Article 43

 

Pension Ripoff

Posts in this section are about pension issues - especially the class action pension suit against AT&T.

Tuesday, August 21, 2018

Bankruptcy Is The New Retirement

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Graying of U.S. Bankruptcy: Fallout from Life in a Risk Society

Deborah Thorne
University of Idaho

Pamela Foohey
Indiana University - Maurer School of Law

Robert M. Lawless
University of Illinois - College of Law

Katherine M. Porter
University of California - Irvine School of Law

August 5, 2018

The social safety net for older Americans has been SHRINKING for the past couple decades. The risks associated with aging, reduced income, and increased healthcare costs, have been off-loaded onto older individuals. At the same time, older Americans are increasingly likely to file consumer bankruptcy, and their representation among those in bankruptcy has never been higher. Using data from the Consumer Bankruptcy Project, we find more than a two-fold increase in the rate at which older Americans (age 65 and over) file for bankruptcy and an almost five-fold increase in the percentage of older persons in the U.S. bankruptcy system. The magnitude of growth in older Americans in bankruptcy is so large that the broader trend of an aging U.S. population can explain only a small portion of the effect. In our data, older Americans report they are struggling with increased financial risks, namely inadequate income and unmanageable costs of healthcare, as they try to deal with reductions to their social safety net. As a RESULT of these increased financial burdens, the median senior bankruptcy filer enters bankruptcy with negative wealth of $17,390 as compared to more than $250,000 for their non-bankrupt peers. For an increasing number of older Americans, their golden years are fraught with economic risks, the result of which is often bankruptcy.

SOURCE

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Bankruptcy is hitting more older Americans, pointing to a retirement crisis in the making

By Michael Hiltzik
LA Times
Aug 6, 2018

Whether America is facing a retirement CRISIS in which seniors are making do with shrinking financial resources has been widely debated. But here’s a telling metric: Seniors are making a larger share of bankruptcy filings.

That’s the finding of a new paper by academic researchers affiliated with the Consumer Bankruptcy Project, which periodically samples personal bankruptcy filings from all 50 states and the District of Columbia. “Older Americans are increasingly likely to file consumer bankruptcy,” they write, “and their representation among those in bankruptcy has never been higher.”

The figures should worry advocates for SENIORS, because in terms of the overall financial health of the 65+ cohort, its likely to be the tip of the iceberg. “Only a small fraction of those who are having financial troubles file for bankruptcy, one of the authors, Robert Lawless of the University of Illinois law school, told me. “So this is part of a much bigger story about financial distress among the elderly.”

It’s true that the elderly have been the beneficiaries since the 1930s of America’s strongest and most successful social safety net. The system was born with Social Security in 1935, which aimed to reduce the scandalous poverty rate among seniors. It was followed by Medicare and Medicaid in 1965, which offered relief for healthcare, and culminated in the Medicare prescription drug program enacted in 2003.

During that same period, a sizable percentage of American workers were covered by corporate defined-benefit pensions, producing what retirement experts have called “a brief golden age” when many American workers could retire with confidence.

Over the last few decades, however, confidence in that safety net has ebbed. Defined-benefit plans have given way to defined contribution plans such as 401(k)s, which saddle workers with all the risk of investment market downturns - and in which wealthier workers are overrepresented, both in enrollment rates and balances.

Some older Americans may have more access to retirement income than their forebears, but theyre also carrying more debt. The share of Americans still carrying mortgage debt when they reach age 65 rose to 38% in 2013 from 22% in 1995, according to the Joint Center for Housing Studies at Harvard. Their mortgage balances also have risen over that period, to $73,000 from $27,300 in inflation-adjusted terms. Despite Medicare, medical expenses remain a large component of “seniors” financial burdens.

It’s also proper to keep in mind that the stagnation of wages for workers is certain to have an impact as today’s workers move into retirement. Jobs that once offered a stable middle-class income with benefits have morphed into low-wage jobs without job security, healthcare or pensions. Workers struggling to make ends meet in an economy in which corporate profits are approaching a post-recession record arent likely to become suddenly flush in their retirement years.

The bankruptcy paper has sustained some criticism from commentators who believe the retirement crisis has been exaggerated. Kevin Drum of Mother Jones observed, fairly enough, that the bankruptcy rate for the 65+ cohort hasn’t changed at all over the last 15 years, and the run-up in the rate during the decade 1991-2001 reflects a sharp increase in the rate among all Americans and that increase began in the mid-1980s.

But I would argue that more seems to be going on here. To begin with, the bankruptcy bulge seems to be moving up the age ladder. In 1991, 8.2% of all bankruptcy filings were made by households led by people 55 or older; by the 2013-2016 period, their share was 33.7%. According to the new paper, the bankruptcy rates among all age groups 54 and younger have fallen since 1991, but the rates for all groups 55 and older have risen.

