By Ed Ott

It is not a secret that the United States has an inadequate and underfunded pension retirement system. And it’s about to get much worse! The private and public sectors’ pension plans are suffering terrible losses as a result of layoffs and investment losses. We are weeks away from a new assault on what’s left of millions of pensions across the country.

There are two kinds of pension plans: (1) a defined benefit plan is when workers retire and get a set amount of money each month (such as 80 percent of their highest wage). This was the gold standard many unions won for their members in the post-WWII years. It required employers to set aside enough money to ensure workers would have adequate income when they retired. (2) Starting in the 1980s, employers began to reject defined benefit plans as too expensive and moved to defined contribution plans — so-called “modern pensions.” In these, the employer and employee make a set contribution to a pension savings each month (often a 401k). Employers preferred these because employees are responsible for their own funds, and they bear all the risk. If the investments don’t yield adequate returns, the employee will have a lower pension income.

Right now, things are looking bad for workers with both kinds of pensions. Continue reading Ed Ott: Bail Out the Pension System →