Article 43


Pension Ripoff

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

Sunday, May 26, 2013

The Great Retirement Ripoff Sequel


How America’s Retirement Crisis Is Crushing the Hopes of a Generation of Young People
We shouldn’t just worry about older workers; their kids are hurting too.

By Joshua Holland
May 22, 2013

The crucially important but largely missing context of today’s debate over so-called “entitlement reform” (read: slashing Social Security benefits and shifting more healthcare costs onto seniors) is that we stand at the early stages of what’s shaping up to be a massively painful retirement crisis.

And while there has been a longterm project among GRANNY-BASHING “entitlement reformers” to fuel a sort of intergenerational class warfare by accusing “greedy geezers” of hurting young people’s prospects, the reality is that this growing retirement crisis is HURTING NOT ONLY OLDER WORKERS AND RETIREES, but also the newest entrants into the workforce, a generation of young Americans whose prospects are FAR BLEAKER than those enjoyed by their parents.

If you’re nearing retirement age or have a parent or grandparent nearing retirement age - you’re no doubt aware of how 40 years of stagnant middle-class wages and the disastrous SHIFT FROM TRADITIONAL PENSIONS to 401(k)-type plans has made a dignified retirement all but impossible for all but the very well-to-do. According to the Bureau of Labor Statistics, the share of private sector workers RESPONSIBLE FOR THEIR OWN RETIREMENT [local copy] savings increased nearly four-fold between 1980 and 2008.

THIS TREND has been an integral part of what Yale political scientist Jacob Hacker called the ”GREAT RISK SHIFT” in which the burden of paying for education, healthcare and retirement has been increasingly shifted from corporations and the government onto the backs of individuals and families. This graphic from the CENTER FOR BUDGET AND POLICY PRIORITIES tells the tale:


Wall Street, and its allies in Washington, swore that this transition to private accounts would harness the awesome power of the market to make us all wealthy in our golden years. In Forbes, Edward Seidle WRITES, as a former mutual fund legal counsel, when I recall some of the outrageous sales materials the industry came up with to peddle funds to workers, particularly in the 1980s, it’s almost laughable - if the results weren’t so tragic.

There was the “Dial Your Own Return” cardboard wheel of fortune that showed investors which mutual funds they should select for any given level of return. Looking for 12%? Load up on our government plus or option income funds! It was that easy to get the level of income needed in retirement, investors were told.

Like so many promises of the vaunted “new economy” popularized by Ronald Reagan and supported by both parties since, this was a scam with disastrous consequences. According to Teresa Ghilarducci, a professor of economics at the New School for Social Research, “seventy-five percent of Americans nearing retirement age in 2010 had LESS THAN $30,000 in their retirement accounts.” She adds: “The specter of downward mobility in retirement is a looming reality for both middle- and higher-income workers. Almost half of middle-class workers, 49 percent, will be poor or near poor in retirement, living on a food budget of about $5 a day.:

Today, two-thirds of retirees rely on Social Security for more than half of their retirement income, and for more than a third, those benefits MAKE UP AT LEAST 90 PERCENT OF THEIR INCOME. The AVERAGE BENEFIT IN 2012 was just $14,760, and while talk of decreasing the cost-of-living adjustment has been all the rage in Washington, the reality, according to the Congressional Budget Office, is that the cost of living for seniors has increased faster than Social Security benefits, meaning that their real value has been falling even as people increasingly rely on them to get by.

How does this hurt younger workers? As it becomes more and more difficult to retire after busting one’s ass in the American workforce for 40 years, an increasing number of older people have no choice but to remain in the workforce. Some work part-time; because of age discrimination, others take whatever jobs they can get, even if they’re wildly overqualified. According to the Social Security Administration, “the labor force participation rates of men and women aged 6279 have notably increased since the mid-1990s.”

Consider two pictures that are worth a thousand words; they show the share of the younger and older populations in the workforce, beginning about a decade after the transition to worker-owned retirement accounts began in earnest. As you can see, regardless of the ups and downs of the business cycle, the trend has been more workers aged 55 and over in the workforce and fewer working people under the age of 25 (The decline in labor force participation for 20- to 24-year-olds also correlates with an increasing share of young people getting a bachelor’s degree, so this isn’t a trend that can be attributed to a single cause.)

This shows the participation rate for workers over 55 (note that this can’t be explained by more women entering the workforce; that shift was already largely BAKED INTO THE CAKE by the time these data begin):


And this shows the participation rate for those aged 20 to 24:


Today, the unemployment rate stands at 7.5 percent, but almost 23 percent of 18- and 19 year-olds and more than 13 percent of 20- to 24-year-olds who want to work can’t land a job. (The unemployment rate for those aged 55 and up is 5.5 percent.)

Again, this is the context that’s largely missing from our endless debates about fiscal policy. It points to a rather obvious conclusion: WE SHOULD be increasing Social Security benefits, decreasing the out-of-pocket healthcare costs seniors have to shoulder, and lowering the minimum age for retirement. In short, we should be focusing on policies that make it possible for older workers who have put in their time to kick back and let some younger workers find jobs. It wouldn’t be a magic bullet for young people; it wouldn’t deflate the student debt bubble or address our crushing level of income inequality, but it would be a darn good start.

Last month, the New America Foundation’s Michael Lind, Joshua Freedman and Steven Hill offered a proposal that would go a long way toward achieving that goal. They envisioned an expanded Social Security program supplemented by a flat benefit that isn’t tied to earnings or funded through payroll taxes, and argued that shifting a greater share of the costs of retirement onto Social Security would make tax-subsidized employer plans less crucial to Americans’ retirement security. University of Texas economist James Galbraith has similarly argued for LOWERING THE AGE of eligibility for Social Security and Medicare, at least until the employment picture improves.

But aren’t these programs already costing too much? And aren’t we already taxed to death, as the Tea Partiers claim? No: that’s ideologically informed mythology. Prior to the Wall Street crash, we had the fourth lowest tax burden in the Organization for Economic Cooperation and Development (OECD). And while the “average replacement rate” for public pensions the share of a workers’ income covered by retirement benefits - is 57 percent, WE COVER just 39 percent, on average, in the United States . Americans have some of the stingiest retirement benefits in the developed world.

As for the politics, it almost goes without saying that at a time when it requires 60 votes in the Senate to name a post office after a war hero—and when the House has essentially given up on legislating in the public interest policies that help real people suffering real pain in this economy are nonstarters.

But one can be certain it won’t remain that way. Because we’re just at the beginning of this crisis, and with each cohort of Americans reaching retirement age, fewer will have pensions and more will have experienced the great middle-class squeeze than the cohort before it. So it will get worse before it gets better, but eventually our elites will have no choice but to finally recognize the severity of the crisis their neoliberal clap-trap has created.


Posted by Elvis on 05/26/13 •
Section Pension Ripoff • Section Dying America
View (0) comment(s) or add a new one
Printable viewLink to this article

Saturday, March 23, 2013

Retirees Loose AT&T Pension Suit


In 1997, AT&T converted its traditional defined benefit pension plan to a cash balance plan. As a result of the conversion, the accounts established for older participants were significantly less than the value of the accumulated annuities they had already earned under the old plan. The workers sued, claiming that the conversion discriminated against older workers and that AT&T executives knew that employees within seven years of retirement eligibility would not earn any additional pension benefits for several years.

The bad news for those people who had their AT&T pensions cut from the cash balance transfer years ago - is they lost the 12 year court battle.



Welcome to the AT&T Pension Plan Class Action Lawsuit about cash balance pension conversions: Engers v. AT&T Management Pension Plan, C.A. 98-3660 (DNJ).


On January 17, 2012, the Supreme Court denied Plaintiffs Petition for Certiorari asking the Court to review the Third Circuit’s decision on our ADEA, plan amendment, and Summary Plan Description claims. We are very disappointed with this outcome, but since the Supreme Court has decided not to hear the case, we unfortunately are out of legal options.


Fifteenth Update: On November 14, 2011, Plaintiffs filed a Petition for Certiorari asking the Supreme Court to review the Third Circuits decision on our ADEA, plan amendment, and Summary Plan Description claims. You can read the Petition HERE. AT&T’s response is due on December 14, 2011, and the Supreme Court will decide whether to hear our case after the briefing is complete.

Fourteenth Update: On August 1, 2011, the Third Circuit denied the petition for rehearing and rehearing on banc. Our only recourse at this point is a petition for certiorari to the Supreme Court. Statistically, the Supreme Court only hears less than 5% of the petitions it receives.

Thirteenth Update: The three-judge panel of the Third Circuit that heard our case issued an adverse decision on all of the ADEA and ERISA claims against AT&T on June 22, 2011 (available HERE. ). We are preparing a petition for rehearing by the same judges or a rehearing en banc (which means a rehearing before all of the active judges on the Third Circuit Court of Appeals). The petition is due on July 20, 2011. Everyone is disappointed by the Third Circuit’s decision, but we believe there are persuasive reasons for a rehearing.

Twelfth Update on the ERISA and ADEA Claims: The oral argument on the appeal in the U.S. Court of Appeals for the Third Circuit was held on Thursday, March 17, 2011. To listen to an audio of the oral argument, click here. The tape is 40 minutes and requires Windows MediaPlayer or RealPlayer. To read a transcriptof the oral argument, click here. There is no fixed time period for the Court of Appeals to issue a decision. Generally, decisions are issued two to three months after the oral argument.

Eleventh Update on the ERISA and ADEA Claims: The oral argument on the appeal in the U.S. Court of Appeals for the Third Circuit has been rescheduled for Thursday, March 17, 2011 at the Albert Branson Maris Courtroom, 19th Floor, James A. Byrne U.S. Courthouse, located at 601 Market Street, Philadelphia PA 19106. Oral arguments will begin at 11:00 am and last about 30 minutes per case.

Tenth Update on the ERISA and ADEA Claims: The oral argument on the appeal in the U.S. Court of Appeals for the Third Circuit is currently scheduled for Friday, March 18, 2011 at the James A. Byrne U.S. Courthouse, located at 601 Market Street, Philadelphia PA 19106. Generally, cases scheduled for oral argument on a particular day start at 10 am and last about 30 minutes per case. We will confirm the time of the oral argument and the floor of the Courthouse on which the case will be heard when more details become available.

Ninth Update on the ERISA and ADEA Claims: On November 3, 2010, Plaintiffs filed their brief in support of their appeal on the ERISA and ADEA claims. Briefing will be completed at the end of December after which an oral argument will be scheduled.

Eighth Update on the ADEA and ERISA Claims: Judge Chesler issued an unfavorable decision on June 7, 2010, dismissing the case without a trial. See article about the ruling dated June 9, 2010. On June 11, 2010, we noticed an appeal of the decision with the United States Court of Appeals for the Third Circuit in Philadelphia. Appeals usually take at least a year to be resolved. We are disappointed with the District Judge’s decision and believe we have a very strong case on appeal.

Seventh Update on the ADEA and ERISA Claims: On April 5, 2010, AT&T filed a motion for summary judgment on the ADEA and ERISA claims and the employees filed a motion for summary judgment on the ERISA claims. The briefs in opposition and related court papers were all filed on the same date, including 191 exhibits assembled by counsel for the employees, primarily from AT&T’s own records. After the Court decides the motions, it will schedule the case for trial (with a jury trial on the ADEA claims). A final pre-trial conference has been set for September 21, 2010 in Federal court in Newark, New Jersey. An article on the case appears in the April 7, 2010 Wall Street Journal ("AT&T Fights Pension Suit: Potential Liability for Retirees’ Plan Conversion Is Estimated at $2.3 Billion").

