The Retirement Heist

[eytonxav]

I saw this book mentioned in the Star-Telegram this morning, here is an exerpt: "examination of how top corporate executives, benefits consultants, insurance companies and banks have worked in concert to rob pension funds of the money built up by the contributions of regular employee." Also, indicates SS is next.

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Thoughts?

 

[JohnP]

Thanks DFW

Seems the CEOs and their enablers have their fingers into a lot of places. What ever happened to the concept that the companies belonged to the shareholders?

JohnP

 

[youbet]

I saw this book mentioned in the Star-Telegram this morning, here is an exerpt: "examination of how top corporate executives, benefits consultants, insurance companies and banks have worked in concert to rob pension funds of the money built up by the contributions of regular employee." Also, indicates SS is next.

Read more: Business Books | Business | Dallas Business, Texas Business, Fort Worth Business, Americ...


Thoughts?

An important omission makes this article less than creditable. The biggest thieves of pension funds are our politicians. Yet, they go unmentioned in the listing of pension fund "robbers."

 

[eytonxav]

An important omission makes this article less than creditable. The biggest thieves of pension funds are our politicians. Yet, they go unmentioned in the listing of pension fund "robbers."

This was simply a book review in the newspaper. While I would agree that we have politicians that have let the robber barron's do what they want, I am not sure that would make the book's content not creditable.

 

[MichaelB]

I hope the book is better than the review. Sounds like nothing new but still plenty of finger pointing and conspiracy.

 

[youbet]

This was simply a book review in the newspaper. While I would agree that we have politicians that have let the robber barron's do what they want, I am not sure that would make the book's content not creditable.

It isn't the "politicians that have let the robber barons do what they want." The politicians are the robber barons, especially here in Illinois!

 

[eytonxav]

I hope the book is better than the review. Sounds like nothing new but still plenty of finger pointing and conspiracy.

Sometimes finger pointing is good, especially if it flushes out wrong doing and leads to positive change. Conspiracy, I dunno, but this does not seem like a subject that would be on par with the moon landing being filmed in hollywood.

It isn't the "politicians that have let the robber barons do what they want." The politicians are the robber barons, especially here in Illinois!

I suppose it would take an encyclopedia to analyze what the politicians have and have not done to demolish our retirements

 

[chinaco]

IMO...

DC plans like 401ks that are controlled by the company should be replaced with an IRA like approach where the individual controls the placement of funds with a financial services company.

The reality is that many many people get scr3wed on the expenses.

In some cases there are conflicts of interest.

It is pretty easy to figure out ways to use that program (and all that money) to a company's advantage.

 

[donheff]

I got the book from the library. It is a horrifying story of executive greed. Turns our impressions of "unfunded" employee pension funds upside down. It turns out many employee pension funds were well funded until corporate cost cutters raided them to the benefit of top execs and CIOs many times legally (although immorally) and often illegally. I'm sure there is a corporate side to the story but her cites seem pretty darn good. And some of the excesses were caught out by courts when arrogant miscreants documented their own misdeeds.

 

[cashbalancetrouble]

The Government let this go on while their contributors robbed many. I was one. In 2006 the Pension Protection act stopped some of the biggest loop holes. It had started in the mid 90's when GE found the loop hole to allow pension conversions and removal of excess funds.

The congress and executive branches looked the other way while the courts system dragged slowly on. Finally the Congress had to act. Many of the cases from 1998 to 2002 are still going thru the courts.

My pension for the first 23 years is now bigger than my pension after the 1998 conversion and working 5 more years. I worked for 5 years at a pension accrual rate of 0, ZERo, nada, nothing. This is clearly illegal., but I could never get the IRS or DOL to do anything because the issue was "in the courts". And the lawyers never wanted anything but larger class action cases. I still have boxes and boxes of evidence. One lawyer returned an entire set after three years of pondering my case, just wasn't big enough.

The 2006 PPA changed the law to not allow what happened to me anymore but left those prior to get screwed.

