The Broken Promise

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Another group that had no pension worries would turn out to be the biggest winners under the bill. Congress wrote the law so broadly that moneymen could dip into pension funds and remove cash set aside for workers' retirement. During the 1980s, that's exactly what a cast of corporate raiders, speculators, Wall Street buyout firms and company executives did with a vengeance. Throughout the decade, they walked away with an estimated $21 billion earmarked for workers' retirement pay. The raiders insisted that they took only excess assets that weren't needed. Among the pension buccaneers: Meshulam Riklis, a once flamboyant Beverly Hills, Calif., takeover artist who skimmed millions from several companies, including the McCrory Corp., the onetime retail fixture of Middle America that is now gone; and the late Victor Posner, the Miami Beach corporate raider who siphoned millions of dollars from more than half a dozen different companies, including Fischbach Corp., a New York electrical contractor that he drove to the edge of extinction. Those two raiders alone raked off about $100 million in workers' retirement dollars--all perfectly legal, thanks to Congress. By the time all the billions of dollars were gone and the public outcry had grown too loud to ignore, Congress in 1990 belatedly rewrote the rules and imposed an excise tax on money removed from pension funds. The raids slowed to a trickle.

During those same years, the PBGC, which insures private pension plans, published an annual list of the 50 most underfunded of those plans. In shining a spotlight on those that had fallen behind in their contributions, the agency hoped to prod companies to keep current. Corporations hated the list. They maintained that the PBGC's methodology did not reflect the true financial condition of their pension plans. After all, as long as the stock market went up--and never down or sideways--the pension plans would be adequately funded. Congress liked that reasoning and, in 1994, reacting to corporate claims that the underfunded list caused needless anxiety among employees, voted to keep the data secret. When the PBGC killed its Top 50 list, David M. Strauss, then the agency's executive director, explained, "With full implementation of [the 1994 pension law], we now have better tools in place." PBGC officials were so bullish about those "better tools," including provisions to levy higher fees on companies ignoring obligations to their employees, they predicted that underfunded pension plans would be a thing of the past. As a story in the Los Angeles Times put it, "PBGC officials said the act nearly guarantees that large underfunded plans will strengthen and the chronic deficits suffered by the pension guaranty organization will be eliminated within 10 years."

Not even close; instead they accelerated at warp speed. In 1994 the deficit in PBGC plans was $31 billion. Today it's $450 billion, or $600 billion if one includes multiemployer plans of unionized employees who work for more than one business in such industries as construction.