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Friday Alert 6/10/05
Alliance for Retired Americans
888 16th Street, N.W. - Washington DC, 20006 - (202)
974-8222 - www.retiredamericans.org
Congress Considers Ailing Pension Plans
The pension plans of millions of American workers and retirees
are severely underfunded because of outdated legislation and corporate
loopholes. Amidst the ongoing debate over the future of Social Security and
spurred by United Airlines record $9 billion pension default, the Senate Finance
Committee held hearings this week on how to shore up the beleaguered retirement
system. Lawmakers criticized chief executives of Delta, Northwest and United,
who appeared before the committee, for shortchanging pensions, hiding problems
and protecting executive pensions while benefits for other employees were
reduced.
The federal Pension Benefit Guaranty Corp. (PBGC) has assumed financial
responsibility for unfunded defined benefit pension plans, mostly in the steel
and airline industries. The Government Accountability Office suggests that many
companies were misrepresenting pension funds and not contributing adequately.
According to the PBGC, total underfunding in the traditional pension system may
be as high as $450 billion. The agency is said to be running a $23.3 billion
deficit, which fuels fears of a taxpayer bailout similar to the savings and loan
crisis of the 1980s.
Finance Committee Chairman Sen. Charles Grassley (R-IA) suggested an overhaul
of pension laws were necessary saying, "The facts are alarming. The time to act
is now. Tinkering with current rules won't do." Senators seem to agree that
change is needed, just what type of change is still unknown.
Social Security Debate Revived
Senate Finance Chairman Charles Grassley says his top priority is making Social
Security solvent. Once he has Republican agreement on solvency, Grassley will
move onto the issue of creating private accounts. Options being considered by
the committee include substantially increasing the amount of income subject to
Social Security taxes; reducing benefits for upper income wage earners; and
raising the retirement age.
However, Grassley does not have the consensus he needs. Sen. Olympia Snowe
(R-ME) contends she will not support private accounts and Sen. Gordon Smith
(R-OR) has proposed an alternative. Claiming that Bush's Social Security agenda
is in serious trouble, Smith joined with Kent Conrad (D-ND) to introduce a bill
intended to increase participation in tax-advantaged savings plans like 401(k)
accounts.
In the House, Rep. John Boehner (R-OH) introduced legislation that would
overhaul federal pension law by raising the premiums companies are required to
pay the federal government to insure retirement plans. Boehner plans to push the
bill through the Education and Workforce Committee by month's end then send it
to the Ways and Means Committee where it is expected to become part of a
sweeping retirement package including a Social Security overhaul.
Dismal Savings Rates Among American Workers
Among American workers aged 50 and older, only 13% are contributing an
additional "catch-up" contribution to their 401(K) retirement accounts,
according to a report released by Vanguard Group. In 2005, workers aged 50 and
older are allowed to add an additional $4,000 to the $14,000 pretax limit. The
study also found that higher income workers were more likely to save. In 2004,
households with incomes of $150,000 or more were six times more likely to save
than those under $50,000.
Post-ABC Poll on GWB
Americans are not feeling confident with President Bush and Congress. A
career-high 52 percent disapprove of his job performance overall, according to a
new Washington Post-ABC News survey. Disapproval of Congress is at 54 percent,
with 6 in 10 Americans saying Bush and the Republicans are not making good
progress in solving the nation's problems.
Bush's campaign to win support for his Social Security plan is failing. 62
percent of respondents disapprove of the way Bush is handling Social Security;
56 percent believe Bush's plan would cut the overall retirement income of
seniors. When considering how the plan would improve the long-term financial
stability of Social Security, 63 percent said the proposal would not improve it.
Drug Panel on FDA Sides With Drug Industry
The FDA Drug Safety Oversight Board is "severely biased in favor of the
industry," according to FDA safety officer David Graham, who also said "the FDA
cannot be trusted to protect the public or reform itself."
After the abrupt withdrawl of the arthritis painkiller Vioxx for harmful
heart effects, the nation needs assurance that the medications they are taking
are safe. The drug safety board was formally established last month to make sure
dangerous drugs are taken off the market. One of the goals of the new board is
to make the safety review process more independent of the new drug review
process. But when 11 of the 15 voting positions on the board are filled by
senior managers of the FDA's Center for Drug Evaluation and Research, the same
office responsible for approving new drugs, that goal is clearly being ignored.
Along with Graham, Senator Charles Grassley is also criticizing the drug
safety board, "what we have here is nothing more than the status quo." Grassley
and Senator Christopher Dodd have introduced a bill that would give drug safety
oversight responsibility to a board much more independent from the FDA.
GET THE FACTS ON SOCIAL SECURITY
The wealthiest Americans pay less in Social Security taxes, as a
portion of their income, than workers at the bottom of the economic ladder. No
other payroll tax allows workers to stop paying taxes altogether once they hit a
certain earnings level. Medicare payroll taxes, for example, continue regardless
of income and without increased benefits.
According to an analysis by The New York Times, under the Bush tax
cuts, the 400 taxpayers with the highest incomes-a minimum of $87 million in
2000-now pay income, Medicare and Social Security taxes amounting to virtually
the same percentage of their income as people making $50,000 to $75,000.
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Come to Washington, DC September 7-9 and Lobby Congress at the Alliance
for Retired Americans Legislative Conference - Register at
www.retiredamericans.org/legconf or call Joni Jones at
1-888-373-6497
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