Meet investigative reporter Ellen Schultz:
| The Daily Show With Jon Stewart | Mon – Thurs 11p / 10c | |||
| Ellen Schultz | ||||
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Time after time, loyal modest income employees have watched their retirement pensions disappear before their eyes because companies restructure or lie about ‘unsustainability.’ Sometimes the funds have been descimated by giving high paid executive millions in golden parachute deals.
USA Today had an in-depth review of this novel yesterday.
Journalist Ellen Schultz has been writing about such shameful behavior for a long time, mostly in The Wall Street Journal. Now she has pulled together the copious, irrefutable evidence between the covers of a book. It is shocking, and demoralizing. But will members of Congress and federal agency regulators stop what Schultz calls “retirement heists”? Probably not, unless voters make it clear the incumbents will lose their jobs unless something changes. Unfortunately, voters are rarely if ever that organized, no matter how much they have been cheated by corporate chieftains.
As congress turns a blind eye to this rape of the American worker, Schultz exposes more:
Schultz opens the book with a look at the December 2010 annual outlook investor meeting sponsored by General Electricand CEO Jeffrey Immelt. (She could have focused on another corporation and another chief executive just as effectively, because the pension heists are so numerous.)
Immelt spoke about the problems for the corporation’s profitability caused by the pension plan and medical benefits, announcing those benefits would be closed to newly hired employees.
Immelt and other corporate spokespeople have suggested that pension plan shortfalls are caused by out-of-control factors such as the large number of retirees, declining stock market investment returns and competition from foreign competitors that eschew good benefits for laborers.
Schultz knows better from her extensive research. She is a reporter who has become an expert in a relatively narrow subject matter. As she writes, “What Immelt didn’t mention was that, far from being a burden, GE’s pension and retiree plans had contributed billions of dollars to the company’s bottom line over the past decade and a half, and were responsible for a chunk of the earnings that the executives had taken credit for. Nor were these retirement programs — even with GE’s 230,000 retirees — bleeding the company of cash. In fact, GE hadn’t contributed a cent to the workers’ pension plans since 1987 but still had enough money to cover all the current and future retirees.”
Then Schultz delivers the clincher: GE was indeed burdened by a pension plan — the plan for top executives. The obligations of that plan, for a minuscule number of individuals compared with the 230,000 lower-level retirees, totaled $4.4 billion and had drained about $573 million from the corporate treasury over the past three years.
When will America do something the correct this theft? Heretofore, American workers have had little option? Pension theft is nothing new. Some 50 years ago a YMCA managed to steal my husband’s grandfather’s pension. Those two old people ended up having to be taken care of by my father in law. It was sad. They were no longer independent. All they had counted on was gone. The grandfather had paid in to this pension for years. In those days, ordinary people just didn’t sue.
As the baby boomers come of age and begin to boom, I can only hope that there is a hue and cry and that somehow corporations have their pants sued off to right this wrong done to the American worker. It is all mathematical charlatanism. Somehow it becomes the workers’ faults. In reality it is corporate theft. It’s time to put a stop to it.
Where to begin on the corruption involved with this one. First, Schultz is absolutely correct, at least in what she’s saying here. I haven’t read the book so I can’t comment further. One of the most frequent ways of stealing employee pension assets is to convert defined benefit plans to defined contribution plans, or purchase minimum annuities. Defined benefit plans are the ones where the retiree gets a guaranteed minimum pension payment, and the plan sponsor (the employer) manages the plan assets and takes the investment risk. “Overfunded” means the plan’s current assets are greater than the actuarially-projected liabilities to retirees. The corporation can grab this surplus by eliminating the plan and buying minimum value annuities, 401(k) accounts or something else for the employees/retirees. The company then pockets the difference. Some of the problems with this are that the projected liabilities (which determines the minimum value of the annuity, etc.) are based on a range of assumptions including future investment returns, inflation, interest rates, etc. The company can skew the estimates and screw the employees/retirees.
This is done in mergers and acquisitions also. In determining the price the acquirer is willing to pay for the target company, they estimate how much of this pension fund surplus they can drain off for themselves as part of the deal.
Companies can also determine their own investment policies for pension portfolios, to a very large degree. That means making speculative bets with the pension plan assets. If the bets pay off, the company skims off the “surplus.” If the bets don’t pay off, assets to support the plan fall. In some cases, businesses can put the pension plan liabilities in subsidiaries or take other measures to avoid paying off on losing bets. They can even arrange for the plan to default, in which case beneficiaries get a partial payment from the Pension Benefit Guaranty Corporation. It’s funded somewhat by premiums from pensions, but would rely on taxpayer money if it ran out of money.
Public employees think they are better protected? Think again. Public pension plans, including VRS, are not subject to even the same laws as are private plans, such as ERISA. ERISA at least mandates that if a private pension fund has a deficit, the plan sponsor (the employer) must make contributions to fund it fully (assets equal projected long-term liabilities to retirees). Public pensions are exempt. Politicians simply decline to make what would be required contributions in the private sector, create huge deficits in plan assets, and declare that have “balanced the budget!!!” Virginia has been doing that for a long time.
Bottom line, save for your retirement. Social Security will not be able to continue paying benefits at the current level much longer, corporate thieves are stealing your private pensions, and lying current politicians are shifting public pension burdens to future politicians who would have to support tax increases to pay the promised benefits to public retirees.