Sixth Update on the ADEA and ERISA Claims: Plaintiffs have now deposed former CEOs Robert Allen and C. Michael Armstrong, as well as AT&T consultant Scott Macey, about the cash balance pension changes and internal Excel spreadsheets, Powerpoint presentations, memos and emails showing that older employees would have long periods without additional retirement benefits. Discovery is complete and both parties are filing motions for summary judgment with the Court. Plaintiffs have asked the Court to rule in their favor on their claims under ERISA that many employees did not receive any additional retirement benefits under the cash balance plan and that two unfavorable plan amendments were not actually adopted by AT&T until October 16, 2000 and cannot be retroactively applied. AT&T has asked that the Court rule in its favor on all issues on various grounds.

Summary judgment briefs will be complete by the end of March, after which the Court will decide the motions and, to the extent the ADEA or ERISA claims are not resolved, set a date for the trial to begin.

Fifth Update on the ADEA Claims: On August 31, 2009, the Magistrate Judge ordered that the Plaintiffs are permitted to depose former CEOҒs Michael Armstrong and Robert Allen, and Scott Macey, an AT&T consultant, about the cash balance changes. The Magistrate Judge also ordered AT&T to produce documents about a special frozen annuityӔ that was offered to Senior Managers.

Fourth Update on the ADEA Claims: Since the beginning of the year, the statistical experts for both parties have been deposed about their findings on age discrimination. Plaintiffs’ counsel have also deposed five additional AT&T executives and benefit consultants about the development of AT&T’s cash balance pension design and have reviewed thousands of pages of documents. AT&T is still refusing to permit former CEO’s Michael Armstrong and Robert Allen, and Scott Macey, a high-ranking consultant who was instrumental in developing these changes, to testify under oath. We have asked the U.S. District Court in Newark to rule on whether AT&T is justified in refusing to allow them to testify.

We are also still seeking information about a “special frozen annuity for executives” that was developed secretly to protect the highest-level Senior Managers from the periods of “crossover” effected by the cash balance changes. Plaintiffs’ counsel are also obtaining AT&T’s videotapes and other records of meetings at which Mike Armstrong told employees that he personally examined the impact of the cash balance changes when he arrived and believed the changes were “fair.”

Six more current and former AT&T employees have agreed to testify on the employees’ side at trial and have all been deposed by AT&T’s lawyers. This brings the total number of current and former AT&T employees who are prepared to testify at trial for the plaintiffs to sixteen (16). Two former executives who AT&T previously listed as potential witnesses on its side have said in writing that they want to be removed from AT&T’s list.

Third Update on the ADEA Claims: See the expert statistical report and the expert actuarial report of the Plaintiffs actuarial and statistical experts dated September 22 and 23, 2008 and the rebuttal reports dated December 3 and 9, 2008 that the Plaintiffs’ actuarial and statistical experts prepared in response to the reports by AT&T’s experts. The expert reports show how AT&T’s cash balance design created periods of “wear-away” during which older employees do not earn any additional retirement benefits for an average of almost 8 years.  The expert reports also analyze the additional losses in benefits for employees who lost their jobs and commenced their pension benefits before age 55. NOTE: Depositions of the actuarial experts took place in Newark, NJ on December 22-23, 2008.

Second Update on the ADEA Claims: Pursuant to a subpoena and a scheduling order from the U.S. District Court in New Jersey, AT&T’s consultants, Aon (formerly known as ASA) are being required to produce all data and documentation that they possess related to the cash balance pension plan conversion by August 8, 2008 (for data and technical documentation) and August 15, 2008 (for consulting advice about the changes).

Expert reports from the Plaintiffs’ actuarial and statistical experts are due September 22, 2008. In those reports, the experts will show how AT&T’s cash balance design produced periods of “wear-away” (with no growth in retirement benefits) that were based on how close AT&T employees were to age 55. Plaintiffs allege that the cash balance design was skewed to produce periods of wear-away based on age.

For example, AT&T and Aon/ASA knew that employees age 47 and up would generally have no growth in their retirement benefits after the cash balance conversion, whereas younger employees in their 20’s or 30’s would see immediate growth in their benefits.

First Update on the ADEA Claims: On December 27, 2007, Plaintiffs filed 23,938 signed opt-in forms from current and former AT&T employees who elected to join in the age discrimination ("ADEA") claims in this case. On January 17, 2008, the Plaintiffs’ lawyers and two former employees met in New York City with a nationally-known mediator and five representatives of AT&T to see if there was a way to resolve this case. Unfortunately, no progress was made and the mediator declared an impasse. The Plaintiffs’ experts are now preparing statistical and actuarial reports to show the Court how AT&T’s rules about pension “crossover” were a thin-disguise for age discrimination. The trial of the case will take place in Federal court in Newark, New Jersey, but the dates have not yet been set.

To confirm whether we received your opt-in form, please call (toll free) 1-888-952-9104.

The Age Discrimination Claims

Plaintiffs Claims One and Two allege that AT&T’s cash balance conversion discriminated against older employees by:

(1) effecting a “benefit freeze” during which older employees do not earn any additional benefits for a period of years; and

(2) implementing a “greater of” provision in which older employees do not actually receive any of their cash balance benefits.  By contrast, younger employees earned additional retirement benefits from the cash balance plan “immediately” and without “contingency.”

Plaintiffs allege that these provisions discriminate against older employees in violation of Section 4(a) of the Age Discrimination Act (the ADEA).  Although Claims One and Two were initially dismissed from the case in June 2000, the Court reinstated these claims back into the case on December 12, 2006, in light of the Supreme Courts decision in Smith v. City of Jackson, 544 U.S. 228 (2005), which allows these types of claims under the ADEA.

