<table width="600" align="center" border="0" cellpadding="0" cellspacing="0"><tbody><tr><td><font face="Verdana, Arial, Helvetica, sans-serif"><font color="#333333" size="2"><a href="http://www.alternet.org/books/152549/how_companies_plunder_and_profit_from_the_nest_eggs_of_american_workers/" target="_blank"><b>How Companies Plunder and Profit from the Nest Eggs
of American Workers</b></a><br></font></font></td></tr><tr><td><font face="Verdana, Arial, Helvetica, sans-serif"><font color="#333333" size="2">ELLEN SCHULTZ - AlterNet</font></font></td></tr><tr><td><br></td></tr><tr><td>
<font face="Verdana, Arial, Helvetica, sans-serif"><font color="#333333" size="2"><i>This shows you the contempt the uber-rich who control
corporations have for the middle class people who work for them.<br>
<br>
Ellen Schultz, an investigative reporter for the Wall Street Journal,
has covered the retirement crisis for over a decade.</i></font></font></td></tr><tr><td><br></td></tr>
<tr><td><font face="Verdana, Arial, Helvetica, sans-serif"><font color="#333333" size="2">n December 2010, General Electric held its
Annual Outlook Investor Meeting at Rockefeller Center in New York City.
At the meeting, chief executive Jeffrey Immelt stood on the Saturday
Night Live stage and gave the gathered analysts and shareholders a
rundown on the global conglomerate�s health. But in contrast to the
iconic comedy show that is filmed at Rock Center each week, Immelt�s
tone was solemn. Like many other CEOs at large companies, Immelt pointed
out that his firm�s pension plan was an ongoing problem. The 'pension
has been a drag for a decade,� he said, and it would cause the company
to lose 13 cents per share the next year. Regretfully, to rein in costs,
GE was going to close the pension plan to new employees.<br>
<br>
The audience had every reason to believe him. An escalating chorus of
bloggers, pundits, talk show hosts, and media stories bemoan the
burgeoning pension-and-retirement crisis in America, and GE was just the
latest of hundreds of companies, from IBM to Verizon, that have slashed
pensions and medical benefits for millions of American retirees. To
justify these cuts, companies complain they�re victims of a 'perfect
storm� of uncontrollable economic forces-an aging workforce, entitled
retirees, a stock market debacle, and an outmoded pension system that
cripples their chances of competing against pensionless competitors and
companies overseas.<br>
<br>
What Immelt didn�t mention was that, far from being a burden, GE�s
pension and retiree plans had contributed billions of dollars to the
company�s bottom line over the past decade and a half, and were
responsible for a chunk of the earnings that the executives had taken
credit for. Nor were these retirement programs-even with GE�s 230,000
retirees-bleeding the company of cash. In fact, GE hadn�t contributed a
cent to the workers� pension plans since 1987 but still had enough money
to cover all the current and future retirees.<br>
<br>
And yet, despite all this, Immelt�s assessment wasn�t entirely
inaccurate. The company did indeed have another pension plan that really
was a burden: the one for GE executives. And unlike the pension plans
for a quarter of a million workers and retirees, the executive pensions,
with a $4.4 billion obligation, have always been a drag on earnings and
have always drained cash from company coffers: more than $573 million
over the past three years alone.<br>
<br>
So a question remains: With its fully funded pension plan, why was GE
closing its pensions?<br>
<br>
That is one of the questions this book seeks to answer. Retirement Heist
explains what really happened to GE�s pensions as well as to the
retirement benefits of millions of Americans at thousands of companies.
