retirement crisis.
The committee heard from Sara Schambers, whose grandfather retired at 55 from his job as an autoworker at Ford Motor Company, receiving "a pension and good healthcare" provided by the company where he'd worked for three decades.
Schambers' grandmother had to retire early due to a diagnosis of Lou Gehrig's disease, "but she didn’t have to choose between paying her medical bills and buying dinner for her family, because her job provided her with the retirement security she needed."
In sharp contrast, Schambers told Sanders and the rest of the committee that she will not have healthcare or a pension when she retires from her job as an autoworker.
"For generations, getting a job at Ford meant stability and security," said Schambers. "It meant being able to plan for yourself and your children. It meant being able to buy a house and see a future for yourself. But for those of us who were hired in after the financial crisis, that has not been our truth."
Schambers said auto companies have been "adamant that they couldn't afford to add to our pension liability... and that giving back our pensions could affect their stock prices and possibly lead to lower credit ratings. Nowadays, a stock price is more important than 150,000 autoworkers."
In his op-ed, Sanders wrote that the loss of pension and fixed benefit plans among American workers—60% of whom had them in the early 1980s, compared to just 4% in 2023—has led to a 23% poverty rate among senior citizens, one of the highest rates compared to other wealthy countries, according to the Organization for Economic Co-operation and Development.
"In Denmark, only 3% of seniors live in poverty," wrote Sanders. "In France, the senior poverty rate is 4.4%. In Germany, it's 9.1%. In Canada, it's 12.3%. In the United Kingdom, it's 15.5%."
Sanders called on Congress to pass the Social Security Expansion Act, which he introduced last year with nine other senators, including Sens. Elizabeth Warren (D-Mass.), Sheldon Whitehouse (D-R.I.), and Tina Smith (D-Minn.).
The bill would make Social Security solvent for the next 75 years and expand the programs benefits for seniors and people with disabilities by $2,400 a year, making a difference to the 1-in-4 senior citizens who now live on less than $15,000 per year and 1-in-2 who live on less than $30,000 per year, as the Senate HELP Committee noted in a report ahead of the hearing last week.
In keeping with Sanders' longtime push to require the wealthy to pay their fair share into the program, the Social Security Expansion Act would apply the Social Security payroll tax to all income, including those from capital gains and dividends, for those who make more than $250,000 per year.
Currently, the senator wrote, the wealthiest Americans benefit from a cap on the Social Security payroll tax.
"Absurdly and unfairly, a billionaire pays the same amount of money into Social Security as someone who makes $168,700 a year," wrote Sanders. "That means, if you make up to $168,700 a year, you pay 6.2% of your income in Social Security taxes. But if you make 10 times more—$1,687,000—you pay just 0.62% of your income in Social Security taxes."
"That may make sense to someone," he added. It doesn't make sense to me."
In an interview with CNN over the weekend, Sanders was asked about a Republican proposal to raise the retirement age instead of properly funding Social Security by taxing the rich.
"Brilliant idea," said the senator sarcastically. "Yes, we've got our people, 87-year-olds packing groceries in a supermarket. You know, really? People have worked hard their whole lives, this is the richest country in the history of the world. Raise the retirement age, cut benefits? I don't think so."
Sanders proposed that every corporation in America should be required to either provide their employees with a retirement plan or "give workers the option of contributing to a federal pension plan similar to what members of Congress and federal employees receive."
"If Congress can provide trillions of dollars in tax breaks to billionaires and large corporations," said the senator, "if Congress can bail out the crooks on Wall Street who caused millions of Americans to lose their jobs, homes, and life savings back in 2008, please do not tell me that Congress can't support a secure retirement for working Americans."
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'Historic Victory': Swiss Approve Pension Boost, Reject Later Retirement
"It is the people who have the power in Switzerland," one union leader said.
Mar 04, 2024
In a move that pensioners rights group Avivo called "a historic victory for retirees," Swiss voters on Sunday voted to boost their pension by one-month's payment.
At the same time, voters rejected a measure to raise the retirement age from 65 to 66. The vote marks the first time in Switzerland's history that its people have voted directly to increase their own benefits, and one expert said the break with the past could be a response to the government bailout of Credit Suisse in 2023.
"Many think that the entrepreneurs and managers have broken the unwritten Swiss social contract: That managers are modest with bonuses and debauchery and the people are modest with social demands," Michael Hermann, who leads the Sotomo poll, told newspaper SonntagsZeitung. "People have been angry for a long time about the behavior of corporations, managers, tax evaders. So you often hear now: 'If they help themselves, then we also want something for us.'"
"Democracy is alive and kicking in Switzerland."
The pension plan measure will see pensioners receive a 13th payment every November, as is already the case for Swiss paychecks, as BBC News explained. Currently, pensioners are paid between $1,393 and $2,760 a month, which many argue is not enough given Switzerland's high cost of living. Zurich tied with Singapore as the most expensive city in the world, according to a November report by the Economic Intelligence Unit.
