Some years ago my company at that time Widder Corporation had a functioning pension as well as profit sharing plan for its employees. This was long before government incursion into the pension business. Some year later our government made the dubious determination that corporations were with these pensions attempting to cheat their employees. They went about correcting these issues by instituting many draconian regulations and rules. Then they said that some of these plans were undefined and created PBGC The Pension Benefits Guarantee Corporation, which they said would guarantee all private pension plans. Then in 1974 they instituted ERISA one of the dumbest articles of legislation that forced ESOP's Employee Stock Ownership Programs to exclusively invest their funds either in their own company stocks or with an insurance carrier.

Widder's plan had invested all their funds in mortgages of the corporate offices and production plants. These paid our employees a healthy 12% on the investment while at the same time allowing the corporation to pay mortgage fees to its employees with 100% security because the outstanding mortgages were less than 50% of the value of the properties. Management, employee participants, that was everyone who worked for the corporation were more than happy with a average return 5% higher than the prime rate at that time.

With the enactment of ERISA however we were advised that this was not a prudent investment and under the new law was no longer allowed. We were forced to purchase an insurance instrument and invest the residual pensions with an insurance carrier that paid us 4.5% on the retained balance. This among other things resulted in a condition of the corporation to increase payment to the fund in order to maintain the actuarially required account balances. The corporation lost 7.5% interest, and was unable to deduct the 12% paid in mortgage from taxes. The employees lost a guaranteed growth of 12% reduced to 4.5%. The government realized a net gain it taxation of the corporation of 7.5% with the additional possibility of further taxes on the earnings of the insurance carrier. The banks then realized a new mortgage that cost the corporation 8.9% a completely new cost. The government then was able to tax the carrier (bank) and realize yet another income that had previously not existed.

In light of the aforementioned information I thought I would tell you what the Sob's you elected to congress have just done. The House of Representatives for the third year in a row have given themselves a pay increase of $ 4,000. Well the previous two-year they only gave themselves $ 3,500. each year. To place that in perspective the three-year increase they have voted themselves is just about equivalent to my annual Social Security payment. They naturally automatically got an increase of pension benefits, which they all get after one term in office. This benefit, which for most multi-term congressmen is in the millions of dollars in residual value, is now placed at $ 158,100. per year. My Social Security is $ 12,192. or roughly one tenth of what my congressman gets. When I die my wife gets the huge amount of $ 350. not quite enough for a coffin. The congressman's family gets the entire residual remainder in his plan. Some payouts have exceeded 5 million dollars. Only one congressman voted against this legislation Jim Matheson (D. UT) lest you worry about other politicians and judges; Supreme Court judges get $ 203,000. Associate Judges get $ 194,300, and House and senate leaders get $175,700.

Now that we have all that under our belts we can examine the state of the government insurance agency PBGC The Pension Guarantee Benefits Corporation. Seems that they are somewhat under-funded they have lost mightily in the 90's market droop. They will not allow private companies to invest in the stock market but they do themselves. The government in fact has estimated the under funding of PBGC is in the neighborhood of about $ 70 billions. They have a potential total obligation short fall of $ 350 billions. So the total shortfall is $ 270 billions, or just about the size of the 90's bank bailout. If we examine only two companies American Airlines and Delta Airlines we see a potential loss of over $ 15 billions, or in other terms just under _ of the PBGC total present asset.

The only thing to be added to this catastrophe is the impact that may well be anticipated on the markets because of all the early retirements being taken by employees of large and failing corporations. With Deltas announcement of 7000 job cuts and many others of like magnitude the impact on the capital markets as well as PBGC might well be more than either can take.

A. H. Krieg is the author of; Our Political Systems available everywhere.

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