SEIU underfunds worker pensions, overfunds officer pensions

Victor Joecks

To paraphrase Orwell, in the SEIU, some are more equal than others.

Both of SEIU’s two national pension plans, the SEIU National Industry Pension Fund and the Pension Plan for Employees of the SEIU, issued critical-status letters last year. The Pension Protection Act requires any pension fund that is funded below 65 percent of what it needs to pay its obligations to inform its beneficiaries of the deficit…

An underfunded pension plan does not have enough assets to meet its obligations to retirees in the future. Recovery is difficult if plans are significantly underfunded, as is the case with the SEIU plans. The Pension Benefit Guarantee Corp. (PBGC) insures only a portion of promised benefits to retirees in union multiemployer pension plans. If one of those plans goes bankrupt, the PBGC will guarantee only up to $12,870 in benefits.

Do not worry about Mr. Stern and other high-ranking SEIU officials, though. At age 59, he has 37 years of service in the SEIU and is entitled to a full pension and lifetime health benefits. Unlike SEIU’s pension plans for rank-and-file members and union employees, SEIU’s officer pension plan, the SEIU Affiliates Officers and Employees Pension Plan, was funded at 102 percent in 2007. (Emphasis added)

So what has the SEIU been doing to take care of its own members – whom, in theory at least, it should be looking out for? Spent over $85 million electing President Obama and the Democratic congressional majority. As a result of this spending, the “SEIU is $85 million in debt, down from its 2008 high of $102 million, and has been forced to lay off employees.” So much for the SEIU’s claim of being “dedicated to improving the lives of workers and their families.”

Unfortunately, the SEIU isn’t the only organization with underfunded pensions (or spending problems). As NPRI’s Geoff Lawrence wrote recently, Nevada’s pension system is in a similar situation.

[Andrew] Biggs [of the Competitive Enterprise Institute] determined that a market valuation of Nevada PERS assets using an economically sound “options pricing” method of accounting for risk reveals a total unfunded liability of $33.5 billion. At current levels, that would amount to roughly 10 years’ worth of state General Fund spending! To put it another way, market-priced unfunded pension liabilities amount to 32 percent of state Gross Domestic Product.

According to Biggs’ analysis, the probability that PERS’ assets will be sufficient to cover accrued liabilities is only 6 percent for police and firefighters and 10 percent for regular employees.

Defined-benefit pensions don’t work for government, unions or private companies. Nevada needs to switch to a defined-contribution pension system immediately.