On July 17, in New York and 50 other cities, one of America's biggest unions, the Service Employees International Union, will try to demonize prominent New York financier Henry Kravis, a founding partner of the private equity firm Kohlberg Kravis Roberts.
The SEIU already has attempted to besmirch Mr. Kravis on its Web site for paying too few taxes, even though it does not accuse him of illegal activity. It asserts that because of tax loopholes, Mr. Kravis's taxes are too low. It wants higher taxes for private equity partners, with the proceeds used for middle-class tax cuts and health care.
The pep rallies are another in a series of SEIU efforts to attack private equity firms. Apart from the silliness of making Mr. Kravis its target when its complaint really lies with Congress, the SEIU would do better to look in the mirror. In its own treatment of workers, especially worker pension plans, it falls short.
Among other activities, KKR buys companies and reorganizes them to make them profitable. It manages investments for pension funds of the SEIU, a union with an estimated 2 million members, many in low-wage jobs, such as office cleaning and nursing assistance.
SEIU local and national pension funds made up more than 30% of KKR's 2006 Fund, one of several investment funds in the firm's portfolio.
SEIU President Andy Stern is not above trying to use that business relationship as leverage to pressure KKR to embrace the SEIU's political goals, either by threatening to harm KKR's name, as with the July 17 rallies, or by controlling proxy votes in shareholder meetings.
The SEIU, which has pledged $85 million to Democratic campaigns this year, wants this pressure to lead to investment decisions by KKR that Mr. Stern asserts would benefit workers: reduced CEO compensation, higher rank-and-file wages, and more emphasis on environmentalism and politics, instead of profits.
Yet in 2006, the SEIU National Industry Pension Plan, a plan for the rank-and-file members, covering 100,787 workers, was 75% funded. That is, it had three-fourths of the money it needed to pay benefit obligations of workers and retirees.
In contrast, a separate fund for the union's own employees, numbering 1,305, participants was 91% funded. Even better, the pension fund for SEIU officers and employees, which had 6,595 members, was 103% funded.
Such disparity was not always the case. In 1996, the SEIU National Industry Pension Fund had close to 110% of the funds it would need to pay all promised pensions to its workers.
When the pensions of the rank-and-file are compared with those for SEIU officers and staff, neither poor market returns nor the weak economy explain the funding discrepancy. The three plans are merged into a single trust, and thus are managed in a similar manner. Poor performance should affect them all equally.
The major difference among the funds is that the decisions regarding contributions to the officers' funds are made by the trustees of the SEIU, instead of by several large employers pursuant to collective bargaining contracts.
The trustees alter contributions to the officers' fund from the SEIU locals so that it is actuarially sound. In contrast, they do not take sufficient care in negotiating adequate employer contributions for the rank-and-file plan, with the result that these plans are underfunded.
The success of the officers' funds shows the heads of the national organization know how to properly fund a pension plan if they so choose. There is no excuse for their inability to negotiate with employers to properly fund pensions.
The problem of poor funding occurs not only in the national SEIU pension plan. Thirteen local pension plans, whose beneficiaries are almost all rank-and-file members, were all less than 80% funded, and, of these, six were less than 65% funded. The Massachusetts Service Employees Pension Fund fell from nearly 110% to 70% funded in 10 years, and the SEIU 1199 Upstate Pension Fund fell from 115% to 75% since its inception in 1999.
Poor stock market performance could explain part of these failings, but Internal Revenue Service filings show that 10 of these funds received two-thirds less of their annual costs in employer contributions.
The SEIU trumpets its efforts to secure health and retirement benefits for service workers. Unfortunately, it is becoming clear that the SEIU is not truly securing these benefits. Workers covered by the union's national pension fund have their retirement incomes dependent on a fund whose adequacy has been falling from year to year.
For the SEIU to hold pep rallies to attack private equity funds, while allowing the pensions of their own rank-and-file members to perform worse than those of union officials, is sheer hypocrisy. On July 17, rather than taking back the economy, workers should insist that their pensions are actuarially sound. Who knows, perhaps KKR could help.
Ms. Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute.