Marathon Pundit: Report from the bloggers' conference call on EFCA and under-funded pensions

Imagine a two year-old manure pile. On the surface it might appear harmless--there could be flowers growing on top it.

But start digging--and you quickly realize it's a manure pile. Keep digging some more, and you find something on the bottom that is odious--in fact you're not even sure if it's manure.

But whatever it is, it's foul.

Which brings us to the two year-old Employee Free Choice Act, which anyone who can tell manure from marigolds knows should really be called the Employee FORCED Choice Act.

If enacted, EFCA will replace secret ballot elections with free-to-peek petition drives, known as card check. The absence of secret ballot elections will also give union organizers the freedom to intimidate workers.

EFCA would also put in place a rigid arbitration system that would not only be a business killer, it will be of course a jobs inhibitor.

The fear of forced arbitration will mean fewer business start-ups.

Now we're getting deep into the manure pile. Based on what I heard this morning, EFCA appears, among other things, to be a stealth union pension bailout plan. New union members means more "fresh fish" who will serve as walking ATMs for earlier entrants into these plans.

Many union pensions are underfunded. And the most recent data on just how underfunded they are is from before last fall's stock market crash.

This morning's bloggers' conference call had two distinguished speakers, Diana Furchtgott-Roth, Senior Fellow and Director, Center for Employment Policy for the Hudson Institute, and Brett McMahon, Vice President of Miller & Long, the nation's largest construction subcontractor.

Furchtgott-Roth, who wrote about the problem last week in RealClearMarkets, spoke first.

"Right now, collectively bargained pensions are in serious trouble," Furchtgott-Roth warned. "Many of them are funded at levels of 65 to 70 percent. In 2005 non-bargained pensions had about 80 percent of the money to needed to pay liabilities."

Only 61 percent of the collectively bargained pensions were 80 percent funded, she added.

Furchgott-Roth referred to the mandatory forced-choice arbitration part of EFCA as "a fix" to this pension problem.

The specific union pension plans that are in trouble are known as multi-employer pension plans. If other firms go broke, the new firms aren't just paying for their workers, but for the former employees of since-shuttered companies.

And of course, companies do go under.

Furchtgott-Roth says this type of funding is known as "Last man standing." She also called it "a massive Ponzi plan."

FORCED choice. FORCED arbitration. FORCED bad pension plans.

Single-payer plans have their own problems, but we'll leave that topic alone today, since it doesn't involve EFCA.

McMahon took his turn, and added some detail on multi-employer pension plans. "By law," he explained,"50 percent of the board and the decision making authority of the plan and its administration is handled by union representatives." He added, "if you talk to actual people involved in these plans, they will tell you they dominate them more than that."

Reminding participants that the under-funding crisis predates the September 22 financial crash--"these problems are systemic."

Especially in the construction industry, many multi-employer pension plans are in "the red zone," 65 percent funded or less. That label comes from the Pension Protection Act.

When funds end up in the red zone, McMahon explained, they have to act. Fund managers can bring in more cash--which new union members would bring. Or they can cut pension benefits for younger payees. Or the fund goes into receivership--and pensioners end up with a maximum annual payout of $12,780.

How do you live on that?

Another problem: It's almost impossible for a firm--besides declaring bankruptcy, closing its doors, or paying a steep fine--to leave a multi-employer pension plan.

For instance, UPS paid $6 billion to leave a multi-emplyoyer plan in 2007.

McMahon went on to say that YRC Trucking is seeking $1 billion in bailout funds from the federal government, because "about half of YRC's payments to the fund cover employees who never worked for the company."

Here is the nastiest part: There is no law preventing a federally appointed arbitrator "from sticking a company and its employees into these underfunded (pension) plans. He added, "It's virtually impossible to find a plan that is fully funded at this time."

Forced arbitration is worse than I thought.

The figures McMahon is working from are from when the Dow-Jones Industrial Average was 13,000. This afternoon the Dow closed at 8,422.

Do rank-and-file union members know about this? For the most part they don't.

If EFCA passes, these pension plans might be fine.

For a little while.

But eventually "other people's money" runs out, and companies that don't have $6 billion to leave awful pension plans will have no choice but to board up their windows and call it a day.

The Employee Free Choice Act is a pile of manure.

Related posts:

George McGovern: "The ‘Free Choice’ Act Is Anything But"
Report from the bloggers' conference call about Employee FORCED Choice binding arbitration
Report from the bloggers' teleconference about card check
Former union organizer talks about card check
Nonsense from a South Dakota AFL-CIO official about card check
Minority business groups coming out against card check
Sen. Mitch McConnell on card check
Card check update: "A mortal threat to American freedom"
Blagojevich and union "card check"
Employee "free choice" may drive economic uncertainty
Dems' secret ballot hypocrisy

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