Submitted by Elaine Magliaro, Guest Blogger
In the past couple of years, we’ve heard many reports from the mainstream media about how the pension funds of public sector workers are experiencing shortfalls and how they are bankrupting states and municipalities that may be unable to fulfill their pension obligations. All of the blame for this problem has been laid at the feet of public sector workers and their unions. Have the mainstream media presented the public with a true picture of the “pension crisis”—or have they just been repeating the talking points fed to them by certain politicians, organizations, and think tanks? Are “greedy” public sector workers and their unions truly responsible for the “pension crisis”—or are there other causes that are at the root of the problem?
David Cay Johnston, a Pulitzer Prize winning investigative journalist and book author who is a specialist in economics and tax issues, wrote about the issue of public employee contributions to their pension funds in the state of Wisconsin in March of 2011:
When it comes to improving public understanding of tax policy, nothing has been more troubling than the deeply flawed coverage of the Wisconsin state employees’ fight over collective bargaining.
Economic nonsense is being reported as fact in most of the news reports on the Wisconsin dispute, the product of a breakdown of skepticism among journalists multiplied by their lack of understanding of basic economic principles.
Gov. Scott Walker says he wants state workers covered by collective bargaining agreements to “contribute more” to their pension and health insurance plans.
Accepting Walker’s assertions as fact, and failing to check, created the impression that somehow the workers are getting something extra, a gift from taxpayers. They are not.
Out of every dollar that funds Wisconsin’s pension and health insurance plans for state workers, 100 cents comes from the state workers.
How can that be? Because the “contributions” consist of money that employees chose to take as deferred wages — as pensions when they retire — rather than take immediately in cash. The same is true with the health care plan. If this were not so a serious crime would be taking place, the gift of public funds rather than payment for services.
In an appearance on Ed Schultz’s news program, Johnston expounded on the subject:
Everybody who has a job who gets any kind of fringe benefits, that`s part of their compensation. And once you have performed the services, the money is yours.
And how the money is divvied up, whether the workers have it direct from the paycheck or it’s paid directly on behalf of the employee, which is the language in the labor contracts in Wisconsin — on behalf of the employee — they earned the money. It`s not the taxpayers`. The taxpayers bought their services.
David Cay Johnston on Gov. Scott Walker’s False Claims of Taxpayer Subsidies for Workers’ Pensions
In August 2012, Dave Johnson penned an article for Campaign for America’s Future titled Discover The Network Out To Crush Our Public Workers. In it, he wrote of how he had found it difficult “to read, watch or listen to the news without hearing that public employees are paid too much and get ‘lucrative’ pensions and this is ‘bankrupting’ your state, county or city.” He said people were getting the same story over and over—and it seemed to be coming from “everywhere.” He added that it was all “part of a broad, nationwide attack on public employees and their unions…” He said that the pension reform campaigns that were going on in a number of states across this country were coming at a time when the states were experiencing budget shortfalls and were seeking solutions to them. He claimed that the “storyline” the public was getting was diverting their attention from the “real culprits.”
Johnson wrote that at a time when people in this country should be laying blame on the financial institutions that caused the financial crisis in this country, studies and public relations tactics were laying the blame on public employees and their unions.
He continued:
The fact that this is happening in several states, from organizations linked in many ways, with similar language, similar tactics, quoting the same “studies”, from organizations with similar boards, etc. suggests this is a coordinated strategy, designed to have the appearance of popular uprising.
In 2011, Dean Baker, a macro-economist and co-director of the Center for Economic and Policy Research, wrote an article for Huffington Post titled Public Pensions 101. In it, he provided insight into the attack on public pensions. Baker wrote:
With the recent spate of attacks on climate science and evolution it should not be a surprise that traditional defined benefit pensions in the public sector are now also under attack. There are powerful political actors in this country who are anxious to build a bridge back to the 19th century; taking us to a time where working people enjoyed few protections and could not count on sharing in the gains of economic growth.
The effort to weaken or destroy public sector unions and take away their pensions is the latest battle in this larger war. As usual, the right has been busy making things up to push its agenda, confident that the media will not expose untrue claims.
