The shortfall in retirement funds for American families is about $4 trillion.  Much of that gap is attributable to the demise of defined benefit pensions. Some government plans may help ease the shortfall, but they carry dangers of their own.

Few employees are active in a defined benefit pension plan, which means that, for a retiree, it will deliver a planned amount in each month’s pension check. Four times as many are active in a defined contribution pension plan where their employer’s contributions accumulate and earn interest. When interest rates are scant, as they have been since 2010, the check from defined contribution plan can be miserly. Fewer than half of private sector workers have access to workplace pension plans, so a defined benefit or defined contribution plan is far better than none at all.

Recently, the Bipartisan Budget Act of 2015 increased the premiums that employers must pay to the Pension Benefit Guarantee Corporation (PBGC) for insuring their pension plans. The higher premiums, low interest rates, oppressive regulations and tepid economic conditions helped push employers to either freeze pensions in place or close them out. The financial difficulty of maintaining pension plans explains why plans such as 401(k)s and IRAs are more typical of the options available to employees.

Relatively high permitted contributions plus employer contributions and the tax advantages of 401(k)s and IRAs make them popular with higher income employees, even though there have been many complaints about IRA and 401(k) fees. The employers of many low income workers do not offer a 401(k) so they are on their own to make provisions for retirement.

Since few workers will be able to survive on Social Security Retirement benefits, they will need plans to supplement Social Security. The federal government and a few states have launched retirement supplement plans that may help them, somewhat.

The federal myRA plan is available to those earning less than $113,000 ($193,000 for couples). They can contribute up to $5,500 per year, but when the account balance reaches $15,000, the funds must be transferred into an IRA. The myRA pays a 1.5% yield and holds the account’s fund in a government guaranteed pool of funds. Of course, the funds are just cheap borrowed money and they are quickly spent by the government – just as it did with Social Security’s notional “trust fund.” The accumulation cap of $15,000 is preposterous for a retirement fund, but the mandatory migration to an IRA is a wise requirement because there is a chance the worker can earn far better than the 1.5% myRA yield.

A score of states are planning to institute pension plans with similar features. These would be available to workers whose employers do not currently offer a pension benefit. The plans typically encourage participation through automatic enrolment and an automatic payroll deduction of about 3%, although workers can opt out. Accumulated money is typically managed by a professional fund manager, e.g. CalPERS in the case of California. Some plans, such as in Illinois, insert the State Treasurer into the mix.

The danger in allowing government near a pension plan has been proven. Governments are incapable of keeping their hands out of other people’s money. They intentionally underfund pensions that they accepted the obligation to pay (e.g. Illinois, Kentucky, Connecticut, and Detroit). They replace “trust fund” money with a paper IOU (e.g. the federal government owes $2.5 trillion to Social Security) and they quickly spend the money they seize, obligating taxpayers to repay both underfunded and misdirected pension funds.

Much of the government mismanagement in pension funds flows from the unholy partnership between politicians who want votes and government employee unions who sell votes for pension increases. Since pensions are a long term venture, by the time pension debacles are clear to the public, the politician and union boss architects are often unreachable (or dead).   Pension difficulties will continue until annual audits by competent actuaries reveal the evidence for no-bail prosecutions with harsh sentencing and aggressive restitution.

Retirement savings plans work well when we make regular contributions into a portfolio of diversified investments. It requires no magic, just discipline. If we trust the management of our retirement funds to government or to unscrupulous advisers, we will face empty pension funds when we are most vulnerable.

Alan Daley is a retired businessman who writes for The American Consumer Institute Center for Citizen Research