Tony DiTommaso – 10/19/06

This page was last updated on October 19, 2006.

Blame mess on Democrats; Tony DiTommaso; Beaver County Times; October 19, 2006.

In a previous letter, Mr. DiTommaso told us increasing the minimum wage would increase business profits.

Below is a detailed critique of the subject letter.

“Sunday’s article about the state of pension plans, unfortunately, didn’t ask the most important questions: How did it get this bad and did the government act in our interest?

“First, pensions are funded by the profits of corporations. Pension funds are set aside by the corporation into a separate account and invested by the fiduciaries of the plan. They invest from 60 percent to 80 percent of the funds into stocks and 20 percent to 40 percent in various government and corporate bonds.”

[RWC] Contrary to Mr. DiTommaso’s assertion, pension plans are NOT “funded by the profits of corporations.” Just as employee wages, contributions to pension plans are tax-deductible expenses. Whether or not a business is profitable, businesses with pension plans must make minimum contributions governed by the IRS tax code.

“They invest the funds this way because over time this has proven to be a successful formula to create wealth.

“At the end of each year, an audit is done by an actuary, to determine if the pension fund has enough assets to pay current and future retirees. If it doesn’t, then it must make up the difference with a contribution to make the plan sound.

“Ok, so how did it go so badly? In 1982, the Dow Jones Industrial Average was trading at 800. By the late ‘80s, the index was at 3,200, which means the assets invested in your pension plan quadrupled.

“Therefore, pension funds were overfunded and flush with money. Because this doesn’t show up as a corporate asset on a company’s balance sheet, they were hidden assets.

“Well, they didn’t stay hidden for long. Merger mania took over, not because it made good business sense but because they could steal the excess funds in our pension plans which were worth billions.”

[RWC] “Steal the excess funds?” I hate to break the news to Mr. DiTommaso, but excess funds in a pension plan belong to the company shareholders, not the pensioners. Just as when a plan is underfunded, an overfunded plan demonstrates fiscal irresponsibility by company management.

“The same raid happened in the ‘90s, but they added a new twist of dumping pensions of unprofitable companies onto the Pension Benefit Guarantee Corp. and busting unions.

“What did Slick Willie and the Democrats in Congress do to protect the little guy? Nothing, just ask any employee of LTV or US Airways.”

[RWC] Why do some people insist on name-calling?

Heaven knows there’s a lot we can blame on Bill Clinton and Democrats in general, but what did they have to do with the problems of LTV and US Airways?