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Pensions - Page 4 - 2003
The Pension TrainEmployee Advocate – DukeEmployees.com - August 6, 2003
There has been vast news coverage of the IBM employees winning their cash balance pension lawsuit. To make the news even more astounding, the very next day the Xerox employees won their pension lawsuit! There have been scattered employee pension wins over the last few years, but nothing to top this. If this pension train can keep up the momentum, it will crush any corporation that gets in front of it.
But look what happened with Enron. As Enron made money with its shady deals, a horde of utilities chased after them. They all wanted a piece of the greed pie. When Enron was nailed, the very same companies disowned it.
Rick Priory once set Enron up on a pedestal. He set a goal for employees to try to make Duke Energy more like Enron. Now that Enron has been brought low, Mr. Priory even jeers the company! The company that the once praised, he now vilifies. So much for stability of the thought process.
Whoever talked of honor among thieves was pulling your leg. When a shark starts bleeding, he will have a very bad day. His “comrades” will have lunch!
Those who have made millions plundering the employees’ pensions will fight the pension train with all they have. But if it looks like the pension train cannot be stopped, some will try to hop on board. It does not matter that the day before they were fighting it. They just want to always be seen on the winning side.
If a corporation voluntarily returns the employees’ pensions, rather than being forced to return it, there will be no end of boasting. The spin doctors will try to make you believe that it was all their idea to come clean with the employees. The newly converted corporations will then denounce other corporations with cash balance pensions as being part of the greed mentality.
Corporations depend upon two things: vigorous spin doctoring and the short attention span of the public.
Swarmed With ThanksEmployee Advocate – DukeEmployees.com - August 6, 2003
The Journal News provided good coverage of the IBM pension lawsuit. It reported that Kathi Cooper received an enormous amount of e-mail from employees thanking her for her efforts. Kathi said that she estimates she has received over 1,000 e-mail messages and phone calls from well wishers.
Ms. Cooper said “I am getting swarmed.”
There is a lot of bogus information about which group, if any, cash balance plans favor. There are several groups that are favored under cash balance plans, but they are not featured in the corporate propaganda. The groups that make a killing off of cash balance plan conversions are the greedy CEO’s, actuaries, management consulting firms, corporate lobbyist, and the politicians with their hands out.
If these are the groups that benefit, where do the employees come in? Well, someone has to furnish the money!
Cash balance plans are touted as being “portable.” But no employee gets a dime unless they have been in the plan for five years. At Duke Energy no one gets the cash balance until they are 55 years of age. There goes the portability. It was just selling hype.
Long-term employees get a double whammy. They get the worst of the old and new plans! So, what was the real purpose of the conversions? Again, to stuff the pockets of the above mentioned groups. And, that was the only reason that cash balance plans were ever invented. The pension predators looked at the existing pension laws and devised a plan to circumvent them all. But they were exposed. Too many people now know the true history of the plans.
Ms. Cooper told of when her lawyer gave her the good news "When he said, 'We won everything,' I burst out crying like a baby. Four years of stress just burst out."
Watson Wyatt & Company did not like the ruling. Small wonder; they helped William M. Mercer devise it. IBM is still paying Watson Wyatt millions of dollars per year, according to IBM employees. Watson Wyatt does not want the gravy train to derail. They do not want to end up facing prosecution for their part in the fiasco. William M. Mercer also did the dastardly cash balance deed to Duke Energy employees.
Karen Friedman, director of the Pension Rights Center, said “The IBM case is a resounding victory for employees of the company and for employees across the country who've argued that cash-balance plans are age discriminatory.”
James Leas, former IBM engineer, said “It seems like IBM got nothing and the employees got everything. The court was very clear that IBM was wrong.”
James E. Lukaszewski, chairman of The Lukaszewski Group Inc., said that the greater peril to IBM might be in the court of public opinion. He said “This has upset a lot of people. This is IBM country.”
Mr. Lukaszewski, also an expert in crisis management, said that IBM's wide criticisms of the judge’s ruling is not the smartest thing. He said “I have a feeling that they are going to tone down their rhetoric as they get closer to the appeal date because judges read the newspaper.”
It looked as though IBM followed Duke Energy into the cash balance quagmire. Duke made their conversion two and a half years before IBM. IBM could also follow Duke’s lead and buy some Wall Street Journal ad space. Then IBM could really tell off the whole judicial system, and see how that works out for them.
Some of the pension predators even made threats against the employees’ remaining pensions!
Ms. Cooper correctly assessed the situation. She said “They're lying. It's a false threat that they're hoping people will buy.”
Ms. Cooper added “I want to be restored to what IBM promised me before all the shenanigans started. I think we had a catastrophic failure of capitalism in the 1990s.”