At the center of the right’s story is the view that governments are somehow being reckless or irresponsible when they provide guaranteed pensions for their workers. They tell us that these guaranteed benefits will bankrupt state and local governments, imposing impossible burdens on future taxpayers.
This story can be easily shown to be untrue. While the right has been scaring the public with talk of a trillion dollars in unfunded liability in state pensions, this sum can also be expressed as about 0.2 percent of state income over the time-frame in which the liabilities will have to be paid.
Baker said it was important to “recognize” the main factor that had contributed to the present problem facing underfunded public pensions—“the collapse of the housing bubble and the subsequent downturn in the economy and the stock market. The plunge in the stock market led to a sharp decline in the value of pension fund assets.” The collapse also led to the budget shortfalls facing state and local governments all across the country. Those shortfalls, in turn, resulted in state and local governments making reduced payments to pension funds.
Baker provided numbers to show the comparison in payments made to state and local pensions before and after the financial meltdown:
In the period since the beginning of the recession, annual payments into state and local pension funds have averaged $6.9 billion less than withdrawals. By contrast, in the three years prior to the downturn, payments averaged $18.4 billion more than withdrawals.1
In the executive summary of his report titled The Origins and Severity of the Public Pension Crisis (Center for Economic Policy Research, 2001), Baker wrote that there have been cases where pensions were underfunded prior to the plunge in the stock market in the years 2007-2009. Still, that underfunding, he said, is not the main reason why pensions are facing difficulties today. According to Baker, “$80 billion of the shortfall is the result of the fact that states have cut back their contributions as a result of the downturn.”
Matt Taibbi, in his recent Rolling Stone article titled Looting the Pension Funds, takes us back even further than the financial crisis of 2007-2009—to 1974, when Congress passed the Employee Retirement Income Security Act (ERISA). Taibbi says that the purpose of the ERISA legislation was to “protect the retirement money of workers with pension plans. ERISA forces employers to provide information about where pension money is being invested, gives employees the right to sue for breaches of fiduciary duty, and imposes a conservative ‘prudent man’ rule on the managers of retiree funds, dictating that they must make sensible investments and seek to minimize loss.” Unfortunately, this law that was supposed to protect workers had a big loophole: “It didn’t cover public pensions. Some states were balking at federal oversight, and lawmakers, naively perhaps, simply never contemplated the possibility of local governments robbing their own workers.”
Taibbi claims that politicians started taking liberties with pension money. Some began borrowing cash from the public pension funds “to finance other budget needs.” Some officials also shirked their responsibility to public employees by failing to make their Annual Required Contributions (ARC)—even though they were required to by law.
Taibbi continued:
Here’s what this game comes down to. Politicians run for office, promising to deliver law and order, safe and clean streets, and good schools. Then they get elected, and instead of paying for the cops, garbagemen, teachers and firefighters they only just 10 minutes ago promised voters, they intercept taxpayer money allocated for those workers and blow it on other stuff. It’s the governmental equivalent of stealing from your kids’ college fund to buy lap dances. In Rhode Island, some cities have underfunded pensions for decades. In certain years zero required dollars were contributed to the municipal pension fund. “We’d be fine if they had made all of their contributions,” says Stephen T. Day, retired president of the Providence firefighters union. “Instead, after they took all that money, they’re saying we’re broke. Are you f*cking kidding me?”
David Sirota wrote a report titled The Plot against Pensions for the Institute for America’s Future that was published recently. His report evaluated the general state of the current debate taking place over public pensions as well as the “specific effects of the partnership between the Pew Charitable Trusts’ Public Sector Retirement Systems Project and the Laura and John Arnold Foundation.”
Sirota’s Findings:
- Conservative activists are manufacturing the perception of a public pension crisis in order to both slash modest retiree benefits and preserve expensive corporate subsidies and tax breaks.
- The amount states and cities spend on corporate subsidies and so-called tax expenditures is far more than the pension shortfalls they face. Yet, conservative activists and lawmakers are citing the pension shortfalls and not the subsidies as the cause of budget squeezes. They are then claiming that cutting retiree benefits is the solution rather than simply rolling back the more expensive tax breaks and subsidies.
