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Thursday, October 17, 2013

The latest attack on pensions (and why it makes me crazy)

The reason a proposal like this one makes me so crazy is that it may get some traction -- because the news media as an institution has done a horrible job of explaining what pensions really are.

When employees at a unionized shop, public or private, negotiate pension payments, they're accepting deferred compensation. That's what a pension is. So instead of, say, a five percent raise as part of a contract, the union agrees to take a three percent raise, and have two percent (or the equivalent) go into a pension fund.

Social security is, in essence, a deferred compensation plan: I pay into it every month, and when I'm 65, I get it back. (Of course, if I die before I'm 65, I don't get it at all, and if I die at 67, I only get a little, and if I live to 104, I get more than I paid in, maybe.)

And since nobody wants that pension money to sit around in a bank, it gets invested in the stock market, and when the market does really well, then the employers figure they can get away with better pensions without paying for it. That's what happened for much of the 1990s and 2000s -- politicians who didn't want to make tough calls (higher pay for workers might mean higher taxes) promised nice pensions instead. And they thought they'd get away with it because the stock market would keep rising, at least until (as in the case of someone like former Mayor Willie Brown) term limits kicked in and it became someone else's problem.

But this is how union negotiations work. You bargain for a better pension and healthcare deal instead of higher wages? Hey, that's the deal you took. But it's your money either way: You paid into that pension system whether you contributed directly or not. You paid for your health insurance whether you pony up $92 a month of $250 a month. Because if the health plan cost more, you'd demand higher wages.

And that's what the BART workers are saying now: You want to pay us less, by reducing the amount you spend to underwrite our health care? Then you have to pay us more in cash every week to make up for it. Seems entirely reasonable.

Again: Health insurance -- the employer contribution-- is part of the pay that you earn as a worker. Pensions are your money, in deferred compensation, invested in a stock market that goes up and down.

The Republicans would like us all the have defined contributions but not defined benefits; that's what a 401K plan is. You put in your money, you take your choices with the stock market.

Unionized employees, with better bargaining ability than individuals, have been able to demand defined benefits. But that's part of the pay package; if you work for BART, your pension is your money.

Now: If BART or any other employer wants to change the contract in the future, and the unions agree -- say, paying more into their pensions or paying more for healthcare, and balancing that with a larger cash wage -- that's fine. That's called collective bargaining.

But you can go backward, and say: Hey, We promised you a pension as part of your pay, and now we're going to retroactively change the deal. That's like going to a group of workers and saying: We paid you $40,000 last year, but now we're broke so we've decided you were only worth $35,000, and you owe us $5,000. Pay up.

Doesn't work that way.

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