IBM Wants to Keep the Pension MoneyEmployee Advocate – DukeEmployees.com - August 1, 2003
After the U.S. District Court for the Southern District of Illinois ruled that IBM's pension plan violated the age discrimination provisions of the Employee Retirement Income Security Act of 1974 (ERISA), IBM issued a press release. It seems that IBM is going to appeal. Is there anyone who is surprised by this knee-jerk reaction? IBM has the employees’ pension money and is clinging onto it for dear life.
IBM issued a long spiel of questionable corporate rhetoric, including: “This is a situation where a few have spoiled it for millions of U.S. workers.”
When executives get caught, they tend to make some nonsensical statements! It was a few greedy CEO’s and actuaries who attempted to spoil the promised pensions of millions of workers! The court exposed them and said that they must give the ill gotten gains back to the employees. The only thing the ruling spoiled was the plot to deprive employees of their earned pensions!
Cash balance plans were hatched only to foil the law and enrich executives, actuaries, and management consultants at the expense of workers. The corporations offered every silly excuse imaginable to brush off employees. But the court did not buy the platitudes.
IBM went on to state: “Under the court's interpretation of the law, every cash balance plan in the country is illegal.”
Well? That’s the truth of the matter! It’s good to hear IBM admit it!
Ole MacDonald is Feigning OutrageEmployee Advocate - DukeEmployees.com - August 1, 2003
IBM executives are in a tizzy since employees won the pension lawsuit. IBM employees presented a letter written by Randy MacDonald, Senior Vice President, Human Resources – it was hilarious! Ole MacDonald is trying to play the outrage card. After IBM took the employees’ pensions, he is outraged that the courts are going to make IBM give it back!
He stated: “We strongly disagree with this ruling.”
IBM executives can disagree all they want, as long as they pay up!
When IBM, Duke Energy, and other corporations raided their pension plans, the employees strongly disagreed. But the executives only laughed – all the way to the bank. The IBM executives have suddenly stopped laughing and started blubbering.
Ole MacDonald stated: “Indeed, to suggest that our pension plan is age discriminatory is an affront to this company and every employee.”
What an idiot! The affront to employees was when IBM took their earned, promised pension benefits. IBM employees do not feel affronted; they are dancing in the streets! They want the pensions that they were promised. And, IBM executives are outraged only because they got caught! They never thought that they would end up in “the dumb crook news.”
Ole MacDonald stated: “This ruling threatens not only IBM's pension plan, but also the plans of hundreds of other companies who have adopted similar formulas.”
Yes! Yes! Isn’t it wonderful?
There is plenty of room for more corporations in the dumb crook news. And, all employees want the pension benefits that they were promised. No employee ever asked for a cash balance plan. They were concocted solely to circumvent the pension laws and let executives get their greedy hands in the pension till.
Ole MacDonald went so far as to try to explain law to the judge. When some people get caught, they do not take it too well.
Ole MacDonald stated: “We are continuing to analyze the ruling to fully understand all its ramifications.”
That’s a good thing for the IBM executives to be doing. It would have been better if they had considered the ramifications before helping themselves to the employees’ money. And speaking of money, IBM executives can start counting out some to give back to the rightful owners!
Pension Victory for EmployeesPension Rights Center – Press Release - August 1, 2003
(7/31/03) - The Pension Rights Center, the nation's only consumer rights group dedicated solely to protecting the pension rights of employees, retirees and their families, hailed today's decision in Kathi Cooper vs. The IBM Personal Pension Plan as a "resounding victory" for employees throughout the country. The U.S. District Court for the Southern District of Illinois ruled that "cash balance" and "pension equity" pension plans violate the nation's age discrimination laws.
The employees had charged that in changing its plan in 1995 and 1999 to new hybrid-type plans, IBM had stripped older employees of almost 50 percent of their expected future benefits. The court found that IBM switched to the 1999 cash balance plan to save $500 million, fully aware of the age discrimination issues that would come with the new plan.
IBM created the controversy by moving from a traditional defined benefit pension plan, that promised pensions based on all of an employees' years of work and final pay, to arrangements where contributions and interest credits were paid to hypothetical accounts. By switching to the new inferior plans, with different rules and different payment formulas, IBM made the missteps that caused it to run afoul of provisions of tax, employment and pension laws that protect older employees.
In a strongly worded opinion, Judge G. Patrick Murphy noted that the cash balance formula "doesn't work with the longstanding statutory framework regarding defined benefit plans. The [cash balance] Plan looks like a defined contribution plan trying to pass for a defined benefit plan. It doesn't make the cut."
"The court recognized what we've known all along," says Karen Ferguson, the Center's Director. "Cash balance plans discriminate against older employees and do not fit within the framework of the law."