AT&T asked the Court to dismiss these claims from the case yet again, arguing that the claims could only be brought under a separate section of the ADEA.  On March 29, 2007, the Court denied AT&T’s motion.  On May 5, 2007, the Court also denied AT&Ts motion to reconsider the decision or to certify the claims for an immediate appeal to the Third Circuit.

Plaintiffs have asked the Court to conditionally certify Claims One and Two as a collective action under the ADEA.  On May 24, 2007, the Court granted that motion. As a result, notices were mailed to over 41,000 individuals who fit the collective action definition. The notices gave those individuals an opportunity to “opt-in” to the collective action by signing a one-page consent to join form. The notices were mailed at the end of August 2007. Click to download the Court’s May 24, 2007 decision. 


March 2006 Decision. On March 30, 2006, the District Court issued a 50-page decision, ruling in favor of AT&T on three claims about AT&T’s disclosures of the impact of the cash balance pension changes.

(1) The claim that AT&T did not distribute a “Section 204h” notice of a significant reduction in future benefits. The Court mistakenly found that there was no reduction in the future benefits available at age 65 and therefore that no notice was required.

(2) The claim that AT&T’s Summary Plan Description ("SPD") about the cash balance changes was inadequate: The Court ruled that employees have to prove not only that the disclosures in the SPD were inadequate, but also “extraordinary circumstances.” Even though internal documents show AT&T deliberately “spinning” the cash balance changes to leave out the “bad parts” and make it appear “more palatable,” the Court did not agree that these are extraordinary circumstances.

(3) The claim that AT&T breached its fiduciary duty to disclose the impact of the cash balance changes: The Court ruled that the employees were foreclosed from proceeding with this claim because of the claim about the Summary Plan Description.

On April 17, 2006, the Plaintiffs asked that the Court reconsider its rulings on each of these issues.  The Court denied the motion on November 20, 2006.

Separately, the Court’s March 2006 decision required the employee class to refile their motion about the violations of law caused by: 

(4) AT&T’s “wear-away” of any new benefits earned after 1997 (which caused older employees to not receive any additional retirement benefits for employment after 1997), and

(5) AT&T’s 6% per year reduction for commencing the Special Update benefits before age 55 (the actuarial expert for the employees has demonstrated how a 6% per year reduction takes away part of the “present value” of the Special Update when benefits commence before age 55, and particularly before age 50).

This motion was refiled on April 10, 2006 and briefing on it was completed on June 5, 2006.  On January 3, 2007, the Court denied Plaintiffs’ motion for summary judgment on these claims and also denied Defendants motion to dismiss these claims.  The judge later denied DefendantsҒ motion to reconsider his decision. The judge invited both parties to revisit these issues later.

Finally, before ruling on the merits of two other claims, the March 2006 decision required the employee class to submit an internal letter appeal to AT&T to “exhaust” the claims that:

(6) The rules in the AT&T Plan documentwhich resulted in the “wear-away” of additional retirement benefits were not actually adopted by AT&T until October 16, 2000, and cannot be applied retroactively, and

(7) The rules which base the “residual” annuity after payment of one year’s pay in cash on the annuity produced by the cash balance formula instead of the annuity produced by the Special Update were also not actually adopted by AT&T until October 16, 2000.

Plaintiffs submitted two internal letters of appeal to AT&T, both of which were denied.  On March 2, 2007, Plaintiffs asked the Court to amend the Complaint to allege exhaustion of AT&Ts administrative procedures on these claims.  The motion is still under advisement.

Class Definition for the AT&T Class Action

The AT&T class action lawsuit centers on the conversion of the AT&T pension plan, which significantly reduced the value of benefits for long term older workers. The lawsuit plaintiffs argue that the pension plan conversion is inconsistent with ERISA and age discrimination laws.

The class definition as adopted by the U.S. District Court on June 6, 2001 and clarified on November 19, 2001, includes all:

“(a) former and current AT&T management employees;

(b) who are currently over age forty; and

(c) who were participants in the AT&T Management Pension Plan on December 31, 1996 and at any time after the July 1, 1997 date on which the Plan was converted to a cash balance design.”

If you meet all three (3) criteria above, you are a member of the class in the Engers v. AT&T class action lawsuit about pension plan conversion.

Attorneys handling the class action lawsuit are:

Stephen R. Bruce, Washington, D.C., lead counsel 202-289-1117
stephen.bruce at 1667 K St. NW, Suite 410 Washington, DC 20006
Edgar Pauk, New York, NY
Jonathan I. Nirenberg, Roseland, NJ
Maureen S. Binetti, Woodbridge, NJ

Posted by Elvis on 03/23/13 •
Section Pension Ripoff
View (0) comment(s) or add a new one
Printable viewLink to this article

Wednesday, March 06, 2013

It’s Not All Our Fault


Everything You’ve Been Told About Personal Finance Is Dead Wrong—Here’s the Truth
Can’t save enough? Worried about your retirement? The personal finance industry is ready to prey on you.

By Lynn Parramore
March 3, 2013

According to Helaine Olen, the lion’s share of financial advice served up by so-called experts is useless—or worse. In her must-read new book, Pound Foolish: Exposing the Dark Side of the Personal Finance Industry, she reveals that to think about money soley in a personal sense causes us to miss the problem. I caught up with Olen to discuss her take on what we’re missing, and how to think better and smarter about our financial lives.

Lynn Parramore: Why does America need a book on the personal finance industry? We’re messed up about money, right?  Don’t we need help?

Helaine Olen: We need help, but not the way we think. In a society where salaries have stagnated and fallen, net worth has plunged, even as the costs of things like healthcare, housing and education have gone up at rates well beyond that of inflation, its not surprising most of us have financial problems. But most of us still don’t see that we have a societal problem. Instead, we listen to people and organizations that insist our problem is an individual one. As a result, we gobble up books and television programs that offer us the promise of the magical tip that will allow us to fix all our financial woes. Of course, that’s not really possible. So… enter Pound Foolish. You can think of it as the anti-personal finance advice personal finance advice book.

