Common Cents

Open Parachute Agreement

Ralph Murphy

(9/1) Early in the fiscal year lightly regarded federal legislation known as Setting Every Community Up For Retirement Act of 2019 (SECUREAct) was signed into law by the President. It was a confusing statement with "give and take" provisions linked to mandatory retirement or defined contribution plans known as individual retirement accounts {IRAs) or 401k plans that redirect wages to private sector banks or insurance groups similar to a refundable federal tax. The redirects have proven fund levels higher than the national budget itself and the provision with broad program reviews are now being contended in backroom deals worthy of increased exposure.

Retirement plans in both the public and private sector are biblically historic, but to recent developments their merger in conflicting interests have proven too costly especially since the introduction of a Early Retirement Income Security Act (ERISA) of 1974. It broadly offered retirement income guarantees to the private sector pensioners in the event their corporations went bankrupt during an era of increased foreclosures or mergers. Linked to a Pension Benefit Guarantee Corporation ( PGBC) that filled tactical plan gaps or losses with federal funds in a corporate identity logo when the labor and corporate interests became increasingly institutionally communal. The arrangement was subject to official and private sector abuse and subsequent legislation to patch or repair it made it far worse.

Prior to the 1974 Nixon administration ERISA control measures the pension plans, conventional understanding as a retirement income or lump sum payment made after work years, were varied pool interests with the government role minimal in monitoring the often sizable investor resource. Prone then to debt instruments as corporate bond investments or simple savings plans the pension requirements of the employees varied, but the returns were fairly predictable.

There were a series of problems with that system however, all of them realized during the late 1960 s and into the early 1970 s reform efforts. The businesses that offered the plans could foreclose or merge without new owners willing to roll over the benefit packages of the previous owner and the pensioner simply lost. Another more pressing aspect of that arrangement linked the pensioners to the investment pool who could claim it was lost to faulty market forces with limited recourse to recover their attached holdings.

When the investment pool was linked to bonds or slower growth interest rate tied securities and businesses solvent, the pension plans were still viable. The real problems or claims to theft or losses seemed a later trend where the corporate investors would link to the (rigged or pegged) equity or stick exchanges. These obviously were subject to vast volatility and the owner could claim losses to market forces with no further obligation to the contributor worker. The feds stepped in with ERISA at that point and guaranteed asset protection in the changing environment but with enormous discretion to policy officials and cost overruns leading to early impetus for the IRAs or what was billed as predictable withdrawals and retirement lump sum payouts on retirement.

The Revenue Act of 1978 firmly established the wage withdrawal opportunity from employee paychecks at varied levels of obligation. There were a variety of plans some taxed others not, but the employee could count on the returns at a scheduled point in time after retirement. The money was controlled, a savings account would offer more but couldn’t be bargained at that time, but again was off limits until late in life. It was federal meddling and corporate control but a large and predictable fund source was established that couldn’t be accessed nor contended by individual contributors. That drew real concerns and the 2006 passage of the Pension Protection Act (PPA) that further established IRAs or 401 k plans as mandatory withdrawals of varied public and private wage earners. There are varied estimates but the program quickly went from $ 3 trillion to $4.7 trillion in polled investor earnings.

The $1.7 trillion overcharge or fund redirect is a legacy of that bill and repeated efforts to repeal it have proven muted or futile as the money has been poorly tracked in an era of other abuse to the corporate board and institutionally the markets. By 2008 the pension funds tied to the collapsing equity or stock markets were billed as key components of the alleged crisis. PGBC bailouts linked to ERISA had proven routine and costly and further market consolidation measures to include a merger role of the common stock markets both to New York and the affiliated Indices abroad had afforded a single corporate culture attempt by vastly dissimilar organizations.

What had emerged was an international identity to benefit packages that especially included the pension plans in an apparent attempt at guaranteed earnings that favored the less advantaged as the package guarantees were among best case scenarios of the larger enterprise. Foreign businesses and players were immediately benefited. United Kingdom practically celebrated the event as a national holiday calling it "A day" and requiring their civil and even private listed beneficiaries to cease-wage contributions to pension plans as New York would then pay it. There were regulatory facility and enforcement lifts as well. There seemed a whole genre of control there that almost retired on that bill series. Prior to the mergers foreign programs were community oriented or drew from predictable domestic resources known as sovereign wealth funds like oil, gas, tolls, or agricultural products that filled a treasury type fund.

If linked to common stock enterprises, those with corporation, company, Ltd to England or the Commonwealth, Ag. to Germany and others it appears the management, public or private officials and their employees could receive a predictable very lightly scrutinized pension package. Abuse was rife however, with ghost employees, early retirement or even payouts to current employees tolerated or overlooked in the theft environment. Again it was a world program. American concern included the cartel like restrictions limiting competition and quelling growth prospects as the Chicago linked NASDAQ group held a grip on pricing and output that affected earnings and briefly stifled growth. That system wasn’t going to long survive and it fell victim to the methodical redress still playing out of federal legal authorities who do seem working in the background to restore the competitive market system usurped by combine legislation like Dodd Frank Reform Act of 2010 that provided fantasy spending in mass consolidation before it was repealed in 2018 that restored the money to investors.

That brings the federal government back to its original impetus for action in the spirit of ERISA and it’s best course now is probably not to meddle beyond conventional theft or damage control laws countering that type of hostile intervention. Employee/ employer relations are routinely hostile but for a predictable benefit package it does seem a standardized contract linked to the health of the concern could be worked out. In the the event of business failure or closure the invested pension fund would be returned to the contributor as any creditor in that sense and not simply " written off" as was often the case before PGBC bailouts.

The PPA of 2006 made the 401 k type of withdrawal mandatory, the issue since then is the national budget itself has been revealed as gross overcharge to auditing reports post Dodd Frank repeal. The withholding if reports are accurate at 1.7 trillion dwarfs the other input measures of the federal tax withdrawals. Legislators are asking $1.3 trillion pending review in next years whole budget. They were guaranteed the parallel IRA money but the SECURE Act is not clear to reward as it provides some access to the funds for student loans or other programs but raises the access age in others.The bill is probably trying to address the issue at that level rather than further cost measures or restrictions to employees. The Treasury Department was also affected tasked with administering it..

Benefits are something of a luxury to most private or public sector endeavors. If proposed, however, in standardized contractual terms the government authorities can become an important assurance that theft or damage is punished. For that authority to assume an actual participatory role in an environment of very slow, "stay the course we have the resources to mask mistakes" , policy mishaps do prove often fatally costly. If that PPA of 2006 could just be dropped and routine legal review to contractual commitments regarding pensioners as investor rights enforced no further action would likely prove necessary. The forced withdrawals of the defined contribution plans, while often amounting to a costly loan are deceptive in tax obligations, public meddling in private accounts, poorly tracked and too costly to continue in current legislative form.