PBS Misses the Boat on PensionsEmployee Advocate – DukeEmployees.com - July 4, 2003
The June 28, 2003 production of “Now, with Bill Moyers” covered the American pension issue, sort of. More precisely, the show skirted the edges of the problem and moved on.
The points covered were valid, but they missed the heart of the issue. The show covered only the most recent examples of pension skullduggery. The most insidious and damaging pension ploy was not even mentioned – cash balance pension plans.
Here are some quotes from the show:
“We lost our post-retirement medical. We've lost, some of us, up to 50% of our pensions.”
“They have taken away what you and I worked our lifetime for.”
“You know, when I retired, it was the promises and the dream, and now it has become the lie and the nightmare…”
“Just protect the benefits you promised. Don't want anything more. If you retired and you were promised a benefit, a company should meet that commitment.”
Each of those statements could apply to the damage caused to workers by cash balance pension conversions.
The stock market crash was offered as an excuse. But the cash balance injustice was being promoted during the bull market. The companies did not convert to cash balance plans because they were losing money. Most were making more money than ever. They converted for one reason only – GREED. The executives wanted all the money, even the employees retirement money.
Bankruptcy was mentioned as an excuse for plundering pensions. But in the majority of cash balance pension conversions no bankruptcy was involved. Overpowering greed was involved.
There is one common dominator to all of the pension scams. With any pension change the workers always lose and the executives always win. Employees lose promised retirement money, as the executives walk away with millions of dollars.
Iraqi Soldiers to Get PensionsEmployee Advocate – DukeEmployees.com - July 1, 2003
The U. S. administration said that Pension payments will begin for former soldiers of Saddam Hussein's military, according to USA Today. What did it take for the Iraqi soldiers to start getting the pensions that they were promised? It took nothing less than blood in the streets.
Less than a week after the violent protest began, the pension payments were announced.
Walter Slocombe, former top Pentagon official, said that Up to 250,000 former career soldiers will be eligible for pensions beginning July 14. Their pensions will equal about what they earned while on active duty.
Many Iraqi soldiers shed blood to earn their pensions. Then they had to shed more blood to begin collecting the pensions. That’s the thing about pensions; sometimes collecting it is harder than earning it.
It is proper that the soldiers of Iraq should get the pensions that they were promised. Perhaps one day American citizens will be able to collect the pensions that they were promised.
The administration did not suggest swindling the Iraqi soldiers with cash balance plans. These plans must be something special for the American people – at least until the actuaries and bean counters invade Iraq.
DOL Enron Pension LawsuitEmployee Advocate - DukeEmployees.com - June 27, 2003
It seemed like the pension plunder by greedy CEO’s was going to go on forever. The government agencies seemed to be buying the flimsiest of corporate excuses. The politicians were too busy counting corporate campaign contributions and attend lobbyists dinners to get involved. It appeared that even Enron was going to get off light for its pension skullduggery.
But the pension windfall for corporations may be turning a corner. The United States Department of Labor announced yesterday that it filed a pension lawsuit against former Enron executives. Former CEO Kenneth L. Lay and Jeffrey K. Skilling, the former board of directors, and the former administrative committee for Enron's retirement plans were sued for failing to prudently protect Enron workers’ retirement assets invested in the stock of Enron.
Oh, happy day!
The Enron executives thought that it was good business for them to leave the company with millions of dollars, while the employees left with nothing. And, what about all of the Enron wannabes? Those who followed Enron should suffer the same punishment.
DOL Secretary Elaine L. Chao said “Today, the Department of Labor is filing suit in federal district court in Houston, Texas to recover losses that Enron employees suffered due to the mismanagement of two of Enron’s pension plans. This action will strengthen the American workforce's confidence in their retirement savings. As I said when we opened our investigation ‘Enron’s employees have gotten the short end of the stick in the collapse of this company, and we are committed to doing everything we can to help them.’ This lawsuit keeps that commitment.”
The lawsuit alleges that the defendants violated the Employee Retirement Income Security Act (ERISA) when they failed to consider the prudence of Enron stock as an appropriate investment for the retirement plans. It further charges that Enron did nothing to protect the workers and retirees from extensive losses.
Duke Energy faces Similar charges in an employee ERISA lawsuit. Government agencies have been known to provide assistance in such private lawsuits against corporations.
Many corporate executives have laughed at the ERISA laws for years. Many have completely ignored their fiduciary responsibility to employees. Evidently they thought that they would never be prosecuted. Greed does tend to make people cocky. As they reel in more and more millions, they tend to feel invincible.
Charges have been made of withholding financial information, failing to appoint and monitor a trustee, failure to reduce or eliminate investing in Enron stock, and misrepresenting Enron’s financial condition to employees and plan officials.