- The pension “reforms” being pushed by conservative activists would slash retirement income for many pensioners who are not part of the Social Security system. Additionally, the specific reforms they are pushing are often more expensive and risky for taxpayers than existing pension plans.
- The Pew Charitable Trusts and the Laura and John Arnold Foundation are working together in states across the country to focus the debate over pensions primarily on slashing retiree benefits rather than on raising public revenues.
- The Laura and John Arnold Foundation is run by conservative political operatives and funded by an Enron billionaire.
- The techniques used by conservative activists to gain public support to privatize the public pensions that public workers have instead of Social Security are, if successful, likely to be used in efforts to privatize Social Security in the future.
NOTE: I plan to write another post on the pension problem. It will focus on the efforts to reform public pensions and the organizations that are behind the campaign.
SOURCES
Looting the Pension Funds: All across America, Wall Street is grabbing money meant for public workers (Rolling Stone)
The Origins and Severity of the Public Pension Crisis (Center for Economic and Policy Research)
The Plot against Pensions; How Pew and the Arnold Foundation Plan to Undermine America’s Retirement Security (Institute for America’s Future)
Pew’s pension reform activism drawing critics: Some concerned over recent advocacy role in public pension reform (Pensions & Investments)
Public Pensions 101 (Huffington Post)
Promise Breakers: How Pew Trusts Is Helping to Gut Public Employee Pensions (Frying Pan News/Huffington Post)
The “Liberal Press” Continues Its Assault on Unions, Pensions, and Public Employees (Huffington Post)
Note To Gov. Walker: Wisconsin Pension Plan Is 97 % Funded, Could Pay Benefits For More Than 18 Years (ThinkProgress)
Matt Taibbi on How Wall Street Hedge Funds Are Looting the Pension Funds of Public Workers (Democracy Now!)
Why Does a Texas Billionaire Care So Much About Our Pension? (Oklahoma Education Association)
Rhode Island Treasurer Misleading Public Is Worse Than Withholding Hedge Fund Information (Forbes)
The Wisconsin Lie Exposed – Taxpayers Actually Contribute Nothing To Public Employee Pensions (Forbes)
Enron Billionaire and Pew Trusts Looting Public Pensions (Occupy.com)
Matt Taibbi on Wall Street’s Campaign to Loot Public Pensions (Bill Moyers)
Report Exposes the Right-Wing Tag Team Plotting Against Pensions (Truth-Out)
David Cay Johnston: Wisconsin Public Workers Earned Their Pensions — It’s Not the Taxpayers’ (Crooks and Liars)
The theft of the American pension
In the last decade, the country’s biggest companies have raided worker benefits for profit. An expert explains how
By Thomas Rogers
9/17/11
http://www.salon.com/2011/09/17/retirement_heist_interview/
Excerpt:
How did you first discover this “retirement heist” was happening?
In the late ’90s I noticed that many companies, including a lot of the largest companies in the country, were hiring experts to change their pension plans. They all claimed they were doing it to make themselves more modern and better for the mobile workforce, but it struck me as unlikely that a lot of companies would be doing something that was apparently costing them money just to make employees happy. I ultimately figured out that they had found a way to use the accounting rules to profit from cutting benefits.
Even after reading the book, I’m a little bit confused by how this actually worked. It was so sneaky.
It took me a long time to find an expert who could explain to me how these accounting rules worked, but when I finally pieced it together, it was enormously simple. Think of pensions as a debt. If a company can reverse a debt, it can record it as income. And that income is the same as if they got it from selling trucks or whatever it is the company sells. There were billions in promises to retirees for pensions and healthcare and death benefits and life insurance, and the companies figured out that if they cut or eliminated them altogether then they could get those billions in profit — and even use them for executive compensation.
