Federal agencies have been warned for more than a decade against promising to reimburse contractors’ pension and retiree health costs without adequately monitoring plans or how the money is invested.
NASA’s inspector general called contractor health and pension plans a high-risk area in 2000, and told the agency not to “blindly accept the risk.” NASA said it agreed, but was required to use Defense Department staff members to vet contractors’ retirement plans, and the Pentagon did not have enough specialists.
Like the government, ALPA failed to adequately monitor pension funds and require that they be invested in low-risk Treasury or AAA corporate bonds. But those instruments offer a lower yield, and would have required higher contributions from the companies to maintain full funding. It was easier to assume that the bull market would continue, underestimating the risk to retirees and taxpayers.
