Pension-Raiding Epidemic Worthy of Condemnation
Schultz, a reporter for the
Schultz begins her saga with
His message was similar to those being exhorted by hundreds of companies that slashed their pensions and medical benefits for millions of retirees. They all claimed the trouble was an aging workforce with retirement packages that were too generous and couldn't be sustained when the stock market faltered.
In fact, as Schultz points out, the plan for GE's workers was in such fine shape that the company hadn't contributed any money into it since 1987, and yet it still had enough money to cover all current and future retirees. The same was true for many large companies. But that didn't stop them from going on a spree of cutting retiree benefits.
The reason, Schultz says, is twofold.
First, cutting benefits replenished pension funds' surplus assets that had been siphoned off for other purposes. For example, GE sold its pension surpluses in restructuring deals. This indirectly turned pension assets into cash.
Second, cutting benefits helped earnings. Because new accounting rules required companies to put pension obligations on their books, cutting pensions generated paper gains. This was all the incentive top executives needed. They could trade their workers' comfortable future retirement for a healthier bottom line today that would enhance their personal earnings.
Federal law prohibits employers from rescinding benefits that have been accrued, but they can suspend the plan's growth by freezing it or providing benefits under a less generous formula. Companies jumped at these options, often changing the way pensions are calculated without disclosing it, to the disadvantage of long-time workers.
The subterfuge avoided a worker backlash, but it also meant a tragic surprise for employees entering retirement -- some "cash-balance" plans for older workers effectively froze their pensions just when they should have been reaping the biggest pension enhancements.
Schultz says an industry of benefits consultants arose that helped employers "turn pension plans into profit centers," treating groups of retirees not as deserving of a decent income after giving their working lives to the company, but as portfolios of assets and debts. Pension benefits were squeezed for any additional profits, leaving less for workers.
Today, she says, the giant surpluses are gone, "sold, traded, siphoned, diverted to creditors, used to finance executive pay, parachutes and pensions." Companies did it to themselves. It was not investment losses, an aging workforce and generous union contracts, as they all claim.
In fact, had companies not raided their pension fund assets, "they would have had a cushion that could have withstood even the (recent) market crash," Schultz writes.
Schultz's book is another example of how corporate executive greed is destroying middle-class financial security. These business titans put America's pensions in crisis to serve themselves. They need to be called out in a documentary, and answer publicly for what they've done. My plea is to Moore and Ferguson. Schultz laid it out expertly, now go get 'em.
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Personal Finance - Pension-Raiding Epidemic Worthy of Condemnation
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