The suit seeks a court order requiring the defendants to restore to the plans all losses with interest. It also seeks to require the defendants to forfeit their right to benefits from the plans and permanently bar them from serving as fiduciaries to any plan governed by ERISA.
The Dallas regional office of the department’s Employee Benefits Security Administration and the Office of the Solicitor conducted an investigation that involved over 2.5 million pages of documents, 110 witnesses, and 78 subpoenas.
The suit was filed in federal district court in Houston. You know that everything is bigger in Texas – even the lawsuits.
IBM Pension Age Discrimination SuitEmployee Advocate – DukeEmployees.com - June 9, 2003
A federal court ruling is expected within the next several weeks on the legality of pension changes made by IBM, according to Gannett News Service. Kathi Cooper, lead plaintiff, has charged that she and 140,000 other employees were discriminated against.
This is the largest cash balance plan class-action lawsuit, but there are more federal court cases to be tried. Keep a close watch on this case, which may eventually end up in the Supreme Court.
U.S. District Judge G. Patrick Murphy said “Neither side will take a loss in this case. Any significant civil case here will be appealed because there's so much money involved.”
Employees have evidence that the IBM pension changes were well plotted. A note written before the first change in 1994, mentioned that the changes would add $2 billion to the IBM bottom line over 10 years. This windfall for IBM was even after setting up two new retirement plans for executives! These plans insulated executives from cash balance losses by meeting “the income replacement objectives." The second part of the pension change came in the form of a forced cash balance plan in 1999.
The corporations that force employees into cash balance plans seldom admit that they did it to take money from the employees. Invariably, a spokesperson will mumble something about “a more mobile work force.” It is true that employees forced into cash balance plans will be more mobile. They will be driving to work for ten more years, when they should have been retired!
“More mobile work force” is a code term. It means “We want your pension money.”
Norman Stein, professor of law at the University of Alabama, said "I'd like to see a judge with some courage to say the king has no clothes. I think cash balance plans flunk on the decency test, and there's not anything compelling in terms of policy to have the courts bend the rules to accommodate them”
David Certner, AARP director of federal affairs, said “These suits are most significant for people who are in middle age and may see reductions in their benefits. For those who may already have put 10 or 15 years in a plan, you are talking about tens or hundreds of thousands of dollars that are at stake.”
Cash balance plan mug senior employees. Their early retirement contributions were artificially low. These employees were promised that the low contribution rate would be made up – if they stayed with the company until retirement age. After the employees were tricked into staying with the company, all they received was the old cash balance plan switcheroo! Now they will get low contribution rates during their final years with company.
Cash balance plans are carefully structured to hide the loss of benefits from the employees. Companies even try to sell the plans as a benefit to workers. Ask yourself this: Anytime the executives change anything, who is likely to benefit? Hint: It’s not the employees.
Eva Cantorella is an attorney who has brought cash balance plan lawsuits against Georgia-Pacific and Bowater. She said “I've had actuaries tell me off the record that once plan sponsors find out how much money they are going to save, they want to do it.”
During the hearings, the IBM attorneys never got around to addressing the issue that the employees’ benefits had been reduced. Attorneys and spokespeople never want to talk about the fact that most cash balance plans are a corporate windfall at the expense of workers.
Cash balance plans do not have to be abusive to employees. But as it turns out, most of them are, hence all the lawsuits. The motive for the abusive plans is simple. The more pension money squeezed from the employees, the more money available to lavish on the executives.
Kodak was the exception to the rampant corporate greed. Kodak gave all employees the choice of the promised pension plan or the cash balance plan. New employees go into the cash balance plan, but they know what they are getting into up-front. They are not lied to for 25 years and then given the worst features of two different plans.
Some companies are learning that it is better to implement the new plans ethically than to face the employee backlash, negative publicity, and federal lawsuits. FedEx is giving all of its employees a choice of pension plans. New FedEx employees will also go into the cash balance plan, but this is not being deceptive. As long as the new employees get what they are promised, no fraud has been committed.
One of the IBM employees’ lawyers has already won cash balance plan lawsuits against Bank of Boston and Xerox. Next!
IBM was originally was going to allow only those over age 50 to choose between pension plans. Employee protests and an upcoming Congressional Pension Hearing changed their minds. IBM agreed to let employees age 40 and above have a choice of plans.
Duke Energy forced employees into a cash balance plan in 1997. Only those over age 50 and with 10 years of service were allowed a choice of plans. The interesting thing is that age discrimination laws protect everyone over the age of 40. So, where did the magic number of age 50 come from? Perhaps Duke figured that it would not be noticed. It was noticed!
