Sloan Sessions: Pension reform
TEXT OF INTERVIEW
SCOTT JAGOW: Last week, Delta Airlines reached a deal with its pilots to kill their pension plan. More big companies are getting rid of pensions or dumping them on the government. That’s prompted accounting regulators to pass new rules about pensions, and Congress just voted in a pension reform law. Newsweek’s Allan Sloan doesn’t like the sound of all this.
ALLAN SLOAN: Any time now I see anything called reform, I reach into my pocket because I want to make sure I get my hands on my wallet before the people reforming things do. And I think in the end, we employees are going to be collectively worse off with all this help than we were without it.
JAGOW: Well what’s the problem?
SLOAN: What they’re trying to do in Congress is they’re setting up things supposedly to make pension funding tougher so that if a company commits to paying you a pension, it really has to set aside money to pay for this pension in the future rather than sticking the Pension Benefit Guaranty Corporation, which is the federal government, with the bill. And I think what’s going to happen is the incentives company have are going to be to either a) drop their pension funds if they can completely or b) to fund them in a way that will be so expensive no one will be able to afford to do it because instead of trying to figure out what’s the best way to provide for the future, these companies that have publicly-traded stock are going to say ‘gee what’s the best way I have to provide for this quarter’s profit?’
JAGOW: Well aren’t pension funds going the way of the dodo bird anyway?
SLOAN: Um, except for things involving unions and governments, they are going the way of the dodo bird. And the shame is it doesn’t have to be that way. You know if you’re a new player in the workforce, and I tell you you’ve got some sort of 401k plan or 403b, I mean it’s never going to work out for you anything the same as a pension fund, because a well-run pension fund can invest better than you, can make more intelligent decisions than you and has a longer time horizon than you and it has access to professional advice which in the end, you really don’t.
JAGOW: But wasn’t the whole idea behind these reforms to stop companies from dumping their pensions on the taxpayers?
SLOAN: But I mean is the most important thing in the world, Scott, keeping the health of the Pension Benefit Guaranty Corporation? It’s got a deficit supposedly of $25 billion. Well I mean the federal government is running a real deficit of half a trillion dollars a year. When you say ‘Are you in favor of dumping stuff on the Pension Benefit Guaranty Corporation?’ the answer has to be ‘No, who’s in favor of that?’ Well, then sign off on this legislation. We take a very narrow view of things but if you ever make me king of the United States or the financial czar, I will solve all the problems.
JAGOW: OK Allan, thanks a lot.
SLOAN: You’re welcome Scott.
JAGOW: Allan Sloan’s the Wall Street editor for Newsweek. In Los Angeles, I’m Scott Jagow. Thanks for listening.
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