'Retirement Heist': How Firms Trimmed Pensions | WAMU 88.5 - American University Radio
Filed Under:

'Retirement Heist': How Firms Trimmed Pensions

Play associated audio

As companies have been moving away from traditional pension plans, they have been shifting employees to new retirement plans, such as 401(k)s, that transfer the cost — and the risk — to workers.

Companies have claimed for years that old-style pensions were unsustainable. Author Ellen Schultz tells Morning Edition host Steve Inskeep that there's another explanation.

"The main narrative is that [companies] are struggling to pay both their pensions and these unexpectedly high health care costs for the retirees," Schultz says. "What isn't known is that companies were well-prepared for this phenomenon. The plans were in fact significantly overfunded. They had more than enough to pay every dime for every person currently employed and already retired."

Schultz investigated the changes in pension plans as a reporter for The Wall Street Journal and has written a book called Retirement Heist.

In the early 1990s, Schultz says, companies were looking for new ways to push out workers, especially older, more expensive ones. She says the expensive way would have been to pay severance, "but the cost-effective way was to instead promise them a bit more pension money in lieu of severance." In the end, "you've just laid off somebody who's expensive and it has cost you nothing."

Schultz cites this example of one well-known company whose pension fund has dropped significantly since the early 1990s. General Electric announced it was closing its pension plan to be more competitive. She says the company's financial filings show that GE has not put a cent into its pension plans since the mid-1980s. Over the years, GE, like most large companies, used assets in the plans to pay for other things.

Morning Edition reached out to several companies for this story, but none would talk in detail about changes to their pension plans.

Don Fuerst, a senior fellow at the American Academy of Actuaries, says companies can offer retirees the opportunity to take a lump sum distribution rather than a lifetime of pension income, which can be beneficial to the company but detrimental to the individual.

"But it's always a choice," he says.

David Certner, a policy director at the AARP, says that "corporations weren't always so transparent and clear about what they were doing."

Schultz says there was a massive transfer of wealth over the past two decades, from a multitude of retirees to a small number of executives. But while she calls her book Retirement Heist, she concedes that nothing that happened was illegal.

"When you have a properly funded plan, it doesn't matter how many retirees you have or how long they live," Schultz says. "It's not the fact that you have a lot of retirees; it's the fact that you have abused the pension plan."

Copyright 2011 National Public Radio. To see more, visit http://www.npr.org/.

NPR

The Other Rock History

What makes an essential rock song? Musicologist Greil Marcus argues that it's not the stature of the performer, but the degree to which a song tells the story of rock 'n' roll itself.
NPR

Can Oxfam Nudge Big Food Companies To Do Right?

Oxfam is scoring the 10 biggest food companies on a scale of 1 to 10 on a host of issues, from worker rights to climate change. But will promises translate into concrete changes?
NPR

Rick Perry's Legal Trouble: The Line Between Influence And Coercion

The Texas governor is charged with abuse of office and coercing a public official, but he claims he was just doing what governors do: Vetoing a budget item.
NPR

Beware: Your Uber Ride May Come With A Side Of Oversharing

The "sharing economy" has created a lot of solutions for cheap rides and places to stay. In a piece for Ozy.com, Pooja Bhatia writes about one undesired byproduct: oversharing.

Leave a Comment

Help keep the conversation civil. Please refer to our Terms of Use and Code of Conduct before posting your comments.