How companies stole worker pensions

Via Alternet, this excerpt from Retirement Heist: How Companies Plunder and Profit From the Nest Eggs of Americans Workers, by Ellen E. Schultz:

In 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.

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.

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.

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.

So a question remains: With its fully funded pension plan, why was GE closing its pensions?

3 thoughts on “How companies stole worker pensions

  1. “Share the wealth”…..Part IV. The repeal of the Glass-Steagall Act is what ultimately cratered the Capitalist worlds economies. Giving banks the authority to bundle mortgages in one division (mortgage) and then sell them to another division (investment) invited the corruption and inevitable crash that occurred. Bill Clinton along with his Treasury Secretary’s Robert Rubin (Co-Chairman of Goldman Sachs) and Lawrence Summers (Chief Economist for the World Bank) sold Americans on the idea that the elimination of the Glass-Steagall Act was “good for America.” Bill Clinton was either incompetently naive about economic history or he was a bald-faced liar. To be continued….

  2. When people complain about the pensions of public workers, and how generous and expensive they are compared to what the employees of private companies are, the have forgotten that once upon a time EVERYBODY had those kind of pensions.

    The big companies looted the pension funds and crushed the incomes of ordinary workers. The public employees didn’t suffer the same way because they were somewhat protected by being in a political environment, but everybody started to complain and get jealous of what the teachers and cops had that they did not.

    They should have been asking why they had lost what they used to have and what happened to the money. Instead they are clamoring to have the rest of their fellow workers brought down to their level. This is the real “politics of envy” used by the oligarchy against the working class.

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