No one disputes that there�s a retirement crisis, but the crisis was no
demographic accident. It was manufactured by an alliance of two groups:
top executives and their facilitators in the retirement
industry-benefits consultants, insurance companies, and banks-all of
whom played a huge and hidden role in the death spiral of American
pensions and benefits.<br>
<br>
Yet, unlike the banking industry, which was rightly blamed for the
subprime mortgage crisis, the masterminds responsible for the retirement
crisis have walked away blame-free. And, unlike the pension raiders of
the 1980s, who killed pensions to extract the surplus assets, they face
no censure. If anything they are viewed as beleaguered captains
valiantly trying to keep their overloaded ships from being sunk in a
perfect storm. In reality, they�re the silent pirates who looted the
ships and left them to sink, along with the retirees, as they sailed
away safely in their lifeboats.<br>
<br>
The roots of this crisis took hold two decades ago, when corporate
pension plans, by and large, were well funded, thanks in large part to
rules enacted in the 1970s that required employers to fund the plans
adequately and laws adopted in the 1980s that made it tougher for
companies to raid the plans or use the assets for their own benefit.
Thanks to these rules, and to the long-running bull market that pumped
up assets, by the end of the 1990s pension plans at many large companies
had such massive surpluses that the companies could have fully paid
their current and future retirees� pensions, even if all of them lived
to be 99 and the companies never contributed another dime.<br>
<br>
But despite the rules protecting pension funds, U.S. companies siphoned
billions of dollars in assets from their pension plans. Many, like
Verizon, used the assets to finance downsizings, offering departing
employees additional pension payouts in lieu of cash severance. Others,
like GE, sold pension surpluses in restructuring deals, indirectly
converting pension assets into cash.<br>
<br>
To replenish the surplus assets in their pension piggy banks, companies
cut benefits. Initially, employees didn�t question why companies with
multi-billion-dollar pension surpluses were cutting pensions that
weren�t costing them anything, because no one noticed their pensions
were being cut. Employers used actuarial sleight of hand to disguise the
cuts, typically by changing the traditional pensions to seemingly
simple account-style plans.<br>
<br>
Cutting benefits provided a secondary windfall: It boosted earnings,
thanks to new accounting rules that required employers to put their
pension obligations on their books. Cutting pensions reduced the
obligations, which generated gains that are added to income. These
accounting rules are the Rosetta Stone that explains why companies with
massively overfunded pension plans went on a pension-cutting spree and
began slashing retiree health benefits even when their costs were
falling. By giving companies an incentive to reduce the liability on
their books, the accounting rules turned retiree benefits plans into
cookie jars of potential earnings enhancements and provided employers
with the means to convert the trillion dollars in pensions and retiree
benefits into an immediate, dollar-for-dollar benefit for the company.<br>
<br>
With perfectly legal loopholes that enabled companies to tap pension
plans like piggy banks, and accounting rules that rewarded employers for
cutting benefits, retiree benefits plans soon morphed into profit
centers, and populations of retirees essentially became portfolios of
assets and debts, which passed from company to company in swirls of
mergers, spin-offs and acquisitions. And with each of these
restructuring deals, the subsequent owner aimed to squeeze a profit from
the portfolio, always at the expense of the retirees.<br>
<br>
The flexibility in the accounting rules, which gave employers enormous
latitude to raise or lower their obligations by billions of dollars,
also turned retiree plans into handy earnings-management tools.<br>
<br>
Unfortunately for employees and retirees, these newfound tricks
coincided with the trend of tying executive pay to performance. Thus,
deliberately or not, the executives who green-lighted massive retiree
cuts were indirectly boosting their own pay.<br>
<br>
As their pay grew, managers and officers began diverting growing amounts
into deferred-compensation plans, which are unfunded and therefore
create a liability. Meanwhile, their supplemental executive pensions,
which are based on pay, ballooned along with their compensation. Today,
it�s common for a large company to owe its executives several billion
dollars in pensions and deferred compensation.<br>
<br>
These growing 'executive legacy liabilities� are included in the pension
obligations employers report to shareholders, and account for many of
the 'growing pension costs� companies are complaining about. Analysts,
shareholders, and others don�t understand that executive obligations are
no different from pension obligations for rank-and-file workers and
retirees-they are governed by the same accounting rules, and they
represent IOUs that a company has on its books. In some ways, executive
liabilities are like public pensions: large, growing, and underfunded
(or, as in the case of the executives, unfunded).<br>
<br>
Unlike regular pensions, the growing executive liabilities are largely
hidden, buried within the figures for regular pensions. So even as
employers bemoaned their pension burdens, the executive pensions and
deferred comp were becoming in some companies a bigger drag on profits.<br>
<br>
To offset the impact of their growing executive liabilities on profits,
many companies take out billions of dollars of life insurance on their
employees, using the policies as informal executive pension funds and
collecting death benefits when workers, former employees, and retirees
die.<br>
<br>
With the help of well-connected Washington lobbyists and leading law
firms, over the past two decades employers have steadily used
legislation and the courts to undermine protections under federal law,
making it almost impossible for employees and retirees to challenge
their employers� maneuvers. With no punitive damages under pension law,
employers face little risk when they unilaterally slash benefits, even
when promised in writing, since they can pay their lawyers with pension
assets and drag out the cases until the retirees give up or die.<br>
<br>
As employers curtail traditional pensions, employees are increasingly
relying on 401(k) plans, which have already proven to be a failure.
