Article 43

 

The Theft Of The American Pension

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In the last decade, the country’s biggest companies have raided worker benefits for profit. An expert explains how

By Thomas Rogers
Salon
September 17, 2011

These days, NOBODY EXPECTS to have a LIFELONG CAREER at one company anymore. And so the idea of having a pension from one single employer seems very alien to a lot of people, especially young people. 

Yes, we’re moving towards a more mobile workforce where people don’t stay around for life at their jobs. But the companies were taking aim at the older people who had already been there for a whole career and were not mobile and didn’t want to leave their jobs because they wanted to keep the money coming in and to pay their bills and build up their pension. The purpose of changing the plan wasnt to make it better for a mobile workforce. It was to take away what the nonmobile workforce had already built up.

Take the retirees of GenCorp. They had been promised their retiree health coverage in writing, but employers put little clauses into the plan documents that said, We reserve the right to change the benefits. The participants didn’t know that clause was in there and assumed when their employers said, If you take early retirement, we promise we’ll continue your health coverage until youre 65 and you can qualify for Medicare. On that kind of promise people said, OK, that sounds pretty good. After a few years, the companies turned around and said, You know what, we can’t afford that. When the retirees challenged them in court, the employers pointed to those little clues in small print deep in the document. So even when they had these benefits promised to them in writing, they legally lost. Union employees had physical legal contracts that had been collectively bargained that said, We promise you lifetime coverage. So the employers claimed, We didn’t mean your lifetime, we meant the life of the contract, and it worked.

Do you think part of the problem is also we have a cultural disdain for the elderly in this culture?

Yes, they were human resources. They were something that could be converted into income, and the thought that this might affect them and their families of course was not the first thing on their list.

I did see a certain reflexive disdain for the plight of some of these groups. One of the earliest incidents where employers aggressively cut retiree health benefits by suing the retirees was with the John Morrell meat-packing plan in Sioux Falls, Iowa. People had this notion, “Oh, these meatpackers: Who are they to whine they’re not getting this healthcare?” So I went out there and met with these folks. Among them were very elderly gentlemen who had worked at that plant from the time they were in high school. They took a time out to go to WWII and then went back and worked in the plant. They were your basic salt-of-the-earth folks. They did not have lavish pensions or retiree healthcare. It was these folks, the backbone of America, who were affected by this, not a bunch of greedy old people.

In a few short years, a lot of baby boomers are going to be looking at their pensions and realizing those aren’t there anymore. What kind of effect do you think that this is going to have on the economy and future of the country?

What we saw here were two generations that SHOULD HAVE been the best off. They had everything: a pension, retiree healthcare, death benefits - and look at whats happened to them. Now compare them to the current generation where people are working without pensions. If they have a 401(k), they’re lucky if they have anything saved in it participation rates are low and people can’t afford to put money aside and if they do, they dont know how to invest it, and if the market goes down they lose a lot of it. The 401Ks DON’T WORK and that’s the thing that’s supposed to be replacing pensions.

Pensions have been decimated for the people who seem to have the most secure retirement, and without Social Security a lot of these people would be destitute. In many cases, thats all they have. I think we’re seeing how critical it is to see some absolute guaranteed benefits in old age. I could see that if people didn’t have that, this country would start to look a lot more like a third-world country.

How does this change?

There are rules under pension law that are supposed to protect people. It would be helpful if they were actually enforced. There is a rule that says that pension assets are to be used solely for the benefit of retirees or the plan participants. That sounds pretty straightforward, but as I’ve noted in the book there are so many loopholes. In the book I talk about how they withdrew billions from the plans, sold assets from the plans, and used assets from the plans to pay executives. All of this is contrary to the intent of pension law, which is that the assets were there protected supposedly for the benefit of the people who earned them, and taxpayers subsidized it, meaning that if employers put money in, it would grow tax-free. Thats why a lot of this is abuse of taxpayers. It’s the company taking advantage of what should have been a tax break to help employees and using it to benefit shareholders and executives.

This was not a crisis that had to happen. It was manufactured. It wasnt an accident, and it’s profited companies greatly.

Thomas Rogers is Salon’s Deputy Arts Editor.

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Posted by Elvis on 10/15/11 •
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  1. A post from the attreirees yahoo maillist 9/20/2011

    Three weeks ago, I received a pension plan update letter from AT&T. AT&T will begin over four years phasing in interest rates set forth in the 2006 Pension Protection Act of 2006 to calculate lump-sum pension amounts. The PPA is aimed to foster stability in employee pension plans. I know I am screwed.

    Instead of using the 30-year US Treasury note rate, AT&T will be using the higher corporate bond rate in calculating lump-sum payouts. This results in lower lump-sum payments if one chooses that route. AT&T says this is similar to what other companies are doing but AT&T’s terms are more favorable than theirs. Am I supposed to be thankful?

    Posted by Burned Out Baby Boomer  on  10/19/11

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