Article 43

 

Pension Ripoff

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

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 •
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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.

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Posted by Elvis on 01/07/14 •
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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 •
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Sunday, October 27, 2013

Milking The Public Pension Cow

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4 Things You Need to Know About the Plot to Sell Off Your Pensions to Wall Street
What your state legislators actually mean when they start throwing around the Orwellian phrase pension reform.”

By David Sirota
Alternet
October 23, 2013

Less than a year ago, the Wall Street Journal ALERTED its national readership to what was happening in the tiny state of Rhode Island. In a story headlined “Small State Gets Big Pension Push,” the paper noted that the state rollback of public-employee retirement benefits has turned (it) into a national battleground over pensions. With the help of billionaire FORMER ENRON TRADER John Arnold and his PARTNERSHIP with the Pew Charitable Trusts, conservative ideologues and Wall Street profiteers who engineered Rhode Island’s big pension cuts were looking to export those “reforms” to other states. Now, after two huge revelations in the last few days, we know more about what that means in practice - we know the kind of corruption and damage the reforms mean for taxpayers and retirees, and we know what kind of new muscle is behind the effort to bring that corruption and destruction to other states.

The first set of revelations comes from a detailed forensic analysis of Rhode Island’s pension system by Forbes columnist and former SEC investigator Edward Siedle. Commissioned by groups representing PUBLIC PENSIONERS in the Ocean State, the data-driven analysis ends up reading like a criminal indictment of the speculator-turned-State-Treasurer Gina Raimondo (D), who is now cheerily touted by the Wall Street wing of the Democratic Party as a rising star. Raimondo has received such billing from corporatist Democrats in no small part because of her role in helping turn her states pension fund into a private profit center. Indeed, in 2012, this Wall Street-funded Democrat joined with Arnold to champion specific pension reforms that simultaneously slash guaranteed retirement income and give adisproportionate amount of retiree money to the hedge fund industry, thus enriching Raimondo’s old pals in the financial industry. According to Siedles report, they also potentially enrich Raimondo personally. Here are just some of his report’s key findings:

1. A sinister pall of secrecy: The report documents a “sinister pall of secrecy” about the pension funds new investments in hedge funds - a pall orchestrated by state officials and aided by key investment services providers. Siedle reports that the overwhelming majority of the information requested for this review (has) been withheld in apparent violation of state law. As Rolling Stone’s Matt Taibbi and I noted in our recent San Francisco Chronicle report, such secrecy is now the norm in states, as reformers have changed the law to prevent retirees from even seeing how much of their money is being handed over to hedge fund billionaires.

2. A transfer of retirement income to Wall Street, potentially costing taxpayers big money: The report documents a staggering, almost 700 percent planned increase in (pension) investment expenses from $11 million to an estimated $70 million - fees paid to Wall Street hedge fund and other alternative managers who control the so-called ԓalternative investments in hedge funds. In total, Siedle estimates that ԓthe projected cost to (the pension fund) of the Treasurers $2 billion alternative investments gamble over the next 20 years amounts to in excess of $3 billion.Ҕ Thats more than the total savings of the retirement benefit cuts, meaning those cuts arenҒt saving taxpayers money - they are beingused to finance a new Wall Street handout.

3. Profiting at the expense of the state: Raimondo came to the Treasurers office from a financial firm backed by billionaire hedge funder Paul Tudor Jones. According to the report, ғA significant portion of (her) wealth and income relates to shares she owns in two illiquid, opaque venture capital partnerships she formerly managed at that firm Ԗ one of which she convinced the state (pension fund) to invest in.Ӕ Siedle notes that during Raimondos time in office running the state’s pension system, the fees Rhode Island is paying to the fund she has an ownership stake in are significantly higher than the venture capital industry.Ӕ As the report concludes, “all of this means that the Treasurer may literally be profiting at the expense of the state.”