This isn’t related to the general graying of the U.S. population. As Lawless observes, the over-65 population has risen by 16% since 1991. But bankruptcy filings in that cohort have increased by 2 times.

“This is not a trend, but something qualitatively different in what were seeing,” he says.

Lawless and his colleagues point out that while bankruptcy is a last resort for any debtor and nothing like the panacea its often depicted to be, itҒs an especially dire choice for seniors. Unlike younger debtors, seniors dont have years ahead of them to rebuild their household finances while their debts are held in abeyance. ғBy the time they file bankruptcy, the paper observes, ԓtheir wealth has vanished.

America has some serious policy choices to make, and pretending that seniors are living the high life on Social Security doesn’t clarify matters, especially as the claim is typically made by conservatives as a rationale to cut Social Security and Medicare benefits.

The figures on bankruptcy suggest that the opposite is necessary expanding Social Security and increasing benefits to shore up retiree resources against the decline of personal savings and pension income. The guaranteed retirement accounts advocated by a number of retirement experts - personal accounts funded by workers and employers during their working years, supported by a tax credit and a government guarantee against loss of principal - are a promising option. America has more than enough resources to make sure, as it did in the 1930s, that its seniors won’t be facing their last years fearing penury.

SOURCE

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Entering retirement broke and bankrupt

By Aimee Picchi
MoneyWatch
August 6, 2018

The “golden years” of retirement are significantly tarnished for some older Americans, whose ranks among the bankrupt have surged fivefold since 1991.

Even though the U.S. population is aging, the spike in older Americans entering bankruptcy far exceeds the demographic shift, according to new research from the Consumer Bankruptcy Project, which analyzed data from bankruptcy court records and written questionnaires. About 100,000 of the 800,000 annual bankruptcy filings are from households headed by seniors, or about 12.2 percent of all filings.

The culprit appears to be cutbacks in the social safety net—such as raising the retirement age and requiring seniors to pay more out-of-pocket health care costs—as well as a shift in risk from government and corporations onto individuals. Americans are less likely today to retire with a private pension, given the growing popularity of 401(k)s, where workers are responsible for making their own investment and savings decisions, and more likely to be carrying mortgage and credit card debt into their 60s and 70s.

The full retirement age for Social Security, once 65, is inching up every year. And retirees are now paying 20 percent of their income on health care expenses even though they are covered by Medicare, compared with 12 percent for previous generations.

As a result, the rate of bankruptcy among Americans over age 65 has doubled over the period studied by the researchers. “For an increasing number of older Americans, their golden years are fraught with economic risks, the result of which is often bankruptcy,” their report noted.

Because one-quarter of the country will be older than 65 by 2050 compared with 15 percent now, the authors predict America will see a “coming storm of broke elderly.”

Older and poorer

The problem with these societal risk shifts, as the authors view it, is that seniors are the group least able to cope with such changes. Because of their age, they have fewer years to build or rebuild wealth, and it’s common for older Americans to have trouble finding jobs that pay as much as they earned when they were younger, they noted.

“Retirement is a particularly precarious time of life,” they wrote.

Bankruptcy is designed to provide a “fresh start” by wiping away debts or restructuring them in a way that makes it easier to pay them down, but bankrupt seniors don’t have enough time to regrow their financial wealth, they added.

Bankrupt seniors are in rough financial shape, the researchers found. They are shouldering more than $100,000 in debt, compared with $1,000 in debt for their non-bankrupt peers. Financially solvent senior citizens have about $251,000 in wealth, but bankrupt older Americans have negative net wealth of more than $17,000.

Older Americans who file for bankruptcy are less likely than their younger peers to have a college degree, although there’s no racial difference between older and younger debtors, the researchers found. But across the general population, Asian-Americans and Hispanics are less likely to file for bankruptcy than white or black Americans.
“All things went up in price”

Older Americans who file for bankruptcy told the researchers in survey responses that they were often hit by a double-whammy: inadequate retirement income and rising costs—especially health care costs.

“All things went up in price,” one unidentified respondent told the researchers. “Retirement never went up. Had a part time job that was helping to meet monthly payments. House payment kept going up. Was fired from my part time job that I had for over 10 years without any warning. Being 67 and having back problems, not many people will hire you even as part time worker.”

Others noted their health problems resulted in a loss of their job or income, while their insurance didn’t fully cover their health expenses.

“I got to the point I owed more than I was making on Social Security. To get out from under these medical bills I had to file bankruptcy,” another respondent told the researchers.

About 7 out of 10 respondents indicated that the combination of medical expenses and missing work contributed to their bankruptcies.

Asked what they were unable to afford in the year before going bankrupt, half of seniors said the most important thing they had to cut back on was medical care, such as surgeries, prescriptions and dental care.