A striking example was Lucent, which inherited about 100,000 retirees when it was spun off from AT&T. From the beginning, Lucent kept saying, “We are crippled by these retirees,” but the truth is, they also received more than enough actual money from AT&T to pay every dime of benefits for all the current and future retirees. Bit by bit, they cannibalized these benefits. They eliminated a death benefit, which is a very simple thing that says, if you work for us for 25 or 30 years, and you die, your widow will get $50,000 dollars or whatever per year. Lucent said they couldn’t afford that. So they took it away and saved $400 million that had been set aside physically in the pension plan for these folks. At the same time, they awarded more than $400 million in bonuses to executives.
I kept on thinking about the market crash of 2008, where bankers were partly saved from public outrage because the public really didn’t understand how the system worked. I remember thinking, “This is so complicated that I can’t even really get angry about it, because I don’t know how it all breaks down.”
The retirees didn’t understand this was being done to them. They just assumed, “Oh well, this company is affected like everyone else by the economy.” They didn’t see the role the companies played [in deceiving their employees]. The federal courts found Cigna documents that made it clear that the HR executives were discussing how, if the cutting of employees’ benefits was handled right, there wouldn’t be an employee backlash because the people wouldn’t understand what was happening. And it’s a pattern that has existed at a number of other companies.
It may seem odd to you that a person wouldn’t know their pension is being cut, from, for example, $20,000 a year to $15,000 or $10,000. But companies have various ways of masking it. One way is to pay people a lump sum when they leave, saying, “Here’s a lump sum so you don’t need to wait until you’re 65 to get a payment.” Almost everyone who was attracted to that assumed it was the equivalent amount to a pension because they didn’t know about the time value of money and discount rates and so forth.
Where were the union fat cats when this theft was occurring? They were @ DC parties eating caviar w/ corporate lobbyists. Read, This Town.
Hostess took workers’ pension money to fund itself
12/10/12
http://www.dailykos.com/story/2012/12/10/1168761/-Hostess-took-workers-pension-money-to-fund-itself
Of all the outrages Hostess has committed against its workers, this may take the cake. In August, 2011, the company just stopped contributing to its workers’ pensions, and is now acknowledging that it instead used the money for operational expenses. The money that didn’t go into pension funds was money that the workers had bargained for and chosen to take as pension instead of wages. But that doesn’t mean there’s anything they can do about it:
The maneuver probably doesn’t violate federal law because the money Hostess failed to put into the pension didn’t come directly from employees, experts said.
“It’s what lawyers call betrayal without remedy,” said James P. Baker, a partner at Baker & McKenzie LLP who specializes in employee benefits and isn’t involved in the Hostess case. “It’s sad, but that stuff does happen, unfortunately.”
It’s a little more than sad. It’s infuriating, at a minimum. And the fact that “that stuff does happen” as often as it does is a sign of a diseased economy
This was how these workers were saving for their retirement over decades at Hostess. They were being responsible, planning and saving like we’re told we should all do, making that decision at a local level as they bargained their contracts:
For example, John Jordan, a union official and former Hostess employee, said workers at a Hostess factory in Biddeford, Maine, agreed to plow 28 cents of their 30-cents-an-hour wage increase in November 2010 into the pension plan.
Hostess was supposed to take the additional 28 cents an hour and contribute it to the workers’ pension plan.
“This local was very aggressive about saving for the future,” he said.
And in the end, Hostess was very aggressive about stealing those savings, hour by hour, from the workers. While there may not be a remedy because the 28 cents an hour didn’t first go to the workers and then into the pension fund, morally, it’s no less stealing, adding up to tens of millions of dollars. The current CEO of Hostess says it’s “terrible,” but don’t blame him, he didn’t know it was happening.
You do not want to be the next person to say in my hearing that Hostess went bankrupt because of those greedy union workers.
Good thing I’m nor smokin’ a doobie, that Twinkie video could start a binge eating episode.
Not bad actually, tough to beat the classic Hostess cupcake.
Union members, “Let them eat cake..Hostess cake.”
Well, well, well! The entire post was about the oppressed public employee unions. Now, a little love for private sector union members. I guarantee you the union fat cat executives 401k’s are safe. And, hard earned money from the working folks will continue pouring into their coffers.