BEEN THERE, DONE THAT!

 

[ikubak]

Yep, whether it's business people, or politicians, if they can get at large amounts if $ they will do it. I have a pension through the state I live in, and just have to assume it's going to be there. They have upped my mandatory contributions by 2.25% of my pay, with no corresponding increase in benefit. Makes me wonder what's going on behind the curtain.

 

[eytonxav]

I got the book from the library. It is a horrifying story of executive greed. Turns our impressions of "unfunded" employee pension funds upside down. It turns out many employee pension funds were well funded until corporate cost cutters raided them to the benefit of top execs and CIOs many times legally (although immorally) and often illegally. I'm sure there is a corporate side to the story but her cites seem pretty darn good. And some of the excesses were caught out by courts when arrogant miscreants documented their own misdeeds.

Don, glad you were able to obtain the book. Have you gotton to the part about S/S yet? I was very curious as to what the author was envisioning happening in that area.

The 2006 PPA changed the law to not allow what happened to me anymore but left those prior to get screwed.

BEEN THERE, DONE THAT!

Despite that many got screwed with their DBP being converted to cash balance programs, and of course I would say almost all companies changed their going forward pension programs to the detriment of everyone. Healthcare has been for some time and will continue to be on the hit list for further change/give backs, and I beleive Obama care has provided more loop holes for that. Since corporate america has been taking back and renegging on promises made to corporate american workers since the early 90s, it should come as no surprise to see this same faight hitting government workers eventually.

Personally, even with the above I have faired reasonably well, but it does get my dander up on how so many $s went into the pockets of top executive management in the process. I'm all for everyone feeling the pain if necessary, but that has not been the case in Corporate America.

 

[donheff]

Don, glad you were able to obtain the book. Have you gotton to the part about S/S yet? I was very curious as to what the author was envisioning happening in that area.

I finished the book. She didn't address SS. Her focus is on corporate rip offs and and well intentioned Government reforms that failed.

 

[eytonxav]

I finished the book. She didn't address SS. Her focus is on corporate rip offs and and well intentioned Government reforms that failed.

OK, thanks, I thought the original book review mentioned something about impacts to S/S, but it appears the link I posted is no longer active.

 

[ziggy29]

Since corporate america has been taking back and renegging on promises made to corporate american workers since the early 90s, it should come as no surprise to see this same faight hitting government workers eventually.

This problem (I'm one of the 'victims' of a frozen corporate pension and eliminated retiree health insurance) has two consequences. First it makes it harder and harder for the average private sector middle class taxpayer to keep affording the legacy public sector deal, because we are falling farther and farther behind -- benefits are watered down and many of us haven't had our incomes increase for 5 years or more, and adjusted for inflation most of us are making a fair bit less than 5-10 years ago even as the costs of these legacy plans keep rising. If I make 10% less (after inflation) than 5 years ago, it's hard for me as a taxpayer to keep up with the funding needs of public retirement plans whose costs are steadily rising.

Secondly, it gives the elites an opening to "divide and conquer" the middle class by pitting the "pension haves" against the "pension have nots" -- and hope the (mostly private sector) have nots will backlash on the public sector "pension haves". (We've seen that battle play out here more than a few times.) Frankly I'd rather see the private sector middle class stop getting screwed instead of bringing the public sector down to "our level" and fueling a race to the bottom. But for that to happen we'd need all of middle/working class America "mad enough" at the status quo to unite and stop the race to the bottom. But how do that is, sadly, easier said than done.

Anyway, the more "divisions" they can create among ordinary folks, the more these elites can screw us all because we're too busy fighting amongst ourselves to notice.

 

[youbet]

I finished the book. She didn't address SS. Her focus is on corporate rip offs and and well intentioned Government reforms that failed.

Did she cover not-well intentioned gov't reforms that succeed? You know, like the legislation signed my former Gov Jim Thompson in Illinois on his last day in office that allows extreme spiking and double/triple dipping at the expense of middle class taxpayers and working families?

