Washington has an unfortunate habit of picking winners and losers. Congress should resist doing so again.President Donald Trump’s supplemental budget request asks Congress to spend roughly $1 billion to restore full pension benefits for about 5,700 former salaried employees of Delphi whose pensions were reduced when their plan was terminated. Supporters portray the proposal as correcting a historic injustice. In reality, it would undermine the pension insurance system Congress created, invite billions more in bailout demands, and reward one politically connected group at taxpayers’ expense.
The Pension Benefit Guaranty Corporation was established to prevent what happened in 1974, when the Studebaker auto company went bankrupt, and thousands of workers lost most or all of their promised pensions. Like every insurance program, the PBGC provides coverage only up to specified limits. For Delphi’s salaried retirees, the guarantee limit at the time of the plan’s 2009 termination was $54,000 annually, which covers about 89% of the plan’s total liabilities. Some media reports claim that 20,000 former Delphi employees lost their pensions, but the PBGC confirms that 14,300 of the plan’s approximately 20,000 participants have received every dollar of the pension benefits they earned. Only about 5,700 experienced any reduction, either because their benefits exceeded the $54,000 statutory insurance limit, or because they earned early-retiree benefits the PBGC does not insure.Most of those reductions were modest. About 60% of affected participants lost less than one-fifth of their promised pension, while fewer than 2% experienced reductions exceeding half of their vested benefits.Yet Congress is now being asked to do something it has never done before: override the insurance limits established by law and make one terminated pension plan whole. Even more remarkably, the proposal would include retroactive payments reaching back to 2009, with 6% annual interest.No private insurance operates this way. Homeowners can’t expect taxpayers to reimburse them for losses above their policy limits after a fire. Drivers can’t expect taxpayers to pay deductibles after an accident. Insurance works because the terms are established before disaster strikes.The PBGC should be no different.(Stock/AP photos)
