January 3, 2012
Why do I mention this? Because I have a habit (a bad one or an admirable one, depending on your point of view) of trying to put myself in other people’s shoes before castigating them. Even when the footwear belongs, as in this case, to people of whom one reviewer of Schultz’s book said, “How such corporate executives and their retirement heist allies sleep well at night is a puzzle to anybody with a conscience and a sense of fair play.”
Every detail of the story in Schultz’s book is analogous to my little Sintra sabbatical, just millions of times bigger. Employee-benefits consultants present corporate executives with innovative, just-barely-legal ways to pull money – and tax deductions – out of benefit plans designed for a company’s retirees. This can include such dodges as freezing the benefits, converting retirement plans to cash balance plans, merging a company with an overfunded plan with a company with an underfunded one, taking out insurance on the employees with the corporation as beneficiary, and a host of other financial engineering gimmicks. Orwellian slogans like “this change is to improve the competitiveness of our benefits program,” accompanied by Orwellian statistics, are presented to the retirees – and to legislators, courts and regulators – to make it sound like the plan is being improved. If any retirees discover the truth and complain to higher-ups about it, the company avoids any accountability like the plague.
The end result is a loss to the corporation’s retirees, and to taxpayers, but a gain in the corporation’s profits and a bonus for the executives and their consultants.
Schultz intersperses highly technical passages about the mechanics of how executives and consultants manage to raid or reduce pensions, with pathos-heavy stories about the individuals who suffer from these plots, and for whom it may require a years-long battle to get so much as an explanation, much less what is due to them. Many of the individuals featured are loyal retirees now approaching their death beds, with precious little time or wherewithal to fight back.
When employers adopted new cash-balance plans, for example, retiree benefits often declined as a result, though brochures the company handed out to employees said, “The changes being made are good for both you and the company.” At the same time, it was next-to-impossible for employees to find out how the new plans actually worked.
For instance, Schultz relates the story of one engineer, Steven Langlie, who “couldn’t figure out how the cash-balance plan his employer changed to in 1989 worked,” Schultz writes.
“[Langlie] relentlessly pestered his employer, Onan Corp., a unit of Cummins Engine in Minneapolis, for answers. When they refused to spill the beans, the increasingly apoplectic Langlie wrote to local lawmakers, complained to the Minnesota Department of Human Rights and the IRS, and traveled to Washington, D.C., to deliver a petition signed by 460 fellow workers to the Department of Labor. …As Langlie’s pension complaints escalated, he was transferred, denied training, and demoted, despite favorable job-performance reviews. The company also refused to upgrade his computer from a primitive IBM 286 – the industry equivalent of an Etch A Sketch, which couldn’t run engineering software or communicate with the company’s servers. Finally, the human resources department told Langlie’s supervisor that it would “help retire him” and eliminated his job. After Langlie’s thirty-seven years with the company, his pension, which would have been $1,100 a month under the old pension plan, was just $424 a month.”
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