 

[youbet]

Despite that many got screwed with their DBP being converted to cash balance programs, and of course I would say almost all companies changed their going forward pension programs to the detriment of everyone.

The conversion from DBP to cash balance plans was NOT to the detriment of everyone. Younger folks who will likely not spend 30+ years with the same company actually benefit from cash balance plans where they can take their pension benefits with them.

This happened to my son. When his MegaCorp employer (he had 9 yrs seniority at the time) offered the choice of converting to cash balance or staying with DBP, he chose cash balance. I disagreed. I was wrong. A year later he accepted an offer at another company and was able to take his cash balance plan with him (rolled to an IRA actually) where the DBP would have stayed at the original MegaCorp, vested but doomed to be near worthless 30+ yrs later when he tried to collect.

The issue of how folks on DBP's were converted (voluntary or mandatory and other details) is key and I know many were not treated well, especially folks with many years in. But cash balance plans in themselves are not necessarily bad especially in our current career culture where long seniority is not likely to be the rule. And the fact that cash balance plans require current period funding by the corp along with control of the money being in the hands of the employee is good too. Less opportunity for shenanigans.

 

[Texas Proud]

This problem (I'm one of the 'victims' of a frozen corporate pension and eliminated retiree health insurance) has two consequences. First it makes it harder and harder for the average private sector middle class taxpayer to keep affording the legacy public sector deal, because we are falling farther and farther behind -- benefits are watered down and many of us haven't had our incomes increase for 5 years or more, and adjusted for inflation most of us are making a fair bit less than 5-10 years ago even as the costs of these legacy plans keep rising. If I make 10% less (after inflation) than 5 years ago, it's hard for me as a taxpayer to keep up with the funding needs of public retirement plans whose costs are steadily rising.

Secondly, it gives the elites an opening to "divide and conquer" the middle class by pitting the "pension haves" against the "pension have nots" -- and hope the (mostly private sector) have nots will backlash on the public sector "pension haves". (We've seen that battle play out here more than a few times.) Frankly I'd rather see the private sector middle class stop getting screwed instead of bringing the public sector down to "our level" and fueling a race to the bottom. But for that to happen we'd need all of middle/working class America "mad enough" at the status quo to unite and stop the race to the bottom. But how do that is, sadly, easier said than done.

Anyway, the more "divisions" they can create among ordinary folks, the more these elites can screw us all because we're too busy fighting amongst ourselves to notice.

I kind of agree with you... and most of the pension plans out there are reasonably funded... and are reasonably sustainable....

But there are enough that are close enough to Ponzi schemes that it would be hard pressed to tell the difference...

I just posted in another thread that if all plans went to cash balance (or something similar), then almost all of the problems go away... sure, you have now moved the risk from the employer to the employee... but who said it was the responsibility of the employer to take care of you when you are old

 

[eytonxav]

The conversion from DBP to cash balance plans was NOT to the detriment of everyone. Younger folks who will likely not spend 30+ years with the same company actually benefit from cash balance plans where they can take their pension benefits with them.

This happened to my son. When his MegaCorp employer (he had 9 yrs seniority at the time) offered the choice of converting to cash balance or staying with DBP, he chose cash balance. I disagreed. I was wrong. A year later he accepted an offer at another company and was able to take his cash balance plan with him (rolled to an IRA actually) where the DBP would have stayed at the original MegaCorp, vested but doomed to be near worthless 30+ yrs later when he tried to collect.

The issue of how folks on DBP's were converted (voluntary or mandatory and other details) is key and I know many were not treated well, especially folks with many years in. But cash balance plans in themselves are not necessarily bad especially in our current career culture where long seniority is not likely to be the rule. And the fact that cash balance plans require current period funding by the corp along with control of the money being in the hands of the employee is good too. Less opportunity for shenanigans.