Have a nice day!
NTK,
Isn’t this something that can be stopped?! Isn’t this why people, however hippy like and maybe over the top, are complaining about on wallstreet? Corporate greed!
Translation: you are screwed.
Thanks for your input, ntk
This is again a case of political corruption driven by influence-buying. From the quote from the book on Amazon:
“With the help of well-connected Washington lobbyists and leading law firms, over the past two decades employers have steadily used legislation and the courts to undermine protections under federal law, making it almost impossible for employees and retirees to challenge their employers’ maneuvers. With no punitive damages under pension law, employers face little risk when they unilaterally slash benefits, even when promised in writing, since they can pay their lawyers with pension assets, and drag out the cases until retirees give up or die.”
Corporations, through their campaign contributions, buy politicians and their lobbyists/attorneys manipulate the entire process. Elena – I don’t yet know entirely what the Occupy Wall Street movement is about, but this is the sort of thing that is driving many of them, and many other people as well.
We face it on the local level, as I have written time and again here. Look at VPAP on the candidates likely to win the Board of Supervisors elections next month. All financed by developers and endorsed by the Prince William Association of Realtors. Not a single candidate who pledged to protect the Rural Crescent won in a contested primary. Main reason – developer money in the campaigns.
Nationally, our corrupt, screwed-up campaign finance system allows these corporations, insurance companies, etc. to steal our retirement money. Locally, the same system allows development interests to steal our quality of life and tax money.
Thanks Moon for posting this. I missed Jon Stewart when he had this guest. This is an issue I care deeply about.
I wish only that more of my fellow Republicans would realize that the free market does not mean freedom for corporations, lawyers, lobbyists, campaign contributions to plunder the economy.
I hate to sound like a Democrat but maybe that is why we have regulations that Republicans howl about. Perhaps it is man’s basic default to try to rape and plunder the system to line his own pockets.
I go back to the buffalo and the railroads each and every time. 2 years after the railroads were in, the buffalo were borderline extinct. Had the govt. not swooped in and saved them, there would be no more buffalo. Extinction is forever. Seeing a wild buffalo is just a grand experience. There is no more beast to uniquely and ultimately American.
Great last paragraph NTK!
“I wish only that more of my fellow Republicans would realize that the free market does not mean freedom for corporations, lawyers, lobbyists, campaign contributions to plunder the economy.”
Where is that happy medium NTK, between TEA Party and OWS?
I believe in Capitalism, but I’m not sure that the corrupt process we have now IS real capitalism. The gap between have and have nots is becoming more like a great abyss.
Plus, they taste good. 😈
@Moon-howler
It was also the gov’t that assisted in the buffalo slaughter. Kill the buffalo and the Indian has no food.
And the railroads were gov’t supported. And they failed. I wish I can remember the link to the article, but it basically stated that every RR that was subsidized by the gov’t took the money and ran, then went bankrupt leaving the fat cats rich. Only one railroad did not and it was one that did not take gov’t money.
Sounding like a Democrat is fine. But a point….. Republicans don’t mind regulations. Republicans want effective and fair regulations. With all our regulations, pensions are STILL underfunded because those that set them up, ie politicians, were using horrible numbers for the returns……GIGO.
I have no problem with people eating buffalo. I have a problem with people using buffalo for target practice and leaving a carcass on the prairie to rot.
The government also stepped in and did what was necessary to preserve the buffalo by isolating a few remaining herds in Yellowstone National Park.
What were they protected from? Man’s greed.
Just out of curiosity, why is it necessary to contradict me? Did people shoot off remaining herds from trains or did they not? Were there shooting excusions? Who gives a rat’s ass who supported the railroads? That isn’t what this is about.
And why are politicians setting up private pensions? This post is about private pensions, not public ones.
There isn’t a person alive, I don’t think, that doesn’t know that the US govt broke treaties with the Indians, stole their land, gave them crap no one else wanted. Was that the point I was trying to make, before you wanted to argue?
Who made the regulations about shooting buffalo and who enforced it?
I’m not contradicting you. I am mentioning a bit of history.
I thought that you were talking about how it was the government that saved the buffalo and enabled the RR’s. I mentioned that it was also the gov’t that helped kill the buffalo and that crony capitalism didn’t work back then either.
The government enabled the RR’s to grow. They RR’s and gov’t fatcats colluded to make a lot of money and let the investors lose. The gov’t assisted in the buffalo slaughter and then declared them endangered.
Time after time, loyal modest income employees have watched their retirement pensions disappear before their eyes because companies restructure or lie about ‘unsustainability.’ Sometimes the funds have been descimated by giving high paid executive millions in golden parachute deals.
And why are politicians setting up private pensions? This post is about private pensions, not public ones.
I apologize. I thought that discussing a related subject about how public pensions, TOO, are in jeopardy was relevant. Never mind.
Yes, why are politicians involved with private pensions? I understand why they are involved with public pensions all too well, existentially even.
The govt did ultimately save the buffalo. They live in Yellowstone and were protected protected. Herds of 60 million buffalo were reduced to just 21 buffalo. That is how close they were to extinction.
The only point of my buffalo comment now and in the past is to demonstrate the need for govt intervention and regulation. People saw the carcasses for miles and miles from train cars and petitioned to the save the animals. So yes. Things change.