“These responses continue to suggest that their health care coverage is inadequate,” the researchers wrote.

Taken together, the portrait of retirement in the U.S. is one of instability and risk, at least for some Americans. And bankruptcy, while designed to provide some relief, may be “too little too late.”

They added, “By the time they file, their wealth has vanished, and they simply do not have the enough years to get back on their feet.”

SOURCE

Posted by Elvis on 08/21/18 •
Section Pension Ripoff • Section Revelations • Section Dying America • Section Personal
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Thursday, August 09, 2018

ATT Pension Clawback

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Remember the ENGERS VS ATT lawsuit?

The one that took 10 years and WE LOST?

Looks like pensioners who didn’t get screwed back then - are getting hit now.

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AT&T overpaid some pensioners. Now the company wants the money back
The telecom giant has enlisted a collection agency, a step other companies in similar situations have declined to take.

By Theo Francis Bloomberg
Business Standard
August 4, 2018

When James Mizelle retired in 2001, he started drawing a pension from his 27-year career with AT&T and other phone companies.

Fifteen years later, he got a letter saying his benefits were miscalculated and demanding he repay $32,116.05. Mr. Mizelle, living in Round Hill, Va., replied that he couldnt repay. Within weeks, he heard from a collection agency.

ғThat money had been spent, says Mr. Mizelle, 70, who had incurred medica bills in a battle with prostate cancer. ԓI could not pay it back.

The former programmer and human-resources worker is among potentially hundreds of ex-employees whom AT&T Inc. has dunned in recent years for what it calls pension ԓoverpayments. AT&T sometimes has enlisted a collection agency to recover the money, a move retiree advocates, pension lawyers and some former Treasury Department officials call unusual.

Among them are 17 retirees from whom AT&T and Fidelity Investments, the pension planԒs record-keeper, have demanded a combined $1 million and who have contacted lawyers working with the Pension Rights Center, a retiree-advocacy nonprofit in Washington, DC, or related groups around the country, the center says.

AT&T spokesman says the pension overpayments affect significantly less than 1/10th of 1%Ӕ of its about 517,000 participants, with a very small percentageӔ referred to collections. He declines to say how the company identified the errors or how much money is at stake.

A Fidelity spokesman says the firm helped zero in on errors at AT&Ts direction, including some predating FidelityҒs role. AT&T and Fidelity decline to address the individual cases in this article.

Companies for years have been taking measures to recoup pension overpayments, an issue federal tax officials have tried to address going back to the 1990s with a series of refinements to rules governing when and how companies must rectify such errors.

AT&T appears to have gone a step beyond many other large companies by sticking to its demands of full repayment and hiring a collection agency in some cases, even where retirees make the case that they lack the wherewithal to repay.

Sydney Smith, a former AT&T information-technology analyst living in the St. Louis area, received a letter in July 2016 saying she owed AT&Ts pension plan $19,306.95 - money she had received, the company later told her, because she provided a date in the pension-benefit calculation that the plans website shouldn’t have let her use.

Ms. Smith says she told Fidelity she didnt have the money. A single mother, she had cashed out her pension to pay debts and living expenses. ғI used it, says Ms. Smith, 42. ԓIts gone.Ҕ

She asked about a repayment plan and was told she could make two payments of nearly $10,000 each, she says. She didnt have that. Days after the plan denied her appeals, Ms. Smith says, she began getting calls from Lyon Collection Services Inc., the same agency that demanded repayment of Mr Mizelle. “They started to call pretty constantly.” Ms. Smith enlisted Roger Curme, a lawyer with the South Central Pension Rights Project, a legal-assistance service funded in part by the U.S. Department of Health and Human Services. “We havent seen that before,” Mr. Curme says of a big companys using a collection agency. “These tactics that AT&T is using - they’re kind of harsh.

Ms. Smith filed a claim with the plan asking it to waive repayment but was denied. The plan also denied her subsequent appeal. She hasn’t heard from the company since February, she says, and is hopeful she wont. Yet, she adds, “its not resolved - its still up in the air.”

Lyon Collection President Rick Mantin says his firm follows laws governing consumer collections and his employees are persistent without harassing customers. He declines to comment on individual cases or clients and says the company doesn’t focus on retirees. “Debtors have the right to request that Lyon cease any further communication with them,” he says, “which we immediately honor.”

In general, pension lawyers say, it is legal for a company to demand back pension overpayments. Pension-plan sponsors and administrators have an obligation to safeguard a plan’s assets. Companies for years have interpreted that obligation to include not just stopping overpayments but also requiring repayment. Often, plans recoup what they can by reducing retirees remaining benefits.

“Not recouping the monies would mean that there would be fewer funds available for distribution to other participants,” the Fidelity spokesman says.