Your point is certainly valid, but I was referring to the fact that the new CB plans are generally not as $ beneficial as the old ones, except for the portability issue as you point out or the case of one working a shorter period of time at a particular company.

 

[HFWR]

...but who said it was the responsibility of the employer to take care of you when you are old

Until recently, the employer...

 

[ziggy29]

Your point is certainly valid, but I was referring to the fact that the new CB plans are generally not as $ beneficial as the old ones, except for the portability issue as you point out or the case of one working a shorter period of time at a particular company.

This is probably true. And it's probably true that a "cash balance" pension plan isn't as generous as the legacy plans. But is it more sustainable? And just as importantly, are they better than having no pension option at all (other than purely DC plans like 401Ks and IRAs)?

There's no going back to legacy pension plans for the masses, I think. But I do think we can create and sustain portable "pension lite" plans for people who would prefer to have some of their retirement savings go into a plan where there is more certainty for planning purposes. And if the choice is between plans like these (especially if it's optional) and having nothing but 401K and IRAs to rely on, I'd prefer to see these plans readily available to the masses. It's as close to a "pension" many folks would see (apart from SS, I suppose).

 

[Mulligan]

Yep, whether it's business people, or politicians, if they can get at large amounts if $ they will do it. I have a pension through the state I live in, and just have to assume it's going to be there. They have upped my mandatory contributions by 2.25% of my pay, with no corresponding increase in benefit. Makes me wonder what's going on behind the curtain.

You might be surprised how little your contribution rate determines in the overall health of your fund, I know I was. Throughout most of my working years we contributed 13% of our salary and benefits, and that was matched by the school. Many people assumed that was the force behind funding the system. Actually it was around only about 35%. The remaining 65% or so comes from the compounding of yearly assumed 8% return on these assets. With the market essentially flat for the past decade, it sure makes it hard to hit that assumption. So actually it shouldn't be surprising to find out your contribution rate has to go up to help keep the system funded. Assuming of course they didn't fully invest in gold the past few years

 

[eytonxav]

This is probably true. And it's probably true that a "cash balance" pension plan isn't as generous as the legacy plans. But is it more sustainable? And just as importantly, are they better than having no pension option at all (other than purely DC plans like 401Ks and IRAs)?

There's no going back to legacy pension plans for the masses, I think. But I do think we can create and sustain portable "pension lite" plans for people who would prefer to have some of their retirement savings go into a plan where there is more certainty for planning purposes. And if the choice is between plans like these (especially if it's optional) and having nothing but 401K and IRAs to rely on, I'd prefer to see these plans readily available to the masses. It's as close to a "pension" many folks would see (apart from SS, I suppose).

Ziggy,

I find myself in agreement with almost everything you post, maybe its a case of great minds think alike

 

[GregLee]

The remaining 65% or so comes from the compounding of yearly assumed 8% return on these assets. With the market essentially flat for the past decade, it sure makes it hard to hit that assumption.

I don't think that's where the problem lies with public pension funds. The 8% assumed return is nominal, I believe, but in nominal terms, the market has not been flat for a decade. The Hawaii retirement portfolio (as I posted previously) has done quite well recently (though the fund has a large unfunded liability):

The ERS portfolio of investments had a total value of $11.6 billion as of June 30, 2011, up 18.3 percent over the previous year. The fund saw a 20.7 percent return on investments for the year ended June 30.
Honolulu Civil Beat - Hawaii Employees' Retirement System

 

[youbet]

Your point is certainly valid, but I was referring to the fact that the new CB plans are generally not as $ beneficial as the old ones, except for the portability issue as you point out or the case of one working a shorter period of time at a particular company.

We agree then.

But I do want to emphasize that the portability issue is huge. Under the plans I've looked at comparing DBP's and CB's, someone who works for several firms for a total of 30 yrs under DBP's is at a huge disadvantage to someone who does the same but with CB plans.

Of course, CB plans seem to be fading away to DCP's anyway so not sure it matters much.