I wrote yesterday that companies should be made fully liable for their employee pension plans. Tom Walkom writes that, essentially, pensions are deferred wages:
Pensions are, in effect, the fruit of forced savings. Workers forego wages now for the promise of income after retirement.
The actual payments are usually split between employer and employee. But conceptually, both represent the same thing — deferred wages.
In North America, company pension plans took off during the Second World War as a way to get around wage controls. It might be illegal to offer scarce workers higher wages. But it was all right to offer non-wage benefits like pensions.
After the war, the growth of unions encouraged the expansion of company pension plans. But it was always a minority of workers who benefitted from them.
The quality of your pension depended on how well managed your company was. If you were lucky, you retired well. But companies go bankrupt. And, if you worked for Sears or Nortel, you were left up the creek.
That is why Walkom believes the best solution is to expand the public pension system:
The CPP is well-run and financially self-sustaining. As the Sears saga demonstrates, even the biggest private enterprises can go out of business. The government of Canada, which ultimately backs the CPP, cannot easily do the same.
If there is a future in pension reform, it is with the CPP. Changing the bankruptcy laws to put pensioners at the front of the queue, as both the New Democrats and Bloc Québécois suggest, is a fine idea. But it doesn’t deal with the fact that the company pension plan such a move would protect is a thing of the past.
Perhaps he's right.
Image: www.pionline.com
8 comments:
It makes good sense to me. The employees' and employers' contributions are remitted to CPP or some offshoot agency with the proviso that, should the employer fail and be found in default of its obligations,including severance, that the government's super-priority charge should attach to the assets in priority to all other creditors, secured creditors included.
If I understand you correctly, Mound, it sounds like the CPP is built not just on the principle of forced savings but on the principle of employer liability.
It's not, Owen. The employer's liability in respect to employees is primarily about remitting withholding taxes and that's a CRA matter which does get into the realm of super-priority. What I'm suggesting is that when employers have a contractual obligation to match employee pension contributions that should be a similar obligation to CPP for which super priority should also attach.
One of the benefits of super priority charges is that it gives the bank or other secured creditor an incentive to monitor the employer to ensure that all withholdings have been remitted as the business goes along, especially if the employer's fortunes begin to wane.
Walkon's suggestion is good as far as it goes, Owen, but I also like the idea of making pensioners and those owed severance secured creditors. He mentions that the argument against it is that it would discourage investment in Canada, but I think we have gotten to the point where governments must start standing up against the neoliberal imperative of profits at any cost; otherwise we are simply endorsing one of the worst kinds of worker exploitation imaginable.
So the law still has to change, Mound? There was a link in yeterday's post, dealing with how Eddie Lampert has stripped Sears of its assets and walked away scot-free. Like Mr. Trump, it appears he has stiffed lots of ordinary folks.
The central problem, Lorne, is that governments refuse to re-balance the interests of capital and labour. They remain firmly on the side of capital.
Bingo, look at the US. Big Pension Fraud of public service pensions is commonplace. See Dallas Police or anything in Ill.
I personally have lost lost lost managing my private pension. A huge chunk went down the drain on Nortel, and Bombardier. I made some money on banks, but generally the holi poli is not qualified to manage their own funds. I have owned several bullet proof mutual funds
and the fees exceeded the return.
The biggest problem in the world today is no place to put money that generates real profit.
However the old fashioned pension invested in bonds is something that must be considered. It worked for centuries.
As with lots of things, Steve, competence and character matter.
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