March 27, 2009

SEIU's pension losses

With its pension fund for private-sector hospital workers plummeting by $3 billion, the 1199 Service Employees International Union (SEIU) is considering reopening its collective bargaining agreement to reduce pension benefits.

In contrast, SEIU workers at public-sector hospitals are sheltered from stock market gyrations, because they are guaranteed fixed pension benefits, which means taxpayers must make up investment losses.

As Crain's New York Business reports, the SEIU board took steps to protect the remaining $6 billion in fund assets .

"The unprecedented downturn across all sectors of our economy has adversely affected the funding status of all pension funds," said a joint statement from the League of Voluntary Hospitals and Homes and the 1199 SEIU Health Care Employees Pension Fund, which covers more than 145,000 retirees and members who work in hospitals and nursing homes.

The league and 1199 SEIU have agreed to collaborate on ways to nurse the pension to health. A plan must be submitted by the fall, and in an unusual step, the parties may open up and modify their current collective bargaining agreement. That decision will probably be made in a few weeks, noted Bruce McIver, the league's president.

Since stock markets often decline during recessions, [defined benefit] plans require governments to spend more money on pensions when unemployment is up and revenues are down--exactly when they can least afford it. This pattern has particularly dire implications for New York, which is much more dependent on revenues from the securities industry than most other states. It makes it even harder for New York to weather economic downturns without raising its already high taxes, which in turn depresses the state's economy and harms its business climate.

Posted by Lise Bang-Jensen

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