US - Union members in the US have been warned to keep a vigilant eye on their retirement funds in a new paper released by non-partisan policy research organisation The Hudson Institute.
Author Diana Furchtgott-Roth said in the paper: "The financial instability of union plans could be due to the longevity of collective bargained pensions. In many cases union contracts are not modified annually. As a result the problem could arise from an inability to alter employer contributions from year to year to help correct for poor market performance."
Calculations by the Institute and the US Department of Labor concluded the average annual payment to correct fund deficiency in collective bargained pensions would be US$2.94bn, compared to $2.27bn for non-union funds.
The paper also pointed the finger towards union politics with leaders described as being possibly negligent or corrupt and unwilling to fight for benefits.
David John, senior research fellow at The Heritage Foundation, said he was much less concerned about the funding differences between union officials' pension plans and those of their members than he was by the relative under funding levels when union members' plans were compared with other non-union DB pension plans.
He said: "It appears that government disclosures are filed late, and that union members don't receive full disclosure of their plans' financial status. This report raises more questions than it answers.
"Unions should respond by disclosing more information about their funding status and the reasons that [the fund] is at those levels. The members deserve to know the truth about the health of their pensions and the Department of Labor should monitor these pension plans more closely. Unfortunately, unions have tended to react defensively, and treat this type of report as an attack on the union itself."
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