How Business Elites Looted Private-Sector Pensions
By Ellen Schultz
http://psc-cuny.org/clarion/march-2012/how-business-elites-looted-private-sector-pensions
Excerpt:
Editor’s note: In New York state, anti-union pundits and politicians are demanding pension cuts for new public employees. They argue that private-sector workers don’t have pensions this good, so in fairness, public-sector benefits must come down to the private-sector level.
But as former Wall Street Journal reporter Ellen Schultz details below, the erosion of private-sector pensions didn’t “just happen.” It is the result of a deliberate transfer of wealth from workers to corporate executives and shareholders – a “pension heist,” to borrow the title of Schultz’s new book. The excerpt below summarizes her conclusions and details the recent case of General Electric; the book is filled with detailed accounts of similar maneuvers by other corporations.
The same corporate interests that attacked private-sector pensions yesterday are leading the charge to slash public-sector pensions today. For example, General Electric’s GE Asset Management is part of the Partnership for New York City, a corporate lobbying group that is one of the loudest voices calling for cuts in the pensions of public workers (see Clarion, April 2011).
Meanwhile, GE’s top executives have seen their pensions grow richer than ever.
***
RETIREE PENSIONS UNFAIRLY BLAMED
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.
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.
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.
But despite the rules protecting pension funds, US 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.
To replenish the surplus assets in their pension piggy banks, companies cut benefits. Initially, employees didn’t question why companies with multibillion-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 “cash balance” pension plans, which superficially resembled 401(k)s.
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…
WORKERS CONTINUE TO LOSE
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.
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.
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.
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.
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.
Hostess CEOS Take Pensions from Employees
OS,
I think pretty much anyone in politics have no social conscience…..its spin city….
Dennis,
Regarding the pensions of public sector workers: The rules and regulations and methods for determining one’s retirement pay vary by state. Public employees in some states pay more into their pension funds than those in other states. Many don’t receive full retirement benefits if they retire at 55. I believe there are certain classes of public employees–such as firefighters–who can receive full benefits at that age …at least in some states.
*****
Here is some information on public safety workers:
STATE GOVERNMENTS’ PUBLIC SAFETY WORKER RETIREMENT PLANS – TABLES
http://www.ncsl.org/issues-research/labor/state-retirement-plans-public-safety-tables.aspx
David Clay Johnson’s explanation that “contributions consist of money employees choose to take as deferred wages as a pension when they retire instead of immediately as cash (during their working years). This implies they would be paid a lot more for their daily work if they chose no pension. Let’s do some calculations. If a public employee starts work at age 20 and retires at age 55 as many of today’s public employees do, multiply his average wage over those 35 years and then calculate his retirement pay from age 56 to average life span to age 80. You will find that his total collected retirement dollars approximates his total working wages. Using Mr. Johnson’s Leftist logic that means the employee should or could have been paid twice as much for his daily work with no pension. See how well that bloated wage sits with the average private employee or small business person who is already making much less per hour input than the public employee and most time has no golden parachute to look forward to at age 55.
“See how well that bloated wage sits with the average private employee or small business person who is already making much less per hour input than the public employee and most time has no golden parachute to look forward to at age 55.”
Dennis,
You are probably right but that’s because the people you’ve been voting for all these years have allowed businesses to reduce costs on their employees backs, or ship jobs overseas. Your guys have looted the middle class in the private sector and as this piece shows are looking for new areas to loot. You talk of Leftists as the problem, which means that you haven’t paid attention all these years. It’s the people on the Right who have let corporations get away with this robbery, mainly because that’s who backs their elections.
davidbluefish,
I was reading through one of my earlier posts about the Campaign to Fix the Debt in the wee hours of the morning. That’s when I found the video above in one of the comments I had posted on that blog. I had forgotten all about Schultz and her book.
Elaine, I have been scratching my head, trying to remember this womans name. Thank you. I watched her talk on C-span a while ago, and could not place her.
It is amazing to me that all this knowledge is out there, and yet the masses of voters continue to allow the middle class to be “drowned in a bathtub”
http://www.c-spanvideo.org/program/301767-1
Corporations Are Stealing Pension Funds – Dylan Ratigan Show – 9/15/2011
It isn’t just the pension funds of public sector workers that are being gutted. There are entities that are plundering/have plundered the pension funds of private sector workers too.