Pension lawyers say that in recent years some employers and plan administrators have grown skittish about giving retirees a pass for even small overpayments. They point to Internal Revenue Service guidance that suggested plans had to pursue repayments vigorously or risk losing key tax benefits, such as deductions for employer contributions and tax-free investment returns.

Among companies recently requesting paybacks is Fiat Chrysler Automobiles NV’s U.S. unit, which says that in 2016 it notified several hundred retirees that their pension checks were incorrect. About 300 people, or 0.3% of its pension recipients, received more than they were supposed to, it says.

The company says it followed federal regulations when asking retirees to return overpayments and doesnt use a collections service. On average, it says, those getting extra payments were receiving benefits of $24,000 a year. Three-quarters of them were asked to repay $3,000 or less. Of the rest, the average recovery the company sought was 3.7% of the retireeҒs monthly benefit,and none was more than 8%.

Had they known the correct payment amount, some retirees might have made different life decisions, such as when to retire or where to move, says Jay Kuhnie, president of the National Chrysler Retirement Organization, a retiree-advocacy group. They might have said, that’s not as much as I thought, Im going to work another 4 to 5 years,Ҕ he says. The retiree has no way of going back.Ӕ

AT&Ts collection agency AT&T’s pension plans have $45 billion in assets, enough to pay about 77 cents on every dollar of pension benefits earned so far by all current and former employees and retirees for their full life expectancy, as well as other beneficiaries. Lawyers who work with retirees say they rarely see referrals to collections agencies by a large company. Some former Treasury Department officials who worked on recoupment issues say it wasn’t something they had seen before.

ғAn awful lot of plan sponsors, just as a matter of culture, are not very enthusiastic about chasing down their retirees to recover overpayments, says Brian Dougherty, co-leader of the plan-sponsor task force at the law firm Morgan, Lewis & Bockius LLP.

The AT&T spokesman says ԓour approach is common and similar to how most other employers handle this issue and follows federal pension rules, treating retirees ethically. The Fidelity spokesman says that ԓhaving a third party to assist with contacting plan participants in seeking reimbursement is a common practice among many employers in the industry.

Faced with complaints from retirees whose pension benefits had been reduced, officials at the Treasury Department and the IRS in 2015 issued new guidance, clarifying that plans could recover funds in other ways instead, including from contractors responsible for errors. Companies could also replace the missing funds themselves, or modify plan rules retroactively to accommodate the overpayments, according to the guidance. “It clarified that plan sponsors were not always required to recoup inadvertent overpayments and pursue all available legal remedies to do so,” says Mark Iwry, a Treasury Department official from 2009 to 2017 who worked on retirement policy. The guidance “took a step toward making the system more practical, workable, and humane.”

Some pension experts have concluded that overpayments essentially never harm plan finances, says Richard Shea, who advises employers as head of the employee-benefits law practice at Covington & Burling LLP. That’s because employers must set aside enough money to cover a lifetime of benefits based on what retirees actually receive, not some earlier estimate.

The way the funding rules work, you’ve already got it, he says. “You don’t have to get it back.” Telephone-company pensions may be more prone to mistakes than others, thanks to the federal breakup of the Bell System monopoly in the mid-1980s. Often, workers pensions accompanied them as they moved among the company’s successors.

An operators case Some errors AT&T identified amount to double-counting, in which retirees received benefits reflecting their full careers plus additional payments reflecting part of the same history.

Eileen Ralston of Daytona Beach, Fla., joined what was AT&T’s Pacific Telephone in 1970 as an operator. She left telephone work in the mid-1980s, then rejoined the new AT&T in 1986 as an operator. She began collecting her AT&T pension of $921.83 a month soon after leaving in 1999. Shortly before turning 65, she says, she called AT&Ts pension administrators and was surprised to hear she was entitled to another $546.73. “I said, are you sure about this? Because I get an AT&T pension,” says Ms. Ralston, 75. “They said, no, this is your pension for your previous service.”

Just before Ms. Ralston’s September 2017 birthday, Fidelity told her in a letter that the additional benefit was a mistake and that she owed $58,500.11.It was about two years after she suffered a heart attack. “I thought I was going to have another one,” she says. Every time I get something in the mail from AT&T that says “benefits department, I get a cold chill up my back.”

AT&T offered to halve her remaining pension to $444.89 a month. After Ms. Ralston consulted a lawyer, she received a letter from AT&T in February reaffirming the debt but adding that “your overpayment information will not be sent to an outside collections agency at this time.”

She hasn’t repaid and worries AT&T might come after her again.

Claudia Jones worked for Bell South and then AT&T for about 16 years, she says, before being laid off in 2015. She took her pension in a lump sum and invested it in an annuity that pays about $600 a month.