LP: What are the biggest factors that have contributed to our current retirement crisis?

HO: There are so many factors contributing to the retirement crisis it is hard to succinctly list them all. But once upon a time, a majority of us at least had the possibility of receiving a pension when we retired. That’s NO LONGER the case. We’re now expected to do this on our own. And, frankly, most of us aren’t capable of this task, and we have 30 years of evidence - that is, the lifespan of the 401k - to prove this fact. We do everything wrong we possibly can. We are unable to save enough money and we don’t invest it well. At the same time, we lack the crucial ability to see the future. We dont really know when we will retire and why that will occur. We don’t know if our investments will pan out. We don’t know how the greater economic environment will either play out or interact with our lives.

I was reporting on this stuff 15 years ago and I can tell you just about no one said anything like “oh, by the way, you’ll need more than $200,000 just for medical expenses in retirement.” It’s just unfair to expect people - who are not financial experts - to be able to pull this off. The fact is Social Security and other such schemes were created for a reason. There was no imagined past where people saved up for their old age. As the family farm gave way to urbanization and industrialization, old people had this distressing tendency to end up in workhouses - which were as Dickensian as they sound - f they couldn’t convince a relative to take them in. And many couldn’t. Yes, the rates of intergenerational living were higher than they are now, but it wasn’t all The Waltons.

LP: How does the industry prey on our fears about our inability to save and plan for the future?

HO: We can’t articulate that for all too many of us our problem is not an inability to manage and invest money effectively; its that we’re expected to do more and more with less and less. So we think we are individually messing up, that we lack the financial skills and smarts to get ahead. The financial services industry presents itself as our savior. But by doing that, it has to confirm our cultural bias that we are alone responsible for our financial fates.

You see this dynamic especially in personal finance and investment initiatives aimed at women, which contain an almost odd mix of the language of empowerment and infantalization. They tell us we are women, we are so strong because we do so much more around the home and work than men, but yet we are financial illiterates who have no clue. In fact, both sexes have low financial knowledge. Men have more money than women for the most obvious of reasons: they earn more.

LP: You mention the work of economist Teresa Ghilarducci, “the most dangerous woman in America.” Who is afraid of her and why?

HO: It became very clear to me while reporting this book that Teresa Ghilarducci had hit a nerve in the financial services sector that no one else had. The reason, to me, was obvious. Most other people discussing retirement reform schemes (Auto IRAs, Save More Tomorrow and the like) were talking about expanding the role - or at least the bottom line of - the current dominant players on the retirement scene. I mean the retail brokerages, the 401k plan providers, the dominant mutual fund companies and the like. Ghilarducci’s Guaranteed Retirement Accounts calls BS on this model. First, she points out HOW MUCH MONEY the current retirement is making on what we think is our money. Second, her model would bring new players in and I mean new, powerful players state pension funds, institutional investors, and hedge funds - into the game.

LP:Media figures like Suze Orman, David Bach and David Ramsey tell us, “Follow my advice and everything will be OK.” Why is this promise a lie?

HO: All of these people are in the business of selling simplistic solutions to complex problems. Should we live below our means? Of course. Is it always possible to do so? No. Its not easy to live within your means if your means are a $300-a-week unemployment check. As if that were not enough, some of the advice they are purveying is flat-out wrong. Our financial woes are not the result of spending our funds on lattes and other small luxuries, like David Bach says. You can’t choose not to participate in a recession, despite what Dave Ramsey thinks. Personal finance cant do it all for us.

LP: You writeabout the financial literacy movement, which, on first glance, looks like a helpful educational crusade. How has it conspired to make us poorer? What does it mean that big banks like Capital One promote it?

HO: Financial literacy classes sure sound good. But students who take the classes don’t seem to retain much of the knowledge. And, when you think about it for a moment, that makes sense. The idea that taking a class on how finance works at the age of 17 can save someone from a predatory 100-page small-print mortgage when they are 40 is just preposterous. Don’t believe me? Tell me how the French and Indian War contributed to the American Revolution. See what I mean? I swear that was taught in your high school history class.

So you need to move on to the next part of the equation. Why is financial literacy being promoted when we know it doesn’t do much at all for consumers? Well, take a look at who is funding it. Its the banks and the rest of the financial services sector. Now think about it for a moment. Wouldn’t it just be a heck of a lot easier to not offer certain products, or design them in such a way so that they are easily comprehended, than to take on the seemingly hopeless task of teaching a consumer what a structured product is? Of course. So why isn’t this happening?  Well, a cynic might say that’s because financial literacy works quite well at what it was really designed to do and that’s head off legislative protection of consumers.

LP:How does the personal finance industry shape our views about government regulation, like rules that protect consumers?

HO: This is a mixed bag. There are many respectable personal finance journalists pushing for greater transparency and more legal protections for consumers. Ron Lieber at the New York Times, for example, was harping on the need for 401(k) fee disclosure for years before it became law. On the other hand, the financial services industry is always pushing the idea that we can do it, and that we can do it alone. How much that’s impacting our views? Hard to know. They keep telling us we can prepare for retirement ourselves, but the survey data shows that 80 percent of us are out-and-out petrified and want some form of pension back. Perhaps the right question to ask is not how the financial services sector shapes our views about government regulation to protect consumers, but how it shapes the views of the legislators whose campaign they contribute to.

LP: Has your research changed your own behavior and attitude toward personal finance?

HO: Yes, but not in the ways that you would think. I don’t spend any less money, but I am more conscious of spending it in ways that are meaningful. Take my Katie, our poodle. She dines on high-quality dog food (not to mention quite a bit of anything that can be begged), but her bed in my office is actually a 20-year-old blanket that I’d never put on a bed any longer but has somehow never gotten tossed. I mean, what does she care if shes not sleeping on an official dog bed from the pet store versus a blanket that no longer has a color? On the other hand, the quality of the food she eats impacts her health and that I care about quite a bit.