Some corporations spend large sums of money getting laws slanted in their favor. Then some companies just do what they want laws or no laws. This keeps the attorneys fully employed.
Corporations keep running into the problem that everyone is not willing to lie for them. It really puts a kink into some of their best plans. Court documents revealed that some IBM middle managers were spilling the beans and telling employees that the changes were designed to save money for IBM.
Most corporations have the mindset that they can pull anything on the employees and they will never know the difference. The problem with trying to hoodwink thousands of people is that someone just might catch on. In the IBM case, an employee with a degree in accounting and finance called their hand. The usual smoke bombs, deceptions, and whining about a more mobile workforce did not obscure the facts from Kathi Cooper. It really is hard to fool all the people all the time.
Janet Krueger, former employee and pension activist, said “With her accounting background, she was more capable of deciphering what was wrong than the rest of us. It was like we were searching through a puzzle with the answer hidden away.”
Kathi Cooper said “I'll do anything to stop the damage. Cash balance is no good. It's part of the greed from the 1990s.”
Pension MagicEmployee Advocate – DukeEmployees.com - June 2, 2003
The Star Tribune reported on pension magic, of sorts. It is when an executive works for a corporation for a number of years, but gets pension credits for many more years! It must be magic; the money comes out of nowhere.
Xcel Energy CEO, Wayne Brunetti did not do too good last year. Shareholders sued him, stock price lost 60 percent, costly attempts to save the corporation failed, and the Minnesota attorney general wanted his head. At age 62, he will have worked 10 years for Xcel, and forerunner companies. But through pension magic, he will get credit for 20 years of service.
His base salary is $1.065 million. With the free years added, he will draw an annual pension of $825,000 (perhaps more). Yes indeed, he believes in magic. And, he is not the only CEO to do so. The creativity employed in finding new reasons to shove money at CEO’s is only overshadowed by the creativity used in stripping earned benefits from employees. Benefits materialize out of thin air for executives. Benefits promised to employees in writing disappear in a puff of smoke. It always turns out to be Black Magic for the employees.
As CEO’s gain pension benefits for years not worked, employees lose pension benefits for years that have already been worked! In a typical cash balance plan, this is exactly what happens; your years of service become worthless.
Magic is based on smoke, mirrors, distraction, and deception. When the smoke clears, employees are left wondering what happened to their promised pensions. CEO’s are saying “What a clever boy am I.”
Paul Hodgson is a senior research associate for the Corporate Library. This organization studies corporate governance. (It must be akin to studying bacteria.) He said this about such CEO perks: "It's usually hidden amongst a plethora of tables in the proxy, and has a lot of calculations that probably only auditors could figure out.”
Hey, magic does not happen by accident; it’s all well planned.
Attempting to explain Xcel’s supplemental executive retirement plan, Parker Newcomb, vice president, total compensation and human resource operations, said "It's really an amazingly complex formula."
The complexity is an integral part of the smoke screen. Without the smoke screen, magic becomes more difficult to pull off.
Don’t forget former CSX CEO John Snow. He left with a $33 million pension! His pension was padded with 19 years of credit that he never worked. As workers’ pension benefits vanish, executives are being literally buried in excess, unearned benefits. To add even more irony, John Snow is now the Treasury secretary. That’s the agency that is trying to legalize age discrimination in cash balance pension plans!
William Patterson, director of the AFL-CIO's Office of Investments, said “These companies are offering service credits to CEOs for years they didn't work at a time when defined-benefit plans are being taken away from frontline employees and risk is being shifted from the company onto individual workers.”
Stockholders are catching on that executives cannot be trusted to equitably handle the pension and pay issues. Each year more resolutions are proposed, in an attempt to reel in runaway management.
Patterson added “This shareholder season is unlike anything we've seen before, because shareholders are voting for proposals reforming executive pay in record numbers. Even the mutual funds have started to assert themselves on executive pay.”
Corporate Pension Shills EmergeEmployee Advocate – DukeEmployees.com – May 29, 2003
The corporate pension shills try to blend into the woodwork as they carry out their mission of enriching executives by reducing employees’ retirement benefits. They operate by lobbying and applying incessant pressure on Washington officials. Every now and then they are flushed out into the open for all to witness. Any time a provision that may make pensions a little more just is offered, the shills began to howl with pain.
The Financial Accounting Standards Board (FASB) recently proposed requiring Corporations that have implemented dubious cash balance pension plans to increase the funding to decent levels.
The ERISA Industry Committee is a shill group for large corporations. It has gone into shock over the new proposal, according to Reuters. The group has begged FASB to reconsider the cash balance funding proposal. FASB immediately caved in and offered to reconsider the new requirement.
This has been going on for years. At any mention of anything to bring justice to the pension game, these shill groups go into their dying duck act.
Only 20 percent of the Fortune 500 companies have forced their employees into these abusive pension plans. If each of these corporations fell off of the face of the earth today, the world would be much better off. These corporations have already severely reduced pension benefits. Now they do not even want to fund the reduced liabilities! In bankruptcy, the employees would come up short, as the executives deployed their platinum parachutes.
These corporations and shill groups did not even want to have to tell employees how much pension money was taken from them. They said it would cost too much!
Now they do not want to even properly fund the pensions that they have reduced!
They are screaming that the world is ending.
Just imagine if the courts or Congress said that the corporations must make restitution to all employees who have been victimized by such pension schemes. CEO’s would be jumping out the windows!
Now that would be a win/win situation.
French Protest ‘Pension Reform’Employee Advocate - DukeEmployees.com - May 26, 2003
French workers, students, and teachers took to the streets by the hundreds of thousands, as strikes over pensions continue. Other issues are also being protested, according to the New York Times.
Just because something is billed as “reform” does not mean that it is a good thing. The French “pension reform” is an attempt to reduce the workers’ pensions. G. W. Bush is trying to ram through a lot of dubious “reforms” in the United States. Tort reform is a ploy to restrict citizens from using the legal system. Social Security reform is a scheme to pad the pockets of Wall Street brokers. Medicare reform is an attempt to drive retirees into cheap HMO programs. In these times, the more reform you get, the less money you are likely to have.
For some reason, people do not like to be promised certain retirement benefits for 30 years, and then be told that they will not really get the benefits. For some reason, such employees tend to feel like victims of fraud.
The French protestors and strikers are unionized government employees. In America, the pension reduction perpetrators are usually big corporations. The goals are similar – the extraction of labor under false pretenses.
Striker Jacques Quintanal said "We won't go back to work until the government backs down."
Dead Workers Do Not Need PensionsEmployee Advocate – DukeEmployees.com – May 25, 2003
There has been an endless parade of half-baked schemes to deprive employees of their earned pension benefits. There is money set aside in pension funds and there is no shortage of unscrupulous people scheming to get it. The absurdity of some of the plots staggers the imagination. But just because a proposal is absurd does not mean it will not become law. All it takes is enough donations, lobbying, and citizens asleep at the wheel and anything can become law!
One of the latest schemes is the idea that blue-collar worker can be shortchanged on corporate pension contributions, because they do not live as long as other Americans! An obscure provision was tucked into a House bill that would allow corporations to reduce their pension obligations to union blue-collar workers by billions of dollars!
Some unions are even supporting the idea. They do not seem to be concerned that their pension funds are already severely underfunded.
The New York Times reported that Edwin C. Hustead, chairman of the actuarial panel that developed the data, is crying foul. In a letter to the Treasury Department, he expressed concern about the improper use of the data. The bill would not require more money to be set aside for white collar workers. Numbers are once again being perverted to provide a windfall for corporations.
Society of Actuaries' committee member, Vincent Amoroso said he volunteered to serve "to make sure that everybody behaves fair. It turned out I was just aghast at the raw, political partisanship of it all."
The data revealed another item that corporations prefer to ignore. The more a worker is paid, the longer he will live. The bill has no provision for this fact. The game is obvious. Just pick out the things that will benefit corporations and ignore the rest.
The Portman, Cardin clowns are all for it. If you have followed any pension legislating, you have undoubtedly caught their act. Their names invariably come up in any mention of pension legislation. They always operate under the guise of helping workers. But they both are wholly owned subsidiaries of the large corporations. They are Benjamin L. Cardin, Democrat of Maryland and Rob Portman, Republican of Ohio.
It is immaterial if these two are diabolical pension saboteurs or merely gullible dupes. They are both fully under the control of the corporate pension lobbyist groups.
A Rob Portman spokesman said the bill would insure companies "aren't forced to overpay" into their pension funds!
Just how many cases have you read about corporations overpaying into pension funds or overpaying retirees? Today’s news is always about underfunded pension funds. It is about corporations denying employees earned pension benefits through forced cash balance plans. It is about miscalculations that short-change retirees. It is about retirees losing benefits by being “whipsawed.” It is about vanishing early retirement subsidies. It is about years of “wearaway,” during which the employee earns zero new pension benefits. It is about retirement benefits being lost when a corporation is bought out.
These are only the headline pension issues. There are even more subtle, nefarious methods being used to reduce earned pension benefits and reduce fund contributions. That is why the pension lawsuits continue to mount.
The spokesman then brought up the thinly veiled threat of mentioning the voluntary nature of the pension system. This is supposed to strike fear into the hearts of all workers. They are supposed to shudder and say “Oh my, the company will take away my pension if I don’t keep quite.” Hogwash!