Employees save too little, too late, spend the money before retiring,
and can see their savings erased when the market nosedives.<br>
<br>
But 401(k)s have other features that ensure that the plans, as they
exist, will never benefit the majority of employees. The plans are
supposed to provide a level playing field, the do-it-yourself retirement
vehicle so perfect for an 'ownership� society. But the game has been
rigged from the beginning. Many companies use these plans as part of a
strategy to borrow money cheaply, or in schemes to siphon assets from
pension funds.<br>
<br>
And just as the new accounting rules led to such mischief, so too did
new anti-discrimination rules. Implemented in the 1990s, the rules were
intended to ensure that employers didn�t use taxpayer-subsidized 401(k)
plans for the favored few, but would make them available to a broad
swath of workers. But thanks to the creativity of benefits consultants,
employers have used the discrimination rules to shut millions of
low-paid employees out of their plans and to provide them with less
generous benefits, while enacting other restrictions that make the plans
more valuable to managers and executives, at the expense of everyone
else.<br>
<br>
Today, pension plans are collectively underfunded, hundreds are frozen,
and retiree health benefits are an endangered species. And as executive
pay and executive pensions spiral, these executive liabilities are
slowly replacing pension obligations on many corporate balance sheets.<br>
<br>
Meanwhile, the same crowd that created this mess-employers, consultants,
and financial firms-are now the primary architects of the 'reforms�
that will supposedly clean it up. Under the guise of improving
retirement security, their 'solutions� will enable employers to continue
to manipulate retirement plans to generate profit and enrich executives
at the expense of employees and retirees. Shareholders pay a price,
too.<br>
<br>
Their tactics haven�t served as case studies at Harvard Business School,
and aren�t mentioned in the copious surveys and studies consultants
produce for a gullible public. But the masterminds of this heist should
take a bow: They managed to take hundreds of billions of dollars in
retirement benefits that were intended for millions of workers and
divert them to corporate coffers, shareholders, and their own pockets.
And they�re still at it. It might not be possible to resuscitate pension
plans, but it isn�t too late to expose the machinations of the
retirement industry, which has its tentacles into every type of
retirement benefit: profit-sharing plans, 401(k)s, employee stock
ownership plans (ESOPs), and plans for public employees, nonprofits,
small businesses, and even churches.<br>
<br>
The retirement industry has exported its tactics, using them to achieve
similar outcomes in retirement plans in Canada, Europe, Australia, and
elsewhere, and has big plans for Social Security and its overseas
equivalents as well. Unless it is reined in, the global retirement
industry will continue to capture retirement wealth earned by many to
enrich a relative few.</font></font></td></tr></tbody></table><br clear="all"><br>-- <br>P2P Foundation: <a href="http://p2pfoundation.net" target="_blank">http://p2pfoundation.net</a>� - <a href="http://blog.p2pfoundation.net" target="_blank">http://blog.p2pfoundation.net</a> <br>
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