LP: What’s the best hope for our financial health? Are we completely screwed?

HO: Our best hope for our personal finances is to realize we aren’t in this alone. There is a powerful culture of shame around money in this country, and it is so powerful it actually seems to prevent us from stepping forward, saying things aren’t working out for us financially, and asking not for charity, but for substantive legislation designed to help us all.

Lynn Parramore is an AlterNet senior editor. She is cofounder of Recessionwire, founding editor of New Deal 2.0, and author of ‘Reading the Sphinx: Ancient Egypt in Nineteenth-Century Literary Culture.’ She received her Ph.d in English and Cultural Theory from NYU, where she has taught essay writing and semiotics. She is the Director of AlterNet’s New Economic Dialogue Project. Follow her on Twitter @LynnParramore.


Posted by Elvis on 03/06/13 •
Section Pension Ripoff
View (0) comment(s) or add a new one
Printable viewLink to this article

Wednesday, December 12, 2012

The Pension Buyout


Analysis: U.S. companies take aim at pension risk with lump-sum offers

By Jilian Mincer
Reuters Canada
October 20, 2012

Corporate America is finally ready to deal with a monkey on its back: massive pension obligations.

AT&T ON FRIDAY SAID said it plans to contribute a $9.5 billion stake in its wireless business to its underfunded pension plan. Earlier this week, Verizon Communications Inc moved to unload $7.5 billion in pension obligations to insurer Prudential Financial Inc.

But by far the most common trend in corporate America is to offer lump-sum payouts to thousands of retirees now - these voluntary buyouts could cost companies millions of dollars upfront, but they eliminate the risk of obligations soaring out of control in the future.

General Motors Inc and Ford Motor Co kicked off the trend earlier this year, and they have been joined this earnings season by companies ranging from Taco Bell and KFC owner Yum Brands Inc to tissue maker Kimberly-Clark Corp.

Companies “have been de-risking to manage the volatility of their (pension) assets,” said Ari Jacobs, senior partner and Global Retirement Solutions Leader at Aon Hewitt. “The logical next step for organizations is to move liability off the balance sheet.”

For years, plan sponsors have been squeezed by lower investment returns and higher costs for retiree benefits, which have forced companies to top up pension plans.

For instance, Sears Holdings Corp in September contributed $203 million to its pension plan to make it at least 80 percent funded.

In July, the average U.S. corporate pension was only 71.4 percent funded, according to BNY Mellon, the lowest level since the firm began tracking this information in December 2007. 

By offering voluntary buyouts, companies expect to protect their balance sheets “from future volatility and future fluctuations,” said Rick Jones, a managing partner in Aon Hewitt’s Retirement Consulting practice.

Kimberly-Clark recently notified about 10,000 former workers not yet receiving retirement benefits that they would be eligible for the lump sum distribution.

“It takes some of the volatility out of the pension plan going forward,” said Bob Brand, a spokesman for the company.

In the case of VERIZON, it aims to remove a quarter of its pension burden with a single upfront payment to Prudential, a deal known as pension terminal funding. The full terms have not been finalized, but Verizon has said it would inject $2.5 billion into its pension plan prior to closing.


Even before the financial crisis, many U.S. companies had stopped offering defined benefit pension plans, especially to new workers. Companies preferred 401(k) plans, where the burden - and risk - is on the employee to save and invest. During the financial crisis, SOME COMPANIES SLASHED their contributions to 401(k) plans.

And now, firms eager to move the defined benefit plans OFF THEIR BALANCE SHEETS are encouraging retired and other former workers to take a voluntary payout.

“We’ve seen a high level of interest this year, and I think you’ll see it next year and beyond,” said Alan Glickstein, senior retirement consultant at Towers Watson in Dallas, Texas.

In a SURVEY released earlier this year by Aon Hewitt, 35 percent of about 500 large American employers expect to offer a lump sum payout. 

Companies - many of which had been on the fence about making changes - are beginning to believe that interest rates will not rise in the near future.

Low interest rates mean lower returns on the investments companies use to pay their obligations; if the companies assume rates will not rise anytime soon, they have to rethink how they plan to meet those obligations.

A company must notify employees when its pension fund’s asset value dips below 80 percent of obligations. When that happens, companies can only make lump sum distributions equal to half the benefit owed to workers. The other half has to be in the form of an annuity.

Archer Daniels recently began notifying vested former workers they are eligible for the payout. Depending on uptake, ADM estimates it could “reduce its global pension benefit obligation by approximately $140-$210 million and improve its pension underfunding by approximately $35-$55 million.”

Yum said in its filings that it is making a similar decision “in an effort to reduce our ongoing volatility and administration expense.” Funding would come from existing pension assets. It expects a pre-tax non-cash charge between $25 million and $75 million in the fourth quarter of 2012.

Historically, the vast majority of people, when offered a lump sum payout, have taken it instead of waiting for a pension check. That rate has fallen slightly since the recession as workers have grown reluctant about managing their own funds.

“We hope people think really carefully about the decision,” said Nancy Hwa, a spokeswoman for Pension Rights Center, a consumer organization in Washington, D.C. “It’s very easy to be tempted by this large sum of money initially, and it’s easy to spend it on something other than retirement.”

Reporting By Jilian Mincer; editing by Edward Tobin and David Gregorio



Examining Actions To Take On “De-Risking”

NLRN Newsletter
March 2013

You may be aware that some large U.S. corporations have chosen to pay billions of dollars to position for voluntary terminations of management pension plans. Companies may pass their plan assets and liabilities on to large financial firms and insurance companies in return for a commitment to pay the accrued full monthly plan benefit as an annuity payment to plan participants. Such plan terminations are called Standard Terminations as opposed to Distress Terminations where the Pension Benefit Guarantee Corporation (PBGC) as the ultimate insurer of defined benefit pension plans ends up paying pension payments, usually less than paid if a plan were not terminated.