In March, she got a letter from AT&T and Fidelity saying her benefit had been miscalculated and that she would have to repay $45,300.17. “Say they did miscalculate,” says Ms. Jones, 66. “We shouldnt be punished for that.” In late June, she says, she started receiving calls from Lyon Collection. She can’t afford to pay, she says, and isn’t sure what shell do.

AT&T left Mr. Mizelle, too, in limbo. Fidelity in a letter wrote that “the Plan will recover the excess benefit amount by any means that are available.”

He enlisted a lawyer to file a claim with the plan, arguing that he no longer had the additional money and that requiring repayment would cause him financial hardship. The plan rejected his claim. The committee that denied his subsequent appeal wrote him reiterating the debt but saying it decided not to pursue further collection attempts of the overpayment amount at this time, without waiving any rights to resume the collection process in the future.

SOURCE

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Here’s another topic about AT&T:

They changed my wireless plan and raised the bill without notice.

Rep on the phone wasn’t too friendly and only offered plans that cost more.

No grandfathering.

I found THIS on the internet.

Posted by Elvis on 08/09/18 •
Section Pension Ripoff
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Tuesday, January 07, 2014

Kiss Boeing Workers Pensions Good Bye

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Boeing Machinists Narrowly Approve End to Pensions

By Jim Levitt
Labor Notes
January 6, 2014

Corporate America beat us, by a hair: on a 51 percent to 49 percent vote, BOEING’S CONCESSIONARY CONTRACT was approved Friday.

It passed by about 600 votes, in a much smaller turnout than the VOTE BACK IN NOVEMBER.

Less than 100 people were in the room for the vote-count announcement, in stark contrast to other times weve voted on a contract. The few hardy souls who came to the main Seattle hall of Machinists (IAM) District Lodge 751 seemed stunned when the results were read. Only one or two shouted anything, and within a minute the room was empty. It all ended with barely a whimper.

But the effects will be profound. Besides losing the defined-benefit pension (current employees will continue to accrue service time until September 2016, at which time the plan will be frozen; new hires will get only a 401(k)), we’ve lost collective bargaining, for all intents and purposes.

Two times now, in a three-year period, Boeing has come after us for concessions while we still had a year (in 2011) or three years (2013) left on our contract. Both times, the company has used the threat of moving the next generation of a given airplane program (737 in 2011, 777X in 2013) if we didn’t comply.

Because we are under contract, we had no strike weapon to provide leverage.

This new contract will be in place until 2024. Boeing will be looking to revamp at least a couple of other airplane programs before then guaranteeing that the company will be back for another bite of the apple.

“Take It or We Leave” is THE NEW MODUS OPERANDI.

At this point 47 percent of the IAM workforce at Boeing is 50 or older. Many of those workers will retire in the next decade. By the time 2024 rolls around, a distinct majority of the union membership will have no experience of a normal contract negotiation, or of a strike.

The question is already being raised by members: What is the union for? Whats the point?

Mood Was Grim

The atmosphere in Everett, where 17,000 union members work, was very strange on voting day. Members needed an eligibility card, sent to them by mail, to obtain a ballot to vote on the contract. A huge number did not receive the card in time. They thus needed to obtain a Œgood standing card, requiring a stop at the front desk in the union hall.

Problem: only two or three office employees were available at the Everett hall. There are only two or three computers for them to use to check the necessary rosters in any case.

Result: thousands of union members spent two hours or more waiting in line out in the cold outside the union hall. (It was tame by Midwest standards, but we specialize in a damp cold out here.) I’m astonished there wasn’t an explosion. Almost everyone just put up with it.

Very few signs, no chanting, no nothing. And it was impossible to read the mood.

When I got to the union headquarters in Seattle, the staff was as uncertain as I was. While we were waiting for the count in Everett to finish, we heard that the count in Auburn had favored passage. Auburn is where the Fabrication Division has its largest plant, with many older workers, including a large proportion of skilled machinists. These have traditionally been strong supporters of strikes.

But what I heard was that many of these guys figured that even if we rejected the contract now, Boeing was going to crunch us on the pension in 2016. So why not take the $10,000 bonus, and the boost in the monthly pension payout to $95/month per year of service that goes into effect in September 2016?

Finally, at 10 pm, District Lodge President Tom Wroblewski came into the hall to announce the results. Union spokespeople took no questions after reading the very short statement.

The union didn’t release an official vote count, but the Seattle Times reported there were about 23,900 votes altogether. Turnout was lower than November in part because this time the International deliberately scheduled the vote when many members, especially long-timers, would still be away on holiday vacations.

Will “Boeing Effect” Spread?

Boeing’s pressure and threats of the last month, aided by nearly all Washington state politicians and the media, clearly got to the membership. The public framework of the debate assumed that since workers elsewhere have been losing (pensions specifically, but wages as well), therefore Boeing workers should as well.

