As Ellen E. Schultz, an investigative reporter for the Wall Street Journal, reveals in her new book, "Retirement Heist," it wasn't the dire economy that led these companies to plunder their own employees' earnings, it was greed. Over the last decade, some of the biggest companies -- including Bank of America, IBM, General Motors, GE and even the NFL -- found loopholes, abused ambiguous regulations and used litigation to turn their employees' hard-earned retirement funds into profits, and in some cases, executive compensation. Schultz's book offers a relentlessly infuriating look at the mechanisms they used to get away with it. ..More at the link (and in the book).
Think of pensions as a debt. If a company can reverse a debt, it can record it as income... There were billions in promises to retirees for pensions and healthcare and death benefits and life insurance, and the companies figured out that if they cut or eliminated them altogether then they could get those billions in profit -- and even use them for executive compensation...
[Lucent] eliminated a death benefit, which is a very simple thing that says, if you work for us for 25 or 30 years, and you die, your widow will get $50,000 dollars or whatever per year. Lucent said they couldn't afford that. So they took it away and saved $400 million that had been set aside physically in the pension plan for these folks. At the same time, they awarded more than $400 million in bonuses to executives.
The federal courts found Cigna documents that made it clear that the HR executives were discussing how, if the cutting of employees' benefits was handled right, there wouldn't be an employee backlash because the people wouldn't understand what was happening. And it's a pattern that has existed at a number of other companies...
These were not gratuities. This was not something the company decided they would give you if they felt like it. This was something that was earned, that was deferred. The pattern after the Second World War was that as companies were growing quickly, they didn't have a lot of cash. So the deal was, they gave workers less pay then in exchange for pay later, and they called it a pension. If you worked for x number of years, you'd get your pay back. Same thing with healthcare. So what we see now are millions of people who should not be in a difficult position financially putting more strain on society, now that we have to pay for their healthcare and public services.
Take the retirees of GenCorp. They had been promised their retiree health coverage in writing, but employers put little clauses into the plan documents that said, We reserve the right to change the benefits... All of this is contrary to the intent of pension law, which is that the assets were there protected supposedly for the benefit of the people who earned them, and taxpayers subsidized it, meaning that if employers put money in, it would grow tax-free. That's why a lot of this is abuse of taxpayers.
20 September 2011
How American workers lost their pensions
Excerpts from an article at Salon: