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www.DukeEmployees.com - Duke Energy Employee Advocate

Pensions - Page 1 - 2000


"If I went to work in a factory, the first thing I'd do would be to join a union." - Franklin D. Roosevelt


Eating Their Words
Plan Sponsor - March 2000

Behind-closed-door comments on cash balance put consultants in hot water

Consulting firms are the latest targets of cash balance opponents' ire. A group of employees angered by companies' switch to the new hybrids has been urging the federal government to investigate not only plan sponsors but also actuaries whom they allege misled employees during conversions.

Representatives of a half dozen employee coalitions--AT&T Global Network Services Employees, Bell Atlantic Employees Coalition for Retirement Security, Boeing Retirees on the Line, Duke Energy Employees, IBM Employee Benefits Action Coalition, and SBC/Pacific Bell Employees -- want the Department of Labor to launch a full investigation into cases in which both actuaries and employers may have tried to hide pension cuts that resulted from cash balance conversions. The group fired off a letter to Labor Secretary Alexis Herman last December. The letter cites statements allegedly made by actuaries speaking candidly at conferences. Its authors suggest that consultants and employers have sometimes instituted cash balance plans as a way to cut costs--while trying to conceal benefits reductions from employees.

For instance:

The letter quotes Gary Hallenbeck of Towers Perrin saying at the 1986 annual meeting of the Conference of Consulting Actuaries that "One of the situations where a company might want to consider this approach is when it can be used to mask a benefit cutback."

The letter identifies Keith S Williams of Watson Wyatt Worldwide as having addressed a 1998 Enrolled Actuaries meeting saying, "I have been involved in cash balance plans five or six years down the road and what I have found is that while the employees understand it, it is not until they are actually ready to retire that they understand how little they are actually getting."

The letter also quotes another actuary telling the same group that "It is easy to install a cash balance plan in place of a traditional defined benefit plan and cover up cutbacks in future benefit accruals." Janet Krueger, who worked at IBM from 1976 to 1999 and signed the letter on behalf of the IBM coalition, says the statements above came from meetings transcripts. Since a number of companies that converted to cash balance plans utilized the services of these actuaries' firms, the letter says, "It does not seem illogical to assume that at least some of these employers did so for the reasons their consultants were advocating."

A Towers Perrin spokesperson questioned the relevance of comments made so long ago by someone no longer affiliated with the company, adding that Towers Perrin "does not support the design of benefit programs that are intended to mislead employees." Watson Wyatt declined to comment.

All the same, the alleged attempts to mask benefit cuts is nothing less than "shocking," according to he coalition's letter. "Words cannot describe the feelings of employees when they first learn that some of the top pension consultants in the country have callously advocated actions designed to obscure the loss of expected benefits." The letter continues: "To try and hide the reduction is unconscionable. Denying the employees even the opportunity to adjust their retirement planning is not a game to be laughed at during conferences of actuaries; it is a grave injustice, which must be stopped at once."

The letter alleges that actuaries may have violated not only their ethical codes but also federal law covering "disreputable conduct." Employers that followed such advice should be investigated for breaches of fiduciary duty, the group claims.



Statement of Congressman Bernie Sanders
"Burlington Web Magazine" - 3/29/2000

The cash balance pension revolt is spreading like wildfire. Employees at AT&T, Boeing, SmithKline Beecham, Duke Energy, and others have set up websites similar to the one created by IBM employees to voice their outrage and sense of betrayal by the shift to cash balance plans. It would not surprise me to see these companies offer more of their employees the option to choose which pension plan works best for them in the future.



100 Best Corporate Citizens
'Business Ethics' - 3/27/2000

Don't ask us how IBM captured number one place! But, their sins against the employees have cost them. This disclaimer was posted along with the award:

Even our No. 1 company, IBM, with a 4.33 score in service to employees, is not without controversy. When the company announced changes in its pension plan last year, which would have cut pensions up to 40 percent for long-time employees, CEO Louis Gersner found himself confronted at the firmís Austin plant in July with a plane circling overhead, dragging a banner that read, 'Hey Lou, Thou Shalt Not Steal.' The company later reserved itself, restoring many of the benefits that would have been lost. This list, after all, is not the 100 Perfect Corporate Citizens. It's the 100 Best Corporate Citizens.

Even though IBM won the number one spot, the company is still tainted. Winning the award could actually be seen as negative publicity with the disclaimer posted for all to see. If anyone has been living under a rock and did not know about the pension scandal, now is another opportunity to discover all. If IBM, with all its warts, could win first place, we shudder to think about the worst companies. And, Duke-Energy? Duke was not even in the running! Last year Duke did not make the 100 Best Companies to Work For in "Fortune Magazine" either. Lie as you will, you just cannot fool all the people all the time.

100 Best Companies to Work For



Moving Toward a Balanced Work Life
"Workforce Magazine" - March 2000

SAS is a North Carolina company with a 35 hour work week. They INCREASED paid vacation this year.

Jim Goodnight, SAS's founder and CEO said: "Ninety-five percent of our assets drive out the gate every afternoon at five; I want them to come back in the morning. I need them to come back in the morning."

There was no mention of them robbing the pension fund.



Calling Sherlock Holmes and Dr. Watson:
Who Added That Sentence, and Why?
"The McGINN FORUM" - March 2000

Pension matters rarely are the stuff of mysteries, but suddenly we have a benefits 'whodunit' in Washington. It seems Congress wants to know whether any government officials profited by adding a single sentence to an official document nine years ago. The sentence that was added to the preamble in 1991 says, essentially, that the age-discrimination rules don't apply to cash-balance plans.

Under the headline 'Inquiry Sought Into History of Pension Rule,' the Wall Street Journal recently reported that Senator Tom Harkin of Iowa had asked the General Accounting Office to determine whether it was legal to include the sentence in question.

And if you've been following developments in the pension world, you won't be surprised to learn that the sentence has to do with the now-controversial Cash Balance Pension Plans. Inserted in the preamble of some proposed pension regulations in 1991, the prose at issue has been regarded by many employers as a safe harbor protecting them from charges that Cash Balance Pension Plans violate anti-discrimination laws.

Now, nine years later, Congress wants to know not only whether the sentence was legal, but also if any government officials benefited from it when they left for jobs in the private sector.

Don't assume, just because you haven't seen anything about it on TV, that this investigation doesn't amount to much. Senator Harkin has suggested that the GAO explore whether the sentence was added properly from the perspective of the Administrative Procedures Act and the normal operating procedures of the Treasury Department; whether other executive agencies were aware of the sentence and its effects; and whether the Labor Department or other agencies considered the policy implications.

Even more ominously, the Harkin letter suggests that the GAO look into the 'degree of outside influence in support of adding the sentence' that regulators received. And the letter goes on to ask, 'Did any of the key proponents of adding the sentence within the Treasury Department or the IRS, who left government service, receive significant financial benefit, directly or indirectly, during the years that followed their leaving government service because of the existence of this sentence?

That's about as close as you can come to saying that government officials may have been bribed to add that pesky sentence to the 1991 language. Pretty heavy stuff, huh?

The way around this is, of course, for an employer to maintain the traditional plans for workers 40 and older, and assign only the under-40 employees to a Cash Balance Pension Plan - - - but that might appear to be discriminatory. Alternatively, employers could offer older employees an option - - - as long as the choice could be on an "informed" basis. Unfortunately, it appears that, with a few notable exceptions, such as IBM, most companies adopting Cash Balance plans haven't "grandfathered" the prior plan benefit levels for their older workers. They haven't because a major goal of converting to Cash Balance Plans appears to be to save money--millions of dollars a year for large employers. Reduced contributions flow through to their bottom lines and the results make executives look far smarter than they really are.

Read that sentence again: "Reduced contributions flow through to their bottom lines and the results make executives look far smarter than they really are." EXCEPT when they get caught! Then they look rather greedy and foolish. They also look like liars.

So to us, it makes little difference whether the Sherlocks and Dr. Watsons in the General Accounting Office are able to learn who inserted that sentence into that 1991 document and whether that person or persons profited as a result. Skip the sleuthing and concentrate on deterring companies from shortchanging older employees on their pension benefits.

You always thought something was not right about the cash balance pension plan. And, you were right! The conversion was a deliberate, diabolical attempt to separate you from your promised money, at the time when you will need it the most!



Warning: This Is a Rights-Free Workplace
The New York Times Magazine - 3/5/00

If the laws of economics were enforced as strictly as the laws of physics, America would be a workers' paradise. The supply of most kinds of labor is low, relative to the demand, so each worker should be treated as a cherished asset, right? But there have been only grudging gains in wages over the last few years, and in the realm of dignity and autonomy, a palpable decline.

