Andy Lang
04-15-2003, 03:28 PM
The High Cost of a Corporate Low-Ball Tactic
Marie Cocco
April 15, 2003
Theirs is yesterday's story. They are ordinary, middle-aged, middle-class people whose complaints were once considered extraordinary enough to make it into the news and congressional hearing rooms. For a while, it seemed, everyone thought they deserved better. Now war has erased their images. Nothing has changed their circumstances.
The workers who were caught up in the latest corporate craze - converting old-style, defined-benefit pensions to less costly "cash-balance" plans that give older workers smaller pension checks than they were promised - are still caught. They still hope to convince the Treasury Department to change a proposed regulation that would make it easier for companies to make this switch.
They still hope the regulation does not halt the age-discrimination lawsuits they've already brought - about 800 so far. They hope to convince Congress to let workers over 40 have a choice between the pensions they were promised and the new system that benefits their younger colleagues.
"At age 65, under cash-balance, I would receive approximately $25,000 - about half what I would have received under the former plan," said Jane Banfield of Bernardsville, N.J.
She was, for two decades, in technical marketing and sales at AT&T. She was the type companies used to want - a shareholder concerned about profits, not just her paycheck. She fretted about whether new hires were as dedicated to AT&T as she'd always been.
Banfield learned in 1998 that the company was converting her pension to a "cash-balance" plan. Under its terms, if she retired at 55 she would suffer a 61-percent cut in her promised benefit. If she stayed on until age 65, she would manage to get about half her previously set benefit. Then Banfield got stuck in the great telecomm meltdown. Now 54, she was laid off in November.
Under defined-benefit plans, workers build the biggest part of their pension in the years just before they retire. The idea is to reward a value corporate America used to admire: loyalty. Under cash-balance plans, workers earn benefits more evenly over their tenure. This rewards younger workers who hop from job to job and might depart with a bigger "lump sum" than they would have received under the old system. It rewards another value corporate America admires: cost-cutting. Some big companies have saved more than $100 million a year by switching plans.
"It's the middle management, basically the mainstream worker in the United States, who's going to get harmed," said Banfield.
She and others who've been thrown off-balance by cash-balance testified at an IRS hearing last week on the proposed regulation. They walked the corridors of Congress in search of sympathetic lawmakers, wearing stickers with a giant red slash through the words "Pension Theft."
Rep. Bernie Sanders (I-Vt.), long an ally, tried a new tactic in the long-running battle. He had the Congressional Research Service calculate what members of Congress would lose if their current pension plan were converted to a "cash