In Standard Terminations, plan sponsors are able to reduce future corporate pension plan funding obligations and are able to significantly reduce balance sheet liabilities and thus enhance their ability to borrow funds more cheaply. If a company is weak financially, pension plans could fall prey to a Distress Termination because of a bankruptcy proceeding. Retirees might feel more secure with an annuity payment resulting from a Standard Termination, rather than risk having to take a lower payment in a Distress Termination.

This sounds straightforward and, for some, it is. However, companies are looking for new ways to implement Standard Terminations, encouraged by a number of firms who counsel pension plan sponsors in ways to tailor such terminations that could work against current and future retirees. These annuity guarantors are highly motivated to sell companies new termination ideas, and their payoff comes only if and when a plan is terminated.

The NRLN is concerned about the variable latitude that is being taken by companies in what has become known as “de-risking” of pension plans. Or, as one NRLN member has termed it “risk shifting” to retirees.

General Motors was the first large U.S. corporation to recently de-risk its management pension plan. GM voluntarily terminated its plan but offered a lump sum payment option to a select group of participants and advised all other participants that they had no choice but to accept an annuity payment from Prudential Insurance Company. The GM management pension plan was terminated. GM negotiated added annuity protection in its agreement with Prudential.

At about the same time, Ford offered a lump sum pension buyout but only to select retirees. Ford did not take action to execute a Standard Termination. Most recently VERIZON did not terminate its pension plan but instead shifted part of its plan assets and liabilities to Prudential to satisfy its plan obligations but only offered annuities to a select subset of management retirees. Its not clear that Verizon negotiated added protection as did GM.

The Employee Retirement Income Security Act (ERISA), the law that prescribes defined benefit pension plan protections, does allow for Standard (and Distress) Terminations but is vague as to what protections there might be when plan sponsors choose to expand the boundaries of execution of a Standard Termination to include what could be discriminatory selections or exclusions and / or the exhaustion of assets through lump sum payouts that can weaken a plan’s asset base over time.

Verizon retirees have filed a lawsuit against the company on a variety of claims. Among them are claims that assert Verizon should not have terminated its obligation to select retirees only, and that the retirees selected lost protection of the Pension Benefits Guaranty Corporation (PBGC) insurance mechanism should Prudential ever fail to make good on annuity payments while others not selected continue to benefit from the PBGC’s insurance protection.

It is not clear how long it will take to litigate the Verizon case or what the outcome might be. It is even less clear that the outcome would apply, win or lose, to another case involving another twist or two by the pension plan sponsor. Advocating changes to ERISA that would define Standard Termination protections may be the only solid solution.

At the NRLN’s Annual Meeting in Washington, D.C., presentations were made on February 5th about “de-risking” by Michael Calabrese, NRLN legislative adviser and preparer of a number of our Income Security white papers, and Curtis Kennedy, one of the attorneys representing Verizon retirees. After hearing the presentations, the NRLN Board has reached the conclusion that the NRLN should conduct an exhaustive analysis of “de-risking” to determine what, if any, regulatory or legislative actions the NRLN should consider and prepare a white paper with our proposals. Michael has agreed to work with a committee of NRLN Retiree Association leaders and writethe white paper.

Our existing white papers have been funded as Special Projects and most of our Retiree Associations and Chapters have agreed once again to provide a one-time special contribution toward funding that will be used to determine what, if any, regulatory or legislative action we should take to begin advocating those reforms with federal agencies and / or members of Congress. Michael has been commissioned to the start the project immediately so that we may complete it by July 1, 2013.

Our objective is to ensure that retirees receiving defined benefit pensions will not be harmed by a conversion to lump sum buyouts or the purchase of annuities. You will be notified when the white paper has been completed and posted on the NRLN WEBSITE.

Bill Kadereit, President,
National Retiree Legislative Network

Posted by Elvis on 12/12/12 •
Section Pension Ripoff
View (0) comment(s) or add a new one
Printable viewLink to this article

Monday, December 03, 2012

Retired Verizon Managers Beware


Verizon Retirees Sue to Halt Verizons $7.5 Billion Sell-Off of 41,000 Pensions
Federal Court Action Seeks to Reverse Spin-Off to Prudential Insurance Annuity Plan

Association of Bell Tel Retirees
November 29, 2012

Management RETIREES of Verizon Communications Inc. have filed a federal lawsuit to halt their former employer’s plan to sell off 41,000 EMPLOYEE RETIREMENT INCOME SECURITY ACT (ERISA) protected pensions to the Prudential Insurance Company of America in exchange for providing Prudential with $7.5 billion in Verizon retirees pension assets.  If the pension spinoff, which was expected to close in December, is not halted, beginning in January 2013, Prudential will replace retirees’ pensions with insurance annuities that are not ERISA-protected.

Attorneys Curtis L. Kennedy of Denver and Bob Goodman of Dallas representing retirees in conjunction with the 128,000 member non-profit ASSOCIATION OF BELL TEL RETIREES have filed for a request for an immediate temporary restraining order to be followed by a hearing to consider a preliminary injunction in the United States District Court, Northern District of Texas, Dallas Division charging that Verizon’s plan to transfer the retirees’ pensions from the Verizon Management Pension Plan into Prudential issued insurance annuities violates federal ERISA law. 

On October 17 Verizon surprised 41,000 pre-January 1, 2010 company management retirees when it disclosed the transaction.  Retirees claim the conversion to an annuity wipes out the federally insured pension safety net provided by the PENSION BENEFIT GUARANTY CORPORATION (PBGC) and is an effort to sever retirees ERISA protections, as well as the companys fiduciary responsibilities to the very retirees who built their company. The Verizon Management Pension Plan currently has approximately 100,000 participants, including plaintiffs.