In addition to intangible losses, Duke Energy employees have suffered some devastating economic losses. The loss of pension and health benefits was the biggest blow of all.

What we need is nothing less than a new civil rights movement - this time, for American workers. Who will provide the leadership remains to be seen, but clearly the stakes go way beyond "labor issues," as these are conventionally defined. We can hardly call ourselves the world's pre-eminent democracy if large numbers of citizens spend half of their waking hours in what amounts, in plain terms, to a dictatorship.

CLICK HERE FOR MORE



Pension Loophole Harms Low and Moderate Income Workers 3/2/00

Published by the Center For Budget And Policy Priorities. Written by Peter R. Orszag.

Pension coverage in the United States is skewed toward high earners. In 1993, for example, 27 percent of full-time private-sector workers who earned between $10,000 and $15,000 were covered by a pension. In contrast, 81 percent of full-time private-sector workers who earned more than $75,000 were covered by a pension. This unequal distribution of pension coverage also manifests itself in the distribution of pension tax preferences: Two-thirds of the benefits from existing pension tax preferences accrue to the top 20 percent of the income distribution.

Didn't you always suspect the game was rigged? Well, it is rigged. And, every way we turn we run into another way it is rigged.

The first section of this paper explains how the cross-testing provision is essentially a loophole that allows businesses to receive the tax benefits that are provided for qualified pension plans while skewing their pension benefits toward high-income owners and providing little pension coverage to low- and moderate-income workers. It also explores a particularly potent form of cross-tested plans, known as "new comparability" plans, that are even more skewed than the first generation of cross-tested plans. Use of new comparability plans allows firms to direct a still-larger share of pension benefits to highly paid owners and executives - and a smaller share to ordinary employees - than the firm otherwise could do.

One would think that the executives would be happy just to make many times more money that the average worker. But no, their greed knows no bounds.

"Under current law, firms sponsoring pension plans must demonstrate that their plans do not discriminate in favor of highly compensated employees to continue enjoying the tax benefits from a qualified pension plan. There are a number of mechanisms firms can use to show they satisfy this requirement. One troubling mechanism, which effectively dilutes the non-discrimination rules for defined contribution plans, is known as cross-testing. Cross-testing essentially allows firms to treat defined contribution plans as defined benefit plans for the purposes of this non-discrimination test (the plans are thus "cross-tested," since they are defined contribution plans but are tested as though they were defined benefit plans). In so doing, cross-testing allows firms to direct a surprisingly large percentage of benefits toward older, higher-income workers."



The Modern-Day Johnny Appleseeds:
Lawsuits Are the Fruit of Their Labor
"The McGINN FORUM" - February 2000

It seems that every week we see another news story about litigation involving employee pensions or savings programs. And it appears to us that this litigation is often a byproduct of the pervasive attitude of many corporate managements that believe "We can do anything we want with retirement and compensation programs and get away with it as long as we make the 'bottom line' look good."

Lately, the corporate game is being played with cash balance pension plans. The goal always appears to be the same: increase apparent corporate profits by reducing pension benefit costs, and do it by a plan change that 'appears' exciting, innovative and good for employees. As we pointed out in a Forum last year, cash balance plans are nothing new; the concept is one that has been around for about twenty years. And there's nothing inherently wrong with or unfair about cash balance plans. For a corporation without a pension plan, establishment of a cash balance plan is fine: it treats all workers the same way.

On the other hand, it almost seems that some corporations with traditional pension plans and their short-sighted management consultants, can't wait to sow the seeds for near-term employee lawsuits and employee dissatisfaction. They accomplish their goal by shifting to a cash balance plan without concern over how the change affects their older, long-service employees. The corporation's rationale for converting a traditional pension plan to a cash balance plan is described as an effort to be fair and to modernize the retirement program; each employee gets his or her own 'account,' and everyone knows exactly how much is in it at any given time. Equally important, the account is portable; when employees quit, the full account value is paid to them."

When employees quit, the full account value is paid to them," is supposed to be a big selling point for cash-balance plans. But with Duke, you do not even get that! If you leave the company before retirement, your money stays with Duke! Only at retirement does Duke reluctantly release their death grip on your funds. (They cannot dip into the fund if it is not under their control).

IT'S THE GREED, STUPID

Switching to a cash balance plan usually yields big savings for many years, during which older employees earn little or no additional benefits. Some companies reportedly have been able to cut their annual contributions to their pension plans by millions of dollars, making corporate earnings appear much larger than they otherwise would.

And who's behind this nefarious activity? We can't prove it, but we have no doubt that it's the management consultants. For all too many of them, manipulation is the name of the game. Propose anything to reduce the company's pension costs and don't worry about the effect on older employees whose future careers are short.

Not surprisingly, workers at some companies are suing, and are even demanding that the federal government prevent employers from adopting these types of plans.

If a Duke employee embezzled $200,000 from the company, do you think Duke would pursue legal action? You can take that to the bank! It is the very same principal. If Duke takes $200,000 out of your benefits without your consent, in a very deceptive manner, and makes attempts to hide the fact, do you not think it time for you to take some action?

A COMMON TREND

The common denominator in the plan design issues and investment matters we've cited is the short-sightedness of many corporate managers, corporate directors and pension fund trustees. While making plan design changes, offering new investment alternatives and providing education in fund investments, they are failing to evaluate the extent of potential future consequences.

If Johnny Appleseed were reincarnated today as a pension asset manager, he'd be appalled at what we've described. He would recognize that what's being planted today by the actions of many corporations and pension trustees is like Kudzu, that ravenous vine that consumes everything in its path. Their actions are creating a vast field with every inch covered with the seeds of litigation. Visualize a hillside or field layered with legal briefs and you'll have a good idea of what to expect in the pension world for years to come.

Duke-Energy is not omnipotent! Big tobacco companies and Microsoft are having to answer for their transgressions. This did not happen because people ignored the situation; it happened because people exposed the corruption!



Staying Off the Cover of "Time"2/5/00

The "Journal of Accountancy" published this article in the February edition.

Only the greediest of companies have to face negative press and disgruntled employees. Companies with management blessed with a little foresight will make cash balance conversion equitable to the employees. We all know which category Duke Energy fell into.

Eric Lofgren, director of the benefits consulting group with consultants Watson Wyatt Worldwide in Philadelphia: "Why did the IBM conversion encounter so much resistance from its workforce?" Without specifically mentioning IBM, Lofgren says it takes a unique set of circumstances to rouse employees' ire. "For a conversion to become a problem, you need a switch that results in an extreme decrease in benefits. Then you need a population that happens to have a large amount of people caught around the 40/20 mark: 40 years of age with 20 years of service."

Duke Energy's cash balance conversion was designed to hurt the maximum number of employees. By doing this, Duke was able to grab the maximum amount of cash from the pension fund!

The period of time when workers no longer earn additional retirement benefits for their service has been dubbed the 'wear-away' period and is a major source of contention in plan conversions.

The wear-away period could have just as well be called the "time your retirement benefits are stolen" period. That is exactly what it is. Many employees will retire and have never earned any retirement benefits since 12/31/96. For all practical purposes, their retirement plan ended on that day! Since the sources quoted sell cash balance plans, you can expect the usual hogwash to be slipped in. But, this time they also let some truth slip out.

Ray Berry, an enrolled actuary and employee benefits manager with Grant Thornton in Chicago: "Morale and productivity can suffer, particularly among long-term employees negatively affected by the wear-away problem." There is also the risk of negative publicity, as IBM's experience demonstrates. "A company must decide what it wants to do about plan provisions," Berry notes. "Is it going to take a relatively hard-nosed approach and go cash balance only in the future..."

We all know that Duke Energy loves the hard nosed approach. But, Duke Energy's nose can be made softer. In fact, it can be made down right pulpy!

Gordon Gould, a principal of Towers Perrin, Denver: "Most companies-roughly two-thirds, according to a study by benefits consultants Towers Perrin-do offer midcareer employees some form of transition benefit. Assuming that a company isn't making the change to save money, there are three ways you can avoid wear-away..."

  1. Offer individuals a choice between the new and old programs. This is done with a one-time election. "It's not that common because it tends to be fairly expensive," Gould says.

  2. Identify individuals who will be adversely affected by the new plan and grandfather them for a period of time under the old plan. "Typically, individuals within 5 or 10 years of retirement are offered this protection," Gould says. "When those individuals leave the company, you calculate their benefits under both plans and give them the greater benefit. There tends to be a time limit on such transitions, so the group that is grandfathered will have 5 to 10 years of protection." Five years is not good enough. Ten years would have helped some employees but, not everone.