We were expected to sacrifice for the greater good of the region. Boeing’s extortion of the state, and of the union membership, was seen as business as usual. This was echoed in the statements of IAM International President Thomas Buffenbarger. Our efforts to defend our contract were completely undercut by the International.

Despite the verbiage in the most current edition of the IAMs publication, touting the importance of defined-benefit pensions, there is no way the IAM will be able to protect pensions anywhere.

The spillover effect on the rest of organized labor is obvious. The IAM workforce at Boeing is the largest unit in the IAM, and one of the last industrial unions with a defined-benefit pension.

I expect the rest of corporate America to mimic BoeingҒs tactics. Why wait until a contract is expiring? Just tell the union that it has to make concessions, or well do x, y, or zҒand it has to be done now, not when you will have the ability to strike.

Much of this echoes the concessionary bargaining that wrecked the auto workers and others. The difference here is that Boeing is immensely profitable.

In 2013 the company enjoyed record output, record profits, and a record stock priceup 80 percent. Plus, in November Washington state handed Boeing a package of tax breaks worth $8.7 billion, the largest any state has ever given a single corporation. Being told we had to sacrifice at the very same time Boeing handed out a $10 billion stock buyback and a 50 percent increase in the dividend (worth another $2 billion) only emphasized the unfairness of it all.

Oust Machinists President?

“Let’s put this vote behind us and go forward in solidarity,” wrote Wilson Ferguson, president of Local A (the largest local within District Lodge 751) and a strong proponent of a “no” vote both times, online. His statement was shared in a public Facebook group where members were discussing the deal. Ferguson wrote:

There is a lot of talk of pulling out of the International, that is a self defeating proposition. Our best strategy is to remove Buffy from office. That campaign starts today.

The loss of our pension is a big blow. Not only to us but to workers across the country. Maybe folks on the GUAV page [a vote yes Facebook page] are right that pensions are a thing of the past but it would have been nice to have had a good faith negotiation on the matter.

So while you may be happy that we accepted the deal, please don’t confuse a victory with the loss of something that folks fought, bled and sometimes died to win.

Jim Levitt is 35-year Machinist at Boeing.

SOURCE

Posted by Elvis on 01/07/14 •
Section Pension Ripoff • Section Dying America
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Friday, December 06, 2013

Pension Theft - Class War Goes to the Next Stage

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Pension Theft: Class War Goes to the Next Stage

By Dean Baker
Truth-Out
December 4, 2013

In the past two days we’ve seen a federal judge rule that Detroit can go bankrupt, putting its WORKERS’ PENSIONS IN JEOPARDY, and we have seen Illinois’ Legislature vote for substantial cuts in its retirees’ pensions. Undoubtedly these two actions are just the tip of the iceberg. We have opened up a new sport for America’s elite: pension theft.

The specifics of the situations are very different, but the outcome is the same. Public employees who spent decades working for the government are not going to get the pensions that were part of their pay package. In both cases we have governments claiming poverty, and therefore the workers are just out of luck.

Before getting to the specifics of these cases, it is worth dealing with a couple of points. First, there has been a huge media campaign to trumpet the generosity of public-sector pensions. The Washington Post once ran a major FRONT-PAGE ARTICLE on public pensions in which its poster child was a former official in a small California city who was getting a pension of more than $500,000 a year.

Of course this sounds horrible, and it is. The official had been the city manager and had assigned himself several other top jobs, all of which came with generous pensions. He also was under indictment.

This is not close to the typical pension in California or anywhere else. In the case of Detroit, the typical pension is a bit more than $18,000 a year. In Illinois it’s around $33,000 a year. It’s important to note that most Illinois workers do not get Social Security, so this is their whole retirement income.

The other item generally missing from the coverage is that these pensions are part of workers’ pay. Controlling for education and experience, public-sector pay is somewhat lower than the pay of private-sector workers. The more generous pension and health care benefits that most public-sector workers enjoy are offsetting lower wages.

The pensions are not gifts bestowed by the government on workers; they are part of workers’ pay. When the city of Detroit or state of Illinois cut workers’ pensions, they are in effect saying that they are not going to pay workers for the work they did.

Turning to the specifics, there is no doubt that Detroit is in bad financial shape. Part of this can be attributed to mismanagement and corruption. However, by far the biggest factor is the decline in the auto industry, which was the driving force of the city’s economy.

This decline has far more to do with national economic policy than any decisions made by the city government. It also didn’t help matters that the state of Michigan made it very easy to escape the problems of the city by stepping over the city line into the suburbs, which many of its middle-class residents did. 

Detroit workers might be forgiven if they thought they could count on getting the pensions for which they worked. After all, the Michigan Constitution prohibits the state from cutting pensions. And the city of Detroit is a creation of the state of Michigan, which might have led them to believe that the Michigan Constitution also applied to Detroit. However, a federal judge just ruled otherwise. Now Detroit’s workers face the prospect of a bankruptcy judge taking large chunks out of their pensions.