4.  Worse returns that damage the pension fund even further: If all this graft was delivering better returns to the states pension system, it might be written off as merely a necessary cost of doing business and protecting taxpayers. But as Siedle documents, at the very moment Raimondo has handed over more retiree money to her hedge fund pals, The investment performance of the Fund has lagged behind its peers, earning a mere 11.07 percent versus 12.43 percent for the median public-sector pension. In total, the New York Times notes that for all of Raimondo’s insistence that giving Wall Street more taxpayer cash will generate better returns, neither set of hedge funds she has put state money into beat the returns of simply investing the cash in a simple S&P index fund - one that doesn’t incur massive fees paid to the financial industry that bankrolls Raimondos election campaigns.

Siedle’s report is worth reading in its entirety to understand what your state legislators actually mean when they start throwing around the Orwellian phrase “pension reform” and thanks to the second piece of news this week, we know that state legislators everywhere will almost certainly be throwing that seemingly innocuous phrase around. That news came from the St. Louis Beacon, which reports that none other than the American Legislative Exchange Council has decided to make cutting pension benefits one of its top goals in the 2014 state legislative sessions. They will be pushing to replicate Raimondo’s much-hyped reforms in legislatures throughout the country.

It is difficult to overstate the influence of ALEC in state policymaking. Bringing together the largest corporations, best-connected lobbyists, and most powerful state legislators, it calls the shots when it comes to state economic policymaking. So it is huge news that it is prioritizing the Plot Against Pensions and not surprisingly, its renewed involvement in the plot is connected to Enron John Arnold. That connection can be seen in the author of ALEC֒s new report urging state legislators to convert traditional defined-benefit pension plans into 401(k) style schemes and consequently reduce pensioners guaranteed retirement benefits. It is written by none other than Utah State Senator Dan Liljenquist (R), who was not only the failed Tea Party primary challenger against U.S. Sen. Orrin Hatch (R), but more important, a paid pension reform consultant for John Arnold’s foundation.

Like Siedles analysis, the ALEC report is worth perusing - but for different reasons. While Siedles report is all about indisputable data and numbers, ALEC’s is all about a kind of misinformation so dishonest its hard to believe even the most shameless propagandists could even think it, much less publish it. As just one example, notice the section of the ALEC report telling legislators to lie to public employees by telling them “that pension reform will increase take home pay and benefits” and then citing that claim as rationale to entitle pension slashing legislation a “wage liberation” act. Of course, in almost every state that has experienced pension reform, retirement benefits have been cut, giving a far different meaning to wage liberation. Workers’ wages havent been liberated to make higher wages - workers themselves have been liberated from their wages.

Why would ALEC involve itself in the effort to cut retirement benefits and replace cost-effective economically stimulative defined-benefit pensions with alternative investments and 401(k)-style systems? Part of it probably has to do with its connections to the financial industry which, as Rhode Island proves, see huge profit potential in reforms that let them raid public pension funds and bilk them with private investment fees.

The other part, no doubt, is about protecting the corporate welfare on which many of ALECs corporate members rely. By pushing to balance state budgets exclusively through cuts to pension benefits, ALEC helps create a budget discourse that solely blames public employees for state budget shortfalls, and thus leaves corporate subsidies off the chopping block. Ultimately, pension shortfalls become the boogeyman, even though the corporate subsidies that benefit ALEC members (but that often donҒt create jobs) are far larger than those pension gaps.

None of this should be particularly surprising in a pay-to-play political system, where there is cash under the control of industry-bankrolled public officials, there will always be the potential for graft and corruption. And where there is the potential to use state legislation to institutionalize graft and corruption, there has always been ALEC. What֒s different here is scale. Public pension funds are collectively worth almost $3 trillion. Though that is supposed to be money to fulfill sacred retirement promises to public workers, a coalition of right-wing ideologues, billionaire political activists, Wall Street profiteers and bankrolled politicians sees that nest egg as a lucrative private profit center. If they are successful in hiding their rip-off schemes in the argot of reform,Ӕ they will have accomplished one of the biggest heists in American history.

SOURCE

Posted by Elvis on 10/27/13 •
Section Pension Ripoff
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