Retiree association President C. William Jones said , “On behalf of 41,000 Verizon retirees scattered across the country, who are being given no choice, no voice and no protection in the TRANSFER of their pension assets, we are calling upon the company to reverse this action and halt this predatory business transaction that will impact many retired Americans, who labored a lifetime to fund their earned pension benefits.”

Retirees note that Prudential could also sell or transfer all or part of its ownership of the annuity asset to another company. While Prudential looks and sounds like a solid insurance company, the retirees say America’s history is littered with the carcasses of many ONCE-GREAT and TOO-BIG-TO-FAIL financial POWERHOUSES such as: AIG, Kentucky Central Life Insurance Co, Executive Life, The Equitable Life Assurance Society (Equitable Life), LEHMAN BROTHERS and Bear Stearns. 

Should the insurer experience a default or asset shortfall, the PBGC would be replaced with a patchwork network of state guaranty associations, many of which are underfunded.

Corporate retirees, like Verizon’s who are at least 65 years of age, are insured by the PBGC, up to the limit of $55,800 per year, per retiree for an unlimited number of years.  By spinning off the 41,000 pensions to an annuity provider, Verizon retirees’ PBGC protections are replaced by insufficient and varying coverage generally determined by state of residence at the time of impairment - from $100,000 - $500,000 (lifetime per person cap).

Eight states and one U.S. territory - AK, AZ, IN, MA, MS, MO, NH, NV and Puerto Rico - limit total lifetime coverage for annuity holders in case of a default or shortfall to a lifetime maximum of $100,000;

28 others - CA, CO, DE, HI, ID, IL, IA, KS, LA, ME, MD, MI, MN, MT, NE, NM, ND, OH, RI, SD, TN, TX, UT, VT, VA, WV, WY - go up to $250,000 lifetime coverage;

10 states and District of Columbia use a $300,000 top end AL, AR, FL, GA, NC, OK, OR, PA, SC, WI;

Just 4 - CT, NJ, NY, WA - go up toa ceiling of $500,000.

Mr. Jones said, “Retirees and their spouses, especially in states with the lowest protection levels, will be seriously harmed and left with as little as two years pension replacement in case of insurer default.  Verizon’s pension spin-off and conversion to a non-PBGC insurance annuity offers zero protection or upside for tens of thousands of Ma Bell’s orphans.”

The case is: William Lee and Joanne McPartlin and Plan Beneficiaries of the Verizon Management Pension Plan vs Verizon Communications Inc. in the United States District Court, Northern District of Texas, Dallas Division (Case No: 3:12-CV-04834-D)



The following is an update on litigation concerning Verizon management retirees challenging the transfer out of their pension plan into Prudential Insurance Annuities. This case is Lee, et al., v. Verizon Communications Inc., et al., and is currently in Dallas Federal Court.

March 28, 2013

Today, a joint motion requesting class certification of the four claims pending in the Lee case concerning the Verizon/Prudential pension/annuity transfer was efiled in the Dallas federal court. The joint motion is the final product of much negotiation with Verizon’s legal counsel.

Within hours after the joint motion was efiled, Chief Judge Sidney A. Fitzwater of the Dallas federal court agreed with the motion, and he entered an order for class certification. The order for class certification does not mean anything about the true merits of the four claims in the Lee case. What the order means is that the outcome of the case will be binding on all others, and there is no need for additional or duplicative lawsuits.

The Lee case is being closely watched by numerous corporate entities and their legal counsel across the nation. Now, today’s order for class certification makes the Lee class action all the more important. As you can imagine, the case is a subject of much discussion within the employee benefits industry. Truly, it is a case of first impression. No other corporation has done exactly what Verizon did, i.e., transfer already retired persons out of an ERISA protected and PBGC guaranteed pension plan into a group insurance annuity while keeping the pension plan on-going for many others. And, no other retiree group has ever brought forward a legal challenge like we have in the pending Lee case.

There are several matters pending in the Lee case, including the Verizon Defendants’ request that the entire case be dismissed and our opposition to that request. As we await rulings from Chief Judge Fitzwater, we will be sending the Verizon Defendants a formal discovery request, so as to get more information about the annuity transaction and gather documents and other evidence needed to support the four pending claims in the Lee case.

This email can be shared with anyone. Copies of today’s court filings are posted at the Association’s website HERE.

There is nothing any Verizon retiree needs to do other than give financial support to the Association’s efforts to go forward with the legal challenge on behalf of retirees.

Curtis L. Kennedy

Posted by Elvis on 12/03/12 •
Section Pension Ripoff
View (0) comment(s) or add a new one
Printable viewLink to this article
Page 2 of 16 pages  <  1 2 3 4 >  Last »


Total page hits 8612030
Page rendered in 2.0399 seconds
41 queries executed
Debug mode is off
Total Entries: 3117
Total Comments: 337
Most Recent Entry: 08/16/2018 11:27 am
Most Recent Comment on: 01/02/2016 09:13 pm
Total Logged in members: 0
Total guests: 10
Total anonymous users: 0
The most visitors ever was 114 on 10/26/2017 04:23 am

Email Us


Login | Register
Resumes | Members

In memory of the layed off workers of AT&T

Today's Diversion

I discovered I always have choices and sometimes it's only a choice of attitude. - Anonymous


Advanced Search



August 2018
      1 2 3 4
5 6 7 8 9 10 11
12 13 14 15 16 17 18
19 20 21 22 23 24 25
26 27 28 29 30 31  

Must Read

Most recent entries

RSS Feeds

Today's News

External Links

Pension and Retirees Links

Elvis Picks

BLS Pages


All Posts



Creative Commons License

Support Bloggers' Rights