The story of Illinois pensions should be at least as infuriating. Unlike Detroit, the economy in Illinois is reasonably healthy. News reports often tout its unfunded liability of $100 billion without pointing out that this is an obligation that needs to be met over the next 30 years. During this period, Illinois’ economy will exceed $18 trillion in output, putting the liability at roughly 0.6 percent of the state’s future income. That is hardly trivial, but neither is it an unbearable burden.

The disturbing aspect about the Illinois situation is that the underfunding of the pension was a deliberate choice. For years the governor and Legislature approved budgets that did not make the required contribution to the pensions. (The city of Chicago, under Mayor Richard M. Daley, did the same thing.) This was a deliberate shafting of workers in which most of the state’s leading political figures acquiesced.

Among those who deserve special vilification in this story are the bond-rating agencies (yes, the folks who rated all those subprime mortgage-backed securities as Aaa). During the years of the stock bubble in the 1990s, they analyzed pension funds using the assumption that the bubble would persist indefinitely. This meant that state and local governments had to make little or no contribution to their pensions.

Unfortunately, it was a habit that stuck. Even after the bubble burst, they continued to contribute little or nothing to their pensions.

So now Illinois, Chicago and several other state and local governments have badly under-funded pensions. It would seem that they would have an obligation to raise the revenue needed to pay workers, after all this money they are owed.

But in 21st century America, contracts and the rule of law apparently don’t mean anything, at least not if the people at the other end are ordinary workers. So, rather than inconvenience all those rich folks at the Chicago Board of Trade or other highly successful businesses with a larger tax bill, the plan is to stiff the firefighters, the schoolteachers, and the people who collected garbage for 30 years.

It may turn out to be the case that the rich and powerful can just rewritethe rules as they go along. But at least the people should know that theft is now in style when it’s their property at stake.

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University. He is a regular Truthout columnist and a member of Truthout’s Board of Advisers.

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Posted by Elvis on 12/06/13 •
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Sunday, November 10, 2013

The Theft Of The American Pension 2

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The Pension Theft Crime Wave Rages On
Rhode Island has become a model for how to rip off teachers and firefighters and enrich Wall Street.

By Mark Brenner
Labor Notes
October 29, 2013

The nations union-haters have a juicy new target, DetroitҒs public employees, ever since the city became the largest in history to file for bankruptcy. Detroit unions will wrangle with a bankruptcy judge this fall over how to handle $3.5 billion in pension obligations for 12,000 retirees.

City retirees receive a princely sum of $19,213 per year on average. Pension obligations to these workers account for less than 20 percent of Detroits debt. But the facts haven’t kept retirees from bearing the brunt of the bankruptcy fallout.

In fact, politicians across the country are seizing on Detroits hard times as an excuse to trim public pensions closer to home. For them - and for bankers angling for a piece of the actionthis could be the breakthrough they’ve been waiting for.

Lawmakers from both parties have climbed onto the same noisy bandwagon as right-wingers who complain that public pensions are too fat, ballooning out of control because of unions run amok. They throw in the fact that retirees are living longer, and tout the soon-to-be swollen ranks of retiring baby boomers, to add some statistical cover to their judgments and finger-pointing.

MANUFACTURED CRISIS

But the fact is that the crisis in funding for pensions, both private and public, is a manufactured one. Its rooted in the Enron-style accounting and something-for-nothing financial engineering that set off the 2008 financial meltdown.

Making wishful assumptions about future stock market performance, corporate execs shortchanged pensions, diverting dollars into outsized dividends and stratospheric bonuses for themselves. Many were long gone by the time the bill came due.

The same dynamic drove politicians - hardwired to tell people what they want to hearto claim that sure, corporations and the rich could have tax cuts while public sector workers continued to receive their pensions and regular raises.

Now that state and local governments are swimming in red ink because of those tax cuts and the Wall Street meltdown, unions are caught flat-footed. Their erstwhile allies, after testing todayגs political winds, now line up to ax their pay and pensions.

Rhode Island drew the road map for politicians everywhere two years ago, slashing state and municipal workers pensions with a brutal reform that forced most workers over to a hybrid plan and froze cost-of-living adjustments.

The brunt fell on retirees like 19-year firefighter Paul St. George, whose $36,000-a-year pension turned into $24,000 overnight. He had to move out of his house into an apartment and find full-time work as a maintenance man, he told the press.

UNCOMFORTABLE ARITHMETIC

Adding insult to injury, the state handed more than $1 billion in pension funds over to hedge fund companies to manage - in exchange for an expected $2.1 billion in fees over 20 years, effectively taken straight out of the pockets of retirees, who would forego $2.3 billion in COLAs over the same period.