"I'm retired now and so obviously I would like a bit more," 65-year-old Zurich voter Mery toldReuters. "It should allow me to give a little something to my grandchildren."
The extra payments will start in 2026.
The measure needed both a majority of voters and a majority of cantons to pass, which it secured with 58.24% of voters and 16 out of 26 cantons, according to Le Monde.
The increase was backed by left parties and the Swiss Trade Union Federation and opposed by business interests and the center-right government and parliament, who argued it would be difficult to pay for. This makes the yes vote especially surprising, as historically Swiss voters have not acted against government advice on financial matters. For example, they rejected previous proposals to shorten the work week and increase the number of vacation days.
"Democracy is alive and kicking in Switzerland," said Interior Minister Elisabeth Baume-Schneider.
Lukas Golder of polling firm gfs.bern, reports Reuters, told SRF that the vote was "a huge milestone from a union perspective."
Head of the Swiss Trade Union Federation Pierre-Yves Maillard, told RTS that the vote sent "a wonderful message to all those who have worked hard all of their lives" and proved that "it is the people who have the power in Switzerland," according to Le Monde.
The proposal to raise the retirement age by one year and tie it to life-expectancy was rejected by 74.72% of voters. Turnout for the election was high for a Swiss plebiscite, at more than 58%.
The election comes amid a push to raise the retirement age in other countries. France's Emmanuel Macron faced massive protests when he upped that country's retirement age from 62 to 64.
U.S. Republican presidential candidate Nikki Haley has called for raising the retirement age for workers who are now in their 20s.
"They should plan on their retirement age being increased, yes," Haley said of younger workers during a January 10 debate.
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Could the Traditional Pension Plan Make a Comeback?
The great 401(k) experiment of do-it-yourself retirement plans was always a better deal for the financial services industry that profited handsomely from managing them than for employers and workers.
Mar 02, 2024
Pension plans never really went away—despite beliefs to the contrary that they are fatally flawed, with 401(k)s being the only sustainable retirement plans. The reality is that there are still 50,000 financially healthy pension plans in the United States. Most public sector workers, for sure a minority of all workers, still have pension plans. The other reality, though, is that progressively fewer workers since the early 1980s have had access to traditional pensions plans.
The general experience in American workplaces has been that once gone, pension plans do not come back. Here and there the trend has been bucked with pension plans returning to replace 401(k)s. In 2008, West Virgina public teachers voted to return their pension plan that had been taken away by the state legislature in 1991. The 401(k)-like plan that replaced it had produced such poor returns that participants were facing poverty in retirement. In 2012, after a long campaign, Connecticut state employees were allowed on a voluntary basis to switch out of a 401(k)-like plan into the state’s traditional pension plan.
More recently, there have been developments of potential large-scale replacements of 401(k)s with pension plans that may portend the beginnings of a significant pension comeback.
There is plenty of evidence that a dollar invested in a traditional pension plan delivers far more retirement income than one invested in a 401(k).
In 2006 the Alaska state legislature took away the pension plan for schoolteachers and replaced it with a 401(k). School teachers and their union never accepted the change and continually fought to reverse it. This year they may succeed. The Alaska Senate has voted to reinstate the pension plan. If the House of Representatives, where the fight will be tougher, follows suit, the plan will be reinstated.
Proponents of the reinstatement argued that Alaska was having a hard time keeping teachers who were quitting and leaving for teaching positions in states that had pension plans, which most do. Opponents of the change have argued, as they usually do, that it would be too expensive. But there is plenty of evidence that a dollar invested in a traditional pension plan delivers far more retirement income than one invested in a 401(k). Further, consulting New School economist Teresa Ghilarducci showed that Alaska would actually save $76 million annually by making the change.
If that can occur in Republican-dominated Alaska, union-strong Michigan, where state employees lost their pension plan in 1997, would seem to be a candidate for a similar development.
Meanwhile, in corporate America where pension plans have dwindled to near extinction, IBM has announced that it may develop a cash balance plan, a kind of quasi-pension plan, to replace its 401(k). Cash balance plans do not deliver as much retirement income as traditional defined-benefit pension plans, but they do have three advantages for workers over 401(k)s. Collective plan contributions are professionally invested, producing higher returns than the often-amateur investments of 401(k) participants. Once credited to participant accounts, contributions remain regardless of future market activity unlike with 401(k)s. And, by law, cash balance plans are required to offer life pensions from their funds that deliver significantly more retirement income than life annuities that life insurance companies sell to 401(k) participants.
IBM’s accountants are exploring the cash balance model mainly because it offers tax advantages over 401(k)s. At the same time investment risks, as with 401(k)s, are shouldered by participants, unlike with traditional pension plans.
The great 401(k) experiment of do-it-yourself retirement plans was always a better deal for the financial services industry that profited handsomely from managing them. For employers it was less of a good deal. Some are now beginning to do until recently the unthinkable and explore readopting the P word.
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