Companies Tap Pension Plans To Fund Executive Benefits

[EV_Ares]

At a time when scores of companies are freezing pensions for their workers, some are quietly converting their pension plans into resources to finance their executives' retirement benefits and pay.

Much like other benefits-consulting firms, Watson Wyatt Worldwide Inc. markets the Qserp, or "qualified" supplemental executive retirement plan, as a way to give top officers bigger benefits from the regular pension plan "without increasing staff benefits at all." Read a page from Watson Wyatt's Web site on the "quirky executive perk."In recent years, companies from Intel Corp. to CenturyTel Inc. collectively have moved hundreds of millions of dollars of obligations for executive benefits into rank-and-file pension plans. This lets companies capture tax breaks intended for pensions of regular workers and use them to pay for executives' supplemental benefits and compensation.

The practice has drawn scant notice. A close examination by The Wall Street Journal shows how it works and reveals that the maneuver, besides being a dubious use of tax law, risks harming regular workers. It can drain assets from pension plans and make them more likely to fail. Now, with the current bear market in stocks weakening many pension plans, this practice could put more in jeopardy.

How many is impossible to tell. Neither the Internal Revenue Service nor other agencies track this maneuver. Employers generally reveal little about it. Some benefits consultants have warned them not to, in order to forestall a backlash by regulators and lower-level workers.

Keeping Quiet

Generally, only the executives are aware this is being done. Benefits consultants have advised companies to keep quiet to avoid an employee backlash. In material prepared for employers, Robert Schmidt, a consulting actuary with Milliman Inc., said that to "minimize this problem" of employee relations, companies should draw up a memo describing the transfer of supplemental executive benefits to the pension plan and give it "only to employees who are eligible."

rest of this article @ link (subscription required): http://online.wsj.com/article/SB121761989739205497.html?mod=hps_us_whats_news

[freethought]

1. Someone should be going to prison!! n/t

[sharesunited]

2. This is where I always advocate that the Social Security Trust Fund

should be authorized to purchase the common stock of the S&P 500, and to vote that stock in the public interest.

To coax as much possible out of the private sector.

Because here is a situation which will very likely result in the company having to dump the pension plan upon the Pension Guaranty Corporation of the USA because it will have been looted for some big wigs.

[bbgrunt]

3. criminals....nt

[Faux pas]

4. Could you post the link to the printable version? Sometimes

that enables others (like me) to read the whole thing w/o subscribing. Thanks!

[EV_Ares]

6. Sure, but what do you mean exactly. I only posted a few paragraphs which

would be the same in a printable version but you would still have to subscribe to be able to read the entire article. Let me know.

[Faux pas]

16. LOL I meant if you were a subscriber you could post the link to

the print version. If you're not a suscriber, that won't work. Thank you for taking the time to answer me.

[Phoebe Loosinhouse]

5. Just more looting and plundering and diversion of corporate assets to a few

Interesting that the "consultants" are advising companies to keep quiet about the practice. That in itself speaks volumes. If this were a legal and ethical practice they would not be so concerned about keeping it in the shadows.

I imagine that some of the companies doing this have lower level employees who hold significant amounts of company stock through their 401Ks. Some of these folks (and a large group of company retirees) need to get together and file a class action suit against the executives and the BODs and consultants who put together plans like this that strip assets and threaten the retirement of the employees.

Fascinating that the WSJ is writing about this. The larger perspective is that more and more people are becoming aware of what a sham many publicly traded companies are. At some point, people smarter than us - like foreign investors - will start declining to invest their Euros,etc. in our stock markets because they will realize that they are just funding a few and getting screwed on what they, the investor SHOULD be reaping in terms of stock price, dividends, etc.

These immoral, unethical HOGS in command have already taken down the housing industry, banking isn't far behind, why not take down the entire stock market, too? What's to stop them? Really, the only ones who can are the stockholders right now with some legal action. I have heard that Calpers is becoming more of a watchdog for things like this.

[antigop]

7. "Fascinating that the WSJ is writing about this." No, not really

Ellen Schultz and Theo Francis (the authors of the article) have written about pension plan abuses for a number of years.

[Phoebe Loosinhouse]

8. That's good to know.

I usually get most of my stomach churning corporate news from Gretchen Morganstern or Graef What's-his-name who does all the studies about how hidiously overpaid American CEO's are.

[antigop]

9. Ellen Schultz even won an award for her coverage of retiree issues

I think it was a Polk award.

I have followed her articles for a number of years.

Here are a couple of articles of hers:
http://www.mindfully.org/Industry/Mergers-Cut-Worker-Benefits.htm

http://online.wsj.com/public/resources/documents/SB110003715157069249.htm

http://online.wsj.com/public/resources/documents/SB110003711129469246.htm

http://online.wsj.com/public/resources/documents/SB108051060575567259.htm

http://online.wsj.com/public/resources/documents/SB107940131862956349.htm

Ellen Schultz has written many articles on retiree health and pension plans.

[antigop]

10. Looks like the entire article is here....

http://www.efinancialnews.com/assetmanagement/index/content/2451435782

[antigop]

11. Sorry...after going back to the site, it required a subscription as well....n/t

[DemReadingDU]

12. For now, I can access the entire WSJ article

I think I will print it out, before access is denied.

[EV_Ares]

13. Try this. I did a google and the Baton Rouge paper had the story

and a link it said you could get the full story. I don't know if it will work for you but thought I would try. I think it is an important article about what they are doing here as it could certainly hurt a lot of people who have already been hurt enough.

Good luck on the link and if it works for you, you might post and let others know that link as well if you don't mind. Thanks and sorry about the subscription hassle.

http://www.businessreport.com/news/2008/aug/04/companies-tap-pension-plans-wkpl1/

[antigop]

14. Thanks, the link is now working for me. Thanks for posting.

Ellen Schultz and Theo Francis are top-notch investigative reporters.

I like to read anything they write. Thanks for posting.

[Vanje]

15. Ladies and Gentlemen..THAT,,,,,,,

shit, and shit like it, is why I do not like rich people.

[riverdeep]

17. Can we call it feudalism yet?

What really gets me is how Fox noise can rile up the rabble on something like oil drilling, say that they're being screwed by the Democrats (falsely), and the pressure by the populace is enough to send our nominee running. Meanwhile, they are actually getting screwed in a thousand different ways by the Republicans but that can't seem to gain any traction. Could it be that the disseminators of the info, or at least those that own them, are part of this elite screwing the serfs?

[Supersedeas]

18. but the Corporatistas on Biz Channel like to label anything class warfare--what's this then?