Bush Seeks to Cut Boomers' Pension Rights

By: Marie Cocco

Bush to Baby Boomers: You're on your own.

The President did not say this, not in so many words. He said it in so many numbers. President George W. Bush's budget is a road map for a pension system with stripped-down security for future retirees.

The budget would speed the shift of pension responsibility from employers to employees. It sets up the likelihood that fewer small and medium-sized businesses would offer pensions at all. It anticipates replacing guaranteed Social Security benefits with a hybrid in which the luck of the stock-market draw would have more to do with the comfort of life in old age than a lifetime of honest, if modestly paid, work.

"What the Bush administration is proposing for the private retirement system is to basically destroy it", said Norman Stein, a tax specialist and visiting professor at the University of Maine School of Law. "He's certainly not interested in preserving and expanding what we have now."

The biggest wrecking ball? Bush's proposal for two new tax-free savings accounts, geared to families who can save as much as $45,000 a year. Creation of the accounts, in which all investment gains would be forever free of tax, would most likely cause many small and medium-sized business owners to drop pension-savings plans for employees, retirement experts say. If owners could tuck away that much money for themselves without the hassle of regulations and paperwork for employees, why would they take up the workers' burden? The savings plans are seen as such a pension threat that even some House Republicans, usually the President's handmaidens, are balking.

Of course, Bush has a plan on troublesome pension regulations, too. He would ease current rules on 401(k) plans that are meant to keep highly paid executives and managers from fattening their own tax-favored accounts without offering significant benefits to workers. The loosening would allow top executives to pump up their own savings without being bound as tightly by government requirements that they offer broad incentives to the rank-and-file.

As for those lucky enough to work for a company that still offers an old-fashioned pension - the kind that guarantees income every month, instead of a guaranteed chance to take a chance on Wall Street - Bush has more ideas. The administration wants to make it easier for companies to replace traditional pension plans, in which a worker earns greater future benefits in the last few years of work, with so-called cash-balance plans. These change the calculation to gear benefits to income earned over a worker's entire tenure.

The shift reduces employer costs. It does this by reducing benefits for workers - particularly those in their 40's and 50's who were promised traditional benefits but now are told to settle for less. Many have brought age-discrimination suits, but Bush has proposed rules to stymie them. His plan hit a temporary snag when key Senators threatened to block Treasury Secretary John Snow's confirmation over the issue. Snow agreed to take a second look.

"This is part of the companies' saying: 'We'll shift more risk and responsibility to the individual.'", said David Certner, director of federal affairs for the AARP. "You sort of have the companies and the government saying the same thing at the same time."

That is, you want to retire? Do-it-yourself.

The White House still says Bush wants to change Social Security from a guaranteed benefit to a system in which workers would put some of their payroll taxes into private accounts, on the assumption that this would both "save" Social Security and allow everyone to retire to Boca. Trouble is, he's spent the budget surplus that more honest proponents of Social Security privatization had assumed would finance the transition to a new system.

Bush's own Social Security commission, stacked with advocates of privatization, anticipated using the now-depleted budget surplus - plus a massive infusion of additional general budget revenues - to shore up Social Security, even after adding private accounts. They never did say where this money would come from. Neither has Bush.

There are seven years to go before the biggest generation ever to retire starts cleaning out its cubicles. Bush wants to take employers and government off the pension hook. Blessed with luck in his own life, the President's plan is to wish us the same.