  3. Freeze current benefits under the existing arrangement. "Under this option no one has wear-away," Gould says. "Whenever the employee leaves, he or she collects that frozen benefit. In addition, the employee receives credit for future service under the cash balance plan, effectively receiving his or her retirement benefit in two pieces. That doesn't mean the individual will receive as good a benefit in the future as he or she would have had the traditional plan continued, but the employee will continue to see the benefit increase at all times in the future."

    This is not a ideal solution. Employees would still lose money. We just would not be completely robbed as we are now.

Kevin MacAfee, manager of retirement plans, Northern States Power in Minneapolis. "When we looked at our existing workforce and the long service employees had in the plan, we decided the easiest way to make the transition and minimize disruption was just to offer everyone the choice of which plan to stay in," according to Kevin MacAfee, manager of retirement plans. "So in 1998 we offered the choice to the nonunion employees, and in 1999 we offered it to our union employees."

And it would have been just that easy! It looks like we are working for the wrong power company.

Diane Audette, Director of Benefits and Human Resource systems, Rhodia, Inc. "If an employee's age and years of service added up to 65, that employee was to be grandfathered. For an eight-year window following the new plan's adoption, grandfathered employees leaving Rhodia receive the better of the old plan or the new one. After eight years, the old plan formula stops and all employees fall under the new plan."

Not a perfect solution but, still better that what Duke Energy offered.

Other things were mentioned such as effective communications. Let's not even go there.



Cash Balance Conversions
Journal of Accountancy - 2/5/00

Does there seem to be a large number of these type of articles popping up? And, they all are certainly not listed on this site. Duke-Energy keeps trying to sweep the issue under the rug. But, all they are creating is a huge lump under the rug. They cannot stonewall forever. But, they will stonewall until their hand is forced!

Wishing to attract younger talent and control costs, companies have been redesigning their defined benefit pension plans.

We can rule out the first one immediately. "Attract younger talent"? After reading about Duke Energy's cash balance plan fiasco, do you think that anyone would seriously consider going to work for them? Duke has exposed itself as a company that wants to fatten the bottom line at the employees' expense. Duke will constantly be searching for ways to take things from the employees. Can you, in good conscience, recommend that your children go to work for Duke Energy? "Control cost"? That's something that we can get our teeth into. Employees are a cost. Take all you can from them and you have reduced your cost. Stupidity In Management 101.

Congressional concerns about cash balance conversions focus on whether companies are adequately disclosing to participants the resulting changes in benefits and whether cash balance formulas discriminate against older employees. This has led the IRS to mandate that all determinations and examinations of cash balance conversions be forwarded to the IRS National Office for review. In informal discussions, the IRS has indicated it might withhold approval of all pending conversions to give the agency time to formulate a policy on qualification issues. In addition, the Equal Employment Opportunity Commission is considering whether conversions violate the Age Discrimination in Employment Act.

Duke's credo: "Grab the money now; worry if it is legal later."

Despite recent negative publicity, companies continue to incorporate cash balance formulas into existing defined benefit pension plans. Cash balance conversions have captured the attention of the public, Congress and various government bodies (the IRS and the Department of Labor among them). The attention is unlikely to fade unless various policy issues are resolved. Until that time, companies thinking about converting to a cash balance formula might want to consider delaying such a conversion until these difficult regulatory issues are settled.

Greedy companies who have already made the conversion in the worst possible manner can face the consequences.



Pro Bono
Contingencies - January-February 2000

Cash balance plans are supposed to be easier for participants to understand. Yeah, like tax simplification. The concept appears simple but, as usual, the devil is in the details. The transition problems are, at best, confusing to participants.

One NEPAP client was told in 1996 that her old plan had an accrued monthly benefit of $1,480. This was used to calculate a grandfathered account balance. Three years later her cash balance account was estimated to provide a monthly benefit of $1,152 at age 65. It was difficult for this nurse to appreciate the simplicity of her new plan.

On its May 4 front page, USA Today focused on IBM's cash balance approach. As reported, younger employees will receive higher benefit accruals, employees with fewer than five years until retirement can stick with he traditional program and the company will save $200 million a year. Clearly, older (oooh! My kids are "older") employees with more than five years to go will enjoy significantly reduced future accruals.

