At a time when CEOs are paying themselves exorbitant salaries, stock options and benefit packages, corporations are slashing the pension benefits of workers who have helped build their companies.
The most heinous of the pension takeaway schemes include switching to cash balance plans (which deprive workers of expected benefit increases from their final years of company employment), changing pension formulas with obscure “modifications” that are really cuts, and “wearaway” which can force employees to work many additional years to increase pension benefits beyond previously established levels.
These schemes reduce corporate contributions to pension plans or enable them to increase pension plan surpluses. Although employers by law cannot take pension surpluses directly for corporate purposes, they are allowed by dint of an accounting rule to show the earnings of the surplus on their corporate balance sheets.
A recent IBM 30 percent gain in operating income was due to such a pension surplus, according to the New York Times. Many IBM workers have been deprived of expected pension fund benefits and the number would have been much larger had protests not protected the pension rights of 35,000 other IBM employees, who faced losses of up to 50 percent of what they would otherwise have earned.
IBM, Bell Atlantic/Verizon, ATT, SBC, Boeing, Monsanto, RJ Reynolds,and Citibank, are among the companies that have opted for the switch to cash balance plans.
In the fall of 2000, Congress is set to make the problem worse, with the Comprehensive Retirement Security and Pension Reform Act.Passed overwhelmingly in the House of Representatives, this “Tax Giveaway and Pension Takeaway” (H.R. 1102) bill would expand employer’s ability to undertake pension fund rip-offs. A version in the Senate is even worse.
The Clinton administration has criticized the pension takeaways, but refused to lead the charge against the rip-off schemes. It remains unclear whether President Clinton will veto or block the Tax Giveaway and Pension Takeaway bill.
This corporate attack on workers pensions must be stopped. Cash balance conversions should be prohibited unless older workers benefits are truly and adequately protected. Companies should be prohibited from cutting back promised benefits following mergers, acquisitions and sales of the division of a company. Surplus pension monies should be used to provide full cost-of-living adjustments. And investment accountability must be enhanced by giving pension plan participants the right to information on plan investments and a greater role in investment management.
Those workers not now covered by a pension plan must also be guaranteed a secure retirement. New pension plans to cover these workers should be simple, fair and portable, with employers contributing the same percentage of pay for all employees, and lifetime monthly payments to retirees that are indexed for inflation and insured.
Of top priority right now is to strip the cash balance provisions from Tax Giveaway and Pension Takeaway bill. Senator Tom Harkin, D-Iowa, is expected to propose an amendment that pension rights groups say would better protect workers interests.
It is hard to overstate the cruelty of the corporate schemes to undermine loyal workers pension benefits. Workers who have relied ingood faith on company pension promises are left helpless in the face of cutbacks that deprive them of expected payments to support them in retirement and old age.
It is now fashionable to speak of the nations “prosperity.” What prosperity there is, is the result of the blood, sweat and tears of millions of working Americans, much more than the efforts of most corporate executives. The executives are paying themselves handsomely. They shouldn’t diminish the nest egg workers who have made them rich expect.
The Washington, D.C.-based Pension Rights Center, the nation’s only consumer organization working solely to protect the pension rights of workers, retirees and their families, is among the organizations leading the campaign to stop adoption of the Tax Giveaway and Pension Takeaway bill. To contact them, contact them at: Suite 602, 1140 19th Street, NW, Washington, DC 20036, tel: 202-296-3776, e-mail: [email protected]