There are two Trusts. One is the pensions trust which is still in pretty good shape. Currently there is about three trillion in it, but we need an adjustment in the contribution rate to adjust for demographic changes. The Trustees called for a one cent on the dollar adjustment for employers and employees several years ago, but congress has been so dysfunctional that they have failed to act. By now it is probably closer to two cents.
The disability trust is a separate trust and it is in some trouble and that program needs some significant reform.
My impression re corporate pension plans is essentially what yours is, namely that some of them are considerably underfunded, as are many of the State pension plans. Most States have already taken action toward putting their public employees pension funds back on a sound basis but it will take many years to bring their unfunded liabilities down. My impression is that many of these plans made assumptions about returns that are unrealistically high and will have to be adjusted..
Wall Street would obviously love to get its hands on trillions of social security dollars. So for years they've been spreading rumors that it is a Ponzi scheme and have done anything else they could to try and wreck the system. They have had some considerable success affecting public opinion. The truth is, however, that despite these unrelenting attacks the system remains quite sound. And clearly the reason that S.S. has been able to fend off these relentless attacks is the great popularity of Social Security. It is the single most popular government program! Politicians play both sides. They do what they can to undermine the system to placate capital and their wealthy donors, but no politician is ever going to be elected on a platform of privatizing Social Security, and they know that. Although surprisingly, some of our representatives and Senators don't seem to know how the System is designed and why it works as it does. That's always baffled me, because you would think that if anyone understood Social Security, it would be Federal politicians.
The fundamental idea behind the U.S. social security system, the pension part, is that those who leave the system before their actuarial death age leave their excess contributions in the Trust. These excess contributions are used to supplement the pensions of those who live beyond their actuarial death age; thus there is shared risk. The great advantage of shared risk is that for a given payout upon retirement one has to contribute significantly less during one's working years. This is the only way that a pension program can work for low paid workers who have virtually no disposable income.Labor simply can not afford to contribute per month what a private, individual retirement plan would require. Individual pension plans, such as 401K and 403B, lack risk sharing, therefore much more per month must be contributed.
The trade off is this: If you die before your private, individual plan funds are exhausted, the residue remains in your estate. With Social Security, on the other hand, if you die before your actuarial death age, or for any other reason leave the system, your contributions remain in the system, you can not pass unused contribution to your heirs. You trade this potential loss of a residual for having to contribute much less for a given monthly payout. It's pretty damn good trade off if you ask me. Social Security is a shared risk, defined benefit plan. In my opinion that is vastly superior, as a pension plan, to any individual, risky, private, defined contribution plan you might contrive.
Of course , the capital class has the best of both worlds. Shared risk S.S. as a back-up or supplement, and a individual private, State, or corporate funded plan on top of Social Security.