The Advocate will have to agree with the pro Bono part. If people were not pro Bono, Sonny would have never been elected to office. He is deceased now, but people still go to see Cher perform. So, the American people are still pro Bono.



Big Firms (Duke Energy/IBM) Hit on Pension Changes

Aging Today By Robert A. Rosenblatt, January-February 2000

Older workers at Bell Atlantic, AT&T, Duke Energy and other big companies have followed angry IBM personnel, who took action against the company last spring, in flooding the Equal Employment Opportunity Commission (eeoc) with complaints charging their employers engaged in age discrimination by switching to a new form of pension plan that favors younger workers and penalizes older ones.

The eeoc has received 'slightly over 100' charges of discrimination, chairwoman Ida Castro said in an interview. The federal agency, showing a sympathetic view toward the workers' grievances, has waived its strict enforcement of a policy rule that individuals must file a discrimination complaint with the agency within six months of the event.

These are not the "who-punched-who kind of questions," Castro said. "We don't know when people were told or when they found out about the changes in the pensions," she said. Castro would not discuss charges against individual companies, citing the eeoc confidentiality rules.

eeoc has accepted complaints filed by workers at Duke Energy, where a new pension plan was put in place in 1997 by the Charlotte, N. C .≠ based electric power company. In Philadelphia, some of the Bell Atlantic workers who were placed in a new pension plan as far back as 1996 have recently filed charges with the EEOC, which enforces federal laws against discrimination on the basis of age. Workers 40 or older are protected.

ANGER ON THE WEB

In addition to employees who have filed with the eeoc, many others are voicing their anger on the Internet, often using websites or chat rooms organized with the help of computer experts from the ranks of the IBM protestors. The sites, all launched since last fall, have recorded thousands of visitors with messages from people with such screen names as 'Angry Spouse,' 'Pension Victim,' 'Ripped Off,' and 'I've Been Mugged.' Internet forums have been established to discuss pension issues at SmithKline Beecham, SBC Communications (parent of Pacific Bell, Southwestern Bell and Ameritech), and other large companies, in addition to those for Duke, IBM and Bell Atlantic. (For links to these sites, visit www.cash pensions.org.)

The common element in the wave of protests is an anguished sense of betrayal from veteran workers who feel their companies have been disloyal by changing the pension expectations late in the workers' careers. They feel they can't go anywhere else to work. "We are what you would call career-locked people," said Janice Winston, a 26-year Bell Atlantic veteran, who calculates that she will lose $169,000 in lifetime benefits under her firm's revised pension plan. "I have been loyal to the company. If it fails, I fail. I don't want to bad-mouth the company, but wrong is wrong," she said, adding that she reluctantly went to the eeoc.

Workers might not realize they could be suffering discrimination "until they actually retire or when they hear about the IBM workers making a fuss," said Laurie McCain, a staff attorney for the litigation unit of aarp (formerly the American Association of Retired Persons), Washington, D.C. She noted that many companies have not explained what is happening. "We believe companies should operate in complete honesty, and tell workers there may be a period when they make no progress at all in building up their pensions," she said. Firms are required to notify workers when they change a pension plan, but the complex technical nature of pension calculations often makes the explanations incomprehensible to most people.

Older workers... enjoy the benefits of the traditional pension, which has its rapid build-up in the last 10 years of a career. Many of the affected workers had expected to retire in their 50s with full pension benefits after a 30-year career. Instead, the switch to a cash-balance program often freezes the build-up of benefits for these older workers. They may never catch up to what they would have gotten under the old plan.

IBM first imposed its new cash balance plan in May, declaring that workers 50 and older, those within five years of retirement, could stay in the old plan. After a round of protests, the company offered a choice between the new and the old plan to employees ages 40 - 49 with at least 10 years at the company.

IBM workers created a website and developed ways to calculate the impact of changes on an employee after the corporation stopped providing individual estimates. They held press conferences, lobbied in Washington and prompted Congressional hearings. The publicity generated by the IBM controversy caused an upsurge of interest among workers who had paid little attention when their own employers changed plans.

Meanwhile, the controversy prompted the Internal Revenue Service (IRS) to freeze any new approvals of cash-balance plans. The IRS has jurisdiction over the finances of such plans because company contributions are tax deductible.