*****
Retirement Heist: How Firms Plunder Workers’ Nest Eggs
by Steve Denning
10/19/11
http://www.forbes.com/sites/stevedenning/2011/10/19/retirement-heist-how-firms-plunder-workers-nest-eggs/
Excerpt:
In December 2010, General Electric [GE] held its annual meeting in New York City for analysts and shareholders. CEO Jeff Immelt reported on GE’s financial health and said that GE’s pension plan was a problem. “The pension has been a drag for a decade,” he said. It would cause the company to lose 13 cents per share the coming year. In order to control costs, GE was—regretfully—going to close the pension plan for new employees. The implication was that workers’ pensions were dragging the company down.
What Immelt didn’t mention was that GE’s pension plans had actually contributed billions of dollars to the company’s bottom line over the last 15 years, earnings that the executives had taken credit for. Nor did he mention that GE hadn’t contributed anything to the workers’ pension plans since 1987 and still had enough to cover all the current and future retirees.
Nor did he mention that the executive pensions for GE executives were a burden. Unlike the plans for the 250,000 workers and retirees, the executive pensions had a $4.4 billion obligation that steadily drained cash from the company’s coffers, including $573 million over the past three years alone.
Why was GE closing its fully funded pension plan, while continuing its financially burdensome executive plan? This is the question to which Ellen Schultz’s incisive new book, Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers (Portfolio, 2011) offers a powerful answer.
A carefully planned heist
She explains that the current retirement crisis is “not a 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.”
Executives 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.”
In 2000, most pensions were fully funded
Two decades ago, pensions were well funded, due to laws and regulations passed in the 1970s and 1980s. By 2000, pension plans at many large companies had large surpluses that would have covered all current and future retirees’ pensions without them having to contribute anything.
Yet US firms found ways to siphon off billions of dollars in assets from the pension plans. Verizon used assets to finance downsizings. GE sold pension surpluses in restructuring deals, indirectly converting pension assets into cash. Many firms clandestinely cut benefits, using “actuarial sleight of hand to disguise the cuts.”…
They all do it
The firms involved in these activities are not a few small unscrupulous operators. They are the best-known companies in the USA, including: GE, Verison, Dupont, Northrop Grumman, Marathon Oil, Lucent, Wal-Mart, General Motors, Chrysler, Ford, AT&T, US Airways, Delta Air Lines, Cigna, Bank of America, Caterpillar, Deere & Co, UPS—the list goes on and on.
Schultz sums up the situation:
“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. 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.”
RobinH45:
A maximum of 2 URLs per comment is allowed.
“Have the mainstream media presented the public with a true picture of the “pension crisis”—or have they just been repeating the talking points fed to them by certain politicians, organizations, and think tanks?” – Elaine M
The main stream media has a strong aversion to journalism because journalism would expose the feudalistic policies that are running the plutocracy from the shadows and from the fog of lore.
Pete, I grabbed the same link twice. This link just explains who manages the USPS retirement fund(s)
http://www.postalmag.com/retirement.htm
Pete, Office of Personnel Management manages all USPS retirement funds. The second link leads to an interesting article that reveals that the USPS consistently over-funds FERS and asks why though the writer doesn’t know. FERS is the pension plan that is basically a 401K, the funds fr CSRS go to retirees under the old CSRS (Civil Service Retirement System – a defined benefit plan) system.
The over-funding is going into the investment market. The writer may not know, or want to open the can of worms the question begs but it’s going to the same (rigged) marketplace it and most people’s 401’s went to be looted before the 2008 meltdown. Who, after all, bought those toxic assets and derivatives, who had the money to buy the nations engineered-to-fail-mortgage debt? Pension funds the world over. Word.
http://www.apwu.org/news/webart/2013/13-068-fed-govt-loots-usps-130528.htm
http://www.apwu.org/news/webart/2013/13-068-fed-govt-loots-usps-130528.htm