Pension System Reform Seen

The nation’s pension system--suffering from growing financial problems and other woes--may soon be the target for much-needed reform efforts. And improving disclosure to workers may be at the top of the reform agenda.

With new teams heading the Department of Labor and the Pension Benefit Guaranty Corp., Clinton Administration officials say they are planning a concerted effort at enacting legislation to overhaul the pension system. A comprehensive reform bill may be sent to Congress by September, officials say.

Pension experts say legislation will attempt to tackle a number of ills. Among them:

* Too few people are covered by pensions--and too many of those uncovered individuals are women.

* Too many companies have failed to set aside enough to pay pension obligations.

* Pensions tend to favor longtime employees and upper managers, so those who switch jobs--and those who don’t get promoted--often find themselves with insufficient savings at retirement.

* Workers are often given little say, and precious little information, about how their pension money is being invested--a pivotal issue in determining how much money each worker will have, experts say. Twenty-year-old pension rules leave millions of Americans in the dark about the vital signs of their plans.

Meanwhile, many firms are doing away with traditional plans in favor of plans that force their workers to do all their retirement saving themselves. While these plans--which include the ever-popular 401(k) program--allow workers to take their pensions with them when they switch jobs, poorly paid workers simply can’t afford to contribute, says Karen Ferguson, director of the Pension Rights Center in Washington.

But while specifics of proposed legislation are yet to be worked out, passage of comprehensive reform may be difficult. While it is easy to enumerate the system’s ills, finding a solution is not easy. There are too many different ailments, each one affecting a different segment of the population. As a result, it is hard to win widespread support for any one measure.

Thus, says one influential accountants group, the Administration may have its best shot at winning reform if it concentrates on the one area of reform that most people can agree on: disclosure.

All employees should know whether their pensions are fully funded and have enough money to pay what has been promised. Workers should know whether the plan’s investments are sound. And they should know whether or not the government will step in to pay benefits if the company cannot, says Jake Netterville, chairman of the American Institute of Certified Public Accountants.

Oddly enough, companies are required to disclose pension assets, income and expenses. But they aren’t required to disclose liabilities--what is promised to beneficiaries--says David Walker, chairman of the AICPA’s employee benefit plan committee.

Plans also do not have to tell workers whether plan benefits are insured by the Pension Benefit Guarantee Corp. Only certain types of plans are insured by this government agency, and then only to certain limits.

Additionally, if you are covered by a union-sponsored plan, you may not even have the right to find out how much pension benefit you have earned, Walker notes.

Normally, this is one vital bit of data that every potential retiree is given. But a glitch in the pension law exempts “multi-employer” plans.

And even when workers do get information, sometimes the information is too old to be helpful. Pension plan administrators can take up to 19 months to tell beneficiaries about significant changes to their pension plans, Walker adds.

Why can they take so much time? Labor department officials say that in the early 1970s, when these rules were drafted, no one anticipated the ease of transmitting information in the computer age.

Regardless, the accountants group says these are problems that are relatively simple to fix.

Regulators should require companies to revise their summary annual reports--the one document most companies are required to furnish annually--to clearly spell out assets and liabilities, as well as whether the plan is covered by the PBGC. And multi-employer plans should not be exempted.

When changes are made to the plan, workers should be notified on a timely basis.

Finally, the law permitting plan administrators to limit the scope of pension plan audits should be repealed, Walker says. It allows administrators to tell auditors not to look at certain investments, which in some cases nullifies the purpose of the audit.

Notably, nearly everyone involved in pension reform says these proposals have merit. They clearly will not solve many of the intractable problems of the system--such as chronic under-funding or lack of availability--but at least they would eliminate some unpleasant surprises.

Troubled Pensions

Current pension disclosure rules make it difficult to know whether your employer is going to have trouble paying benefits and whether those benefits are covered by the Pension Benefit Guaranty Corp., a government agency that pays pensions when companies cannot.

Here are the nation’s 10 most-troubled pension plans as of last November. Figures show the gap between what the company promised to pay and what assets it has available for payment.

Unfunded promises Company (in millions of dollars) General Motors $11,827 Chrysler Corp. $4,019 LTV Corp. $2,990 Bethlehem Steel $1,854 Westinghouse Electric $724 Navistar International $709 Uniroyal Goodrich Tire $554 Deere & Co. $428 American National Can $413 Trans World Airlines $394

Source: Pension Benefit Guaranty Corp.