San Jose, CA – With the continuing decline in the stock market, private pension plans in the United States are now short $300 billion of the amount needed to pay future promised benefits. In addition, state and local government pension plans have also lost almost $300 billion over the last two years, leaving them with a $180 billion shortfall. These deficits, along with decline in workers’ 401(k) retirement accounts and company cutbacks in retirement health insurance, mean even more insecurity for present and future retirees. To make things worse, Bush and some state governments want to replace current pension plans and social security with private investment accounts.

Today, only 20% of all workers have company pension plans which pay a guaranteed retirement benefit based on salary and years of service. Twenty years ago, it was 40%. Almost half of these companies are considering cutting their benefits. Many are introducing so-called ‘cash balance’ plans to replace their traditional pension plans, which can lead to up to a 50% cut in benefits for older workers. Most workers who have a company retirement plan – and many, especially lower income workers, don’t – are in a 401(k) plan that offer no guaranteed benefits to retirees. 401(k) plans lost an average of 13% in 2002. On top of these losses, many large corporations, such as stock brokerage Charles Schwab, automaker Ford, Goodyear Tire and Rubber, and power producer El Paso Corporation, are reducing their contributions to their workers 401(k) retirement accounts.

While companies are required by law to set aside money to cover future pension benefits, there is no such requirement for company health insurance for retirees. Bankrupt Bethlehem Steel has been trying to end its health insurance for retirees in order to sell itself to another steel corporation. Retirees at other companies, such as Lucent Technologies (formerly a division of AT&T), are worried that their health insurance will be reduced or even cut entirely as the companies struggle to increase their profits. Across the country, states are planning to cut more than a million low-income Americans, including many retired, disabled, unemployed and low-income workers from the Medicaid program.

Because of the growing numbers of corporate bankruptcies, the Pension Benefit Guaranty Corporation (the government agency that insures workers’ pensions), suffered an $11 billion loss last year, leaving the PBGC with a $3 billion deficit. New regulations being proposed by the Bush administration would make it easier for businesses to adopt cash-balance plans and cut their older workers’ retirement benefits. Last, but certainly not least, Bush wants to replace social security with private investment accounts similar to 401(k)’s. This would be a big prize for Wall Street banks and brokerages, which would make billions of dollars in fees, but it would throw the average worker to the mercy of stock market.

One of the big fights around pensions will be waged by teachers and other state and local government workers, who face cuts in their pension plans by states with big pension and budget deficits. One of the worst situations is in Illinois, where the state pension fund has only 54% of the assets needed to pay its future benefits, a shortfall of almost $35 billion. In Massachusetts, teachers and their unions are fighting the governor’s proposal to force teachers out of their present traditional pension plan and into a 401(k)-style plan.

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