"The eeoc, in addition to handling individual complaints, also is studying whether to issue a general policy statement giving guidance to employers on the issue," Castro said.

Robert A. Rosenblatt, who co-chairs the Aging Today Editorial Board, is a Washingtonvcorrespondent for the Los Angeles Times.

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Know Your Enemy: ERIC
Employee Advocate - 1/21/2000

You should know your enemy, and ERIC is your enemy. ERIC stands for: ERISA Industry Committee. By the name, you may think that it is a government agency or group to help employees. It is quite the opposite! It is a lobbying group for the largest businesses.

ERISA stands for: Employee Retirement Income Security Act (1974). The ERISA laws are to help employees. The laws are weak, but they are about all we have. The fact that ERIC uses ERISA as part of its name can confuse people. ERIC does NOT promote ERISA laws. ERIC is strictly a lobbying group that seeks to circumvent the ERISA laws. A good rule of thumb is: "If ERIC likes it, it is bad for us. If ERIC opposes it, then it is good for us."

You can be sure that ERIC sent its letter to the IRS. What they had to say will NOT help any employees. The majority of workers are probably oblivious to ERIC as they go about their daily jobs. Little do they know, that day in and day out, ERIC is seeking to reduce their retirement benefits by any means available. What do you need to do about ERIC? There is nothing that you need to do. Just recognize ERIC for what it is, your enemy.

There is one thing that you can do. Your letters to Senators and Congressmen will help offset the relentless lobbying efforts of ERIC. Let them know how bad the cash balance conversions really are. Not all of our representatives are knowledgeable about pension laws. Some may even think that ERIC is a good organization with good will toward employees. Enough letters from us may drown out ERIC's lobbying.



Another Good Move
Employee Advocate - 1/15/2000

If you have read "Cash Balance Plans Should Not Be Immune From Age Discrimination" and the IBM Employee Benefits Action Coalition's press release on the "News" page, you may have wondered why the IEBAC came down so hard on the proposal. After all, nine out of the ten proposals sounded like the answer to the whole case balance plan problem.

As it turns out, the IBM employees were right on again. The IEBAC did not just "fall off the turnip truck yesterday." The IEBAC has not accomplished all that it has in the short time it has existed by being stupid. Remember this: "Weak laws are worse than no laws at all."

History has shown that any weak spot in a law will be exploited to the fullest extent imaginable. Large corporations with millions of dollars to throw at lobbyist and consultants will circumvent the law if ANY weakness is found. Senator Grams proposal had a fatal flaw, the anti age discrimination provision. If that provision would ever become law, crooked CEO's, actuarial firms, and various snake oil salesmen would leap with joy.

Make no mistake, age discrimination charges are a grave concern of CEO's who have raided pension fund via shady cash balance plans. If the proposal had went unchallenged, the good parts could have been chopped away. The anti age discrimination provision would have never went away. The dark forces promoting cash balance plans would have attempted to attach it as an amendment to every bill going. It is important for us to let our senators and congressmen know that we will not tolerate any bills exempting cash balance plans from age discrimination laws.

Many experts feel that age discrimination is the best thing that employees have going for them. It would be foolish to allow it to be thrown away. For any law to do Duke-Energy employees any good, it would have to be retroactive. The farther back the law goes the better. That many more cash balance plan victims would be rescued from its devastation. Now is the time to write. A letter gets more attention than e-mail. Most political offices are overrun with e-mail. E-mail is better than nothing. A letter or call is better. There is nothing wrong with doing all three. Points to include:

  • We need laws protecting employees from abusive cash balance plans.
  • Cash balance plans should NOT be exempt from age discrimination laws.
  • Any (good) laws should be retroactive (as far back as possible).



Cash Balance Plans
"Hewitt Newsstand"

With regard to cash balance plans, Congress is likely to enact legislation in 2000 that will, at a minimum, require increased disclosure by employers that make pension plan amendments that would reduce future benefit accruals. In addition, forthcoming Republican proposals are expected to limit the use of "wear away" specifically in the context of a cash balance conversion. Action on this general issue could come early in the year in response to continuing political pressure. In addition, findings are expected early in the year from the review of potential age discrimination issues connected with cash balance plan conversions conducted jointly by the Equal Employment Opportunity Commission (EEOC), Treasury/Internal Revenue Service, and the Department of Labor.


Pensions - 1999