The $400 billion safeguard
Bring up the issue of pension funds and most Americans usually think in terms of their own retirement plans. But pension funds - not just one's own but all private pension funds considered in the aggregate - constitute a substantial amount of investment dollars in the US. All told, private pension plans make up some 20 percent of all retirement payments and represent over $400 billion in assets. So when Congress considers new ways of protecting those assets - as it is currently doing - it is only prudent to take careful notice.
The hearings that have been underway this week before a subcommittee of the House Ways and Means Committee grow out of efforts of prior administrations to gain - and maintain - control over the huge Central States Pension Fund, which just happens to be a fund of the powerful Teamsters Union. The fund itself has over $3.3 billion in assets and has been charged over the years with corruption. In 1977 the federal government forced the resignation of the trustees of the fund and the appointment of a new, outside, independent asset manager, Equitable Life Assurance Society of the US. That outside management, as well as the 1977 Labor Department agreement monitoring the fund, expires Oct. 3.
The current situation points up the need for tough new legislation - as proposed by the Reagan administration - to protect pension fund assets. The Labor Department has the authority to seek consent degrees regarding standards for outside asset managers, as it has been doing regarding the Central States fund. But what happens if, as in this case, fund officials balk and refuse to sign the agreement and insist upon taking back control of assets? Under the administration bill, such recalcitrance would be handled in two ways:
* The Internal Revenue Service would be allowed to tax pension plan trustees as much as $40,000 a month if they refuse to honor prior promises to use independent asset managers (such as Equitable.)
* The Labor Department would be empowered to obtain a court injunction enforcing such promises.
Such a proposal is hardly draconian. The legislation should be quickly enacted and signed into law. Given the fact that pension funds have grown so large - and represent the future income of millions of retired persons - it is essential that the federal government have strict laws to ensure impeccably honest management of such funds. And a starting point for all funds might logically include some independent trustees and, wherever possible, independent asset management.