No wonder Wall Street has pumped $2 million into the possible gubernatorial campaign of Gina Raimondo, who engineered the Rhode Island scam, as Matt Taibbi recently reported for Rolling Stone.

Even before the 2008 financial crisis and the gaping holes it created in state and local budgets, pensions were an endangered species. In 1980, 40 percent of the workforce had traditional defined-benefit pensions. Today its less than half that.

Corporations drove this shift - axing retirement plans altogether when they could get away with it, switching to 401(k) plans where they couldnt. These programs were legalized in 1978 and were originally designed to supplement traditional pensions. But 401(k)s quickly provided a cheap escape route, costing companies about half as much as traditional pensions. Even more important, 401(k)s shifted risk off companies and onto us.

Traditional pensions were a stab at a collective solution to a universal problem - how to lead a decent life when your working years were through. Pooling retirement savings among workers at a large company, or across an entire industry, smoothed out insecurity for everyone. Now its just you and the stock market.

The research shows you’ll end up with far less in your pocket. A 401(k) typically yields 10 to 33 percent as much as a traditional pension. Half of all participants between the ages of 55 and 64 have less than $120,000 in their 401(k)s.

PRIVATE SECTOR PLAYBOOK

For union members in the private sector, todays attacks on public sector pensions have a familiar ring. Corporations spent years gaming the defined-benefit pension system in a similar pattern: First, siphon off pension contributions to pump up profits - as simple as tweaking the company spreadsheet to reflect a rosier forecast of your investment returns.

Then, once the accounting gimmicks are played out, howl about legacy costs, declare bankruptcy, and stick someone else with the bill.

Companies from steel giant LTV to Twinkie-maker Hostess have followed this pattern. And things have gone from bad to worse in the five years since Wall Streets collapse.

At the end of 2012, private sector defined-benefit plans had only about 75 percent of what they owed participants. Shortfalls this year could swell to as much as $322 billion - up from $47 billion at the end of 2007according to the Pension Benefit Guaranty Corporation.

The PBGC, a government agency established in 1975 to backstop private sector pensions, is funded by premiums paid by healthy plans, along with assets recovered from bankrupt companies. But swamped today with failing plans, the agency is operating in the red. Last year the deficit between its income and its obligations swelled to a record $35 billion.

Even before the red ink, the PBGC’s payouts typically amounted to less than half of what retirees were promised by their employers. Republic Steel is an egregious example: workers watched their pensions get cut by up to $1,000 a month in 2002 when the PBGC took over, then get cut again in 2004.

In the second round, some retirees saw their benefits fall as low as $125 a month.

The PBGCs bulging deficits could trigger even more cuts to payouts, with Washington in no mood for any emergency appropriations.

For workers in multi-employer pension plans like the TeamstersҒ ailing Central States Fund, pending federal legislation would permit preemptive cuts even without PBGC involvement (see Stealth Bill Would Allow Cuts to Current Pensions).

ONE-TWO PUNCH

Though 80 percent of public employees still have traditional pensions, more and more politicians are reading from the private sector playbook. After skipping payments into their pension funds repeatedly during better economic times, when the funds looked flush, now they are pushing for deep cuts.

The numbers speak for themselves - the pension system as we know it is unsustainable, Andrew Cuomo insisted after his election as governor of New York.

Cuomo, like politicians across the political spectrum, has pitted public employees and their unions against taxpayers - while the corporations and 1&#xer;s who benefited from decades of tax cuts quietly slip out of the spotlight.

With two-thirds of public sector pensions facing shortfallsto the tune of $700 billion in 2010חthese attacks from politicians are gaining traction.

New York, one of 10 states to push through major changes to pensions last year, added a sixth tier for new hires in its state plan. Other states took similarly severe measures, such as dropping traditional pensions for new employees in favor of defined-contribution plans, increasing age and service requirements for retirement, and jacking up employee contributions. Alabama took the controversial step of terminating its traditional pension plan.

Far from shoring up our faltering retirement system, these measures will only increase its fragmentation, putting each small slice of the population into a different leaky boat.

As unions fight to defend members pensions, itҒs worth thinking beyond our shrinking share of the workforce to measures that will benefit everyone. For half the countrys workers, Social Security is already all they have. And on the flip side, some or all public employees in 15 states don’t get Social Security, so their pensions are all they have.

What if we took seriously the fate of retirees, and strengthened Social Security so that it could actually pay for most living expenses? Whether your retirement was golden or tinfoil would not depend on the health of your particular employera radical proposition, to be sure.

Weגre a long way from a universal retirement plan that robust. Cutting Social Security is almost a bipartisan goal now. So the first step is to stop politicians from hacking at Social Security as part of a “grand bargain” on the debt ceiling, Obamacare, future government shutdowns, or anything else.

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Posted by Elvis on 11/10/13 •
Section Pension Ripoff
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