First, corporations cannot legally take away the pension benefits that you have already earned. If the pension plan is shut down, the employees are to be paid all that is due them. The IRS will then take half of any excess.
If corporations could keep all of the employees’ money and pay no penalty on any excess, they would be standing in line to terminate the pension plans. No CEO is going to voluntary give the IRS 50 percent of anything! Then there is the matter of the repercussions from such an act. Few corporations can stand any more egg on their faces. Plus, Congress does not want to take the blame for pension losses. Voluntary can become compulsory with the stroke of a pen. This is an empty threat only employed by corporate shills.
Cash balance plans were an attempt to circumvent these laws. Pension benefits could be reduced and money could be extracted without penalty. Any mention of benefiting workers is pure hype. Cash balance plans are all about benefiting CEO’s. With the staggering sum at stake, it will likely be years before the legality of cash balance plans are determined.
Cash-Balance Pensions Under ScrutinyEmployee Advocate – DukeEmployees.com – May 24, 2003
Dow Jones reported on a possible change in cash-balance pension plan accounting by the Financial Accounting Standards Board (FASB). The change, which could take place next week, has corporations in a tizzy. It is always great to see corporations in a tizzy! It is usually their own greed that gets them there.
The change would affect only corporations that forced employees into cash-balance pensions. Corporations that took the moral high road, and avoided cash balance plans, will not be affected.
The worried corporations took retirement money from employees that had been promised to them for decades. All the victims had left was a piddling “cash balance” amount. It will be a joyous occasion if the screws are tightened on the offending corporations.
Many corporations would have to use government bond yields to calculate their liabilities, rather than using corporate bond yields. Corporations are screaming because the lower government bond yields will translate into bigger pension liabilities.
The old accounting method would not cover pension liabilities in the event of bankruptcy. The new method will not set aside enough money either. It will just be a step in the right direction. Many corporations have rushed into so many dubious deals that bankruptcy is a real possibility.
Corporations often have guaranteed funds tucked away for executives, in the event of bankruptcy. Executives are protected, but workers could be left holding the bag – again.
Many executives, aided by management consulting actuaries, have schemed to reduced workers’ pensions through the use of cash balance plans. Because of decreased benefits to workers, these corporations were able to slide for years without contributing anything to the pension funds. The thoughts of actually contributing to the pension funds have executives perplexed. They never intended to put in another dime.
Executives have called on the actuarial shills to save them. And why not? They got them into the cash balance mess. No one is surprised that the actuaries are attempting to block the proposal. If the entire cash balance scheme should collapse, someone would come knocking on the actuaries' front door. They do not want this. They will continue to dance and crank their smoke machines for all they are worth. It’s hard to imagine that actuaries were originally supposed to serve as employee advocates! They have evolved from advocates into enemies of the workforce.
Eric Lofgren, Watson Wyatt's global director of benefits consulting, moaned: "This would be a real curve ball to a lot of companies." When Watson Wyatt and their kind were gleefully taking earned retirement benefits from employees, they never thought of the curve ball being thrown to workers. They were making big money and the corporations were making big money off of the pension plans. That is all that mattered to them.
The time is ripe to address the concerns about underfunded corporate pension plans.
FASB has promised more pension action, such as requiring more detailed reporting on pension assets, cash-flow, expected rates of return on assets, and pension cost.
There is another cash balance plan matter to be challenged – the legality of the plans. As the corporations and actuaries squabble over each possible issue concerning cash balance plan, they are desperately trying to avoid one question: Are these plans legal? The only ones that claim cash balance plans are legal are the ones making money off of them!
Pension SubterfugeEmployee Advocate – DukeEmployees.com – May 17, 2003
Reuters reported that the House passed pension bill H. R. 1000 this week. The problem is that it is so weak that it is nearly worthless. It is an old game in Congress. Passing a bill that does not correct the original problems leaves corporations free to continue the pension scams, or even accelerate them. Congressmen will earn pats on the head from corporate lobbyist and may even be tossed a treat. Some workers will even think that they have been helped, when the system has actually been opened up for more corruption.
The bill will not help employees who have lost half of their pensions due to cash balance conversions. The “big benefit” being touted is that Wall Street firms will now be allowed to sell advice to employees (wow). The clowns that have been penalized recently for conflicts of interest involving stock analysts will now “save” the employees.
The sponsor was John Boehner, Ohio Republican. His “insightful” observation was “the only place they (employees) can get investment advice is from Bob at the coffee shop." What rubbish! Everyone has always been free to buy any advice that they wanted. That was never the problem with pensions. The problems is, and always had been, that corporations find ways to dip into employee pension assets.
Politicians are notorious for solving problems that never existed. That leaves them free to ignore the real problems. Then they take bows for “doing something.” What a joke.
Congressman George Miller (D-CA) provided this quote from New York State Attorney General Eliot Spitzer: "This legislation opens a loophole that will sharply erode, rather than enhance, safeguards for employees seeking independent and untainted advice about how to invest their retirement savings. Clearly, this bill puts the interests of Wall Street firms far ahead of the interests of millions of working Americans who simply want a fair shake in making sound decisions about their retirement investments."
Congressman Miller said: “That (investment) advice is going to come from the very same people that just had an out-of-court settlement of $1.4 billion because they lied to their clients.
"In every respect, their bill fails to provide a solution to the serious pension inequities and risks faced by American employees.
"They do not respond to the increasingly common exorbitant executive pension plans that come at the expense of rank and file employee plans, and they do not do anything to stop conflicted investment advice to average investors -- in fact, they make it legal to provide conflicted advice to 401(k) plan participants.
"That's why NY's Attorney General, Eliot Spitzer, today called the Republican's investment advice provision a 'loophole' that 'puts the interests of Wall Street far ahead of the interests of millions of working Americans.' "
Congressmen Miller and Rangel offered a substitute bill that would have solved over 90 percent of the pension problems. Among other things, it would have allowed employees with 10 years of service to choose between the traditional pension plan and the forced cash balance plan. The House, once again, chose fluff over substance.
Mysterious Executive PensionsAssociated Press – by Rachel Beck – May 15, 2003
NEW YORK (AP) - We know the salaries of the top executives. We know how much their annual bonuses are. We know how many stock options they have.
But we don't know everything that goes into their compensation. Not even close.
We don't know all about their pensions. They're huge and getting bigger all the time.
"Executives are using preferential retirement plans to gain surreptitious pay," said Brandon Reuse, a research analyst for the AFL-CIO, which is lobbying for compensation reform.
Executives, like rank-and-file workers, can participate in company-sponsored pension plans, which promise future payments to employees based on a percentage of annual income.
But executives often complain that federally imposed caps curb the amount of their annual pensions at $160,000. Given their hefty paychecks, they think they should get more.
That's led many companies to set up special retirement programs just to service top officers, which some critics say is yet another back-door way to line executives' pockets.
And they are doing that without having to disclose much.
"This creates an uber-tier of employees," said Bill Coleman, senior vice president of compensation at Salary.com in Wellesley, Mass. "They just keeping adding and adding to executive hidden benefits."
Much of the confusion comes in the disclosure of supplemental executive-retirement plans, or SERPs, which offer pension payments usually based on a certain percentage of an executive's highest average compensation.
Companies must say when a SERP exists, but details beyond that are slim.
In fact, when companies offer these plans, they often don't immediately set aside money to fund them. Companies just lump what they've promised to pay into a liability in their financial statements called a pension obligation.
But that liability covers anyone entitled to a pension - both executives and employees - so investors can't get any sense of the size of the potential executive payouts.
Breaking down individual benefits is even trickier. Most companies just provide a table in their annual proxy statements that generally states the expected pension payouts for executives based on ranges of final average earnings and years of service.
That often leaves it up to the investor to try to crunch the possible pension for each executive, which is impossible when companies only have to provide annual earnings and years of service for their top five officers.
And it's even tough to figure out the correct metrics to use when calculating potential payouts for the executives whose compensation is disclosed.
At American Airlines, for instance, the SERP covers 45 executives and the airline says in its proxy statement to shareholders that the SERP is based on the final average of base salary, incentive compensation and performance returns.
But you have to go to the plan description in the back of its annual report to find that the final average isn't based on the last few years that an executive worked, or that the years used don't have to be consecutive.
Instead, it includes the average of their four highest incentive bonuses as far back as 1985, when its SERP first started. Independent of that, it also includes the average of the four highest years of performance bonuses from 1988 to the last year they were offered in 1999, according to American spokesman Bruce Hicks.
By cherry-picking their best bonuses, American executives could potentially have their pensions based on an average compensation higher than what they actually made in any given year.
Once companies decide to fund these pensions so they can be paid out, some create special secure trusts that are protected from bankruptcy or if business fails. But they are only required to disclose that the trusts exist, not how much is included or the portion allocated to each executive.
American Airlines created a secular trust in October, but didn't reveal until last month that it had been funded with $41 million. That made headlines because the carrier was asking its work force for major concessions at the same time to stay out of bankruptcy.
"Companies need to ask themselves if they are doing too much ... and whether are they creating hidden additional compensation," said Robin Ferracone, worldwide partner at Mercer Human Resources Consulting in Los Angeles.
The business scandals were supposed to spur greater corporate disclosure. That doesn't seem to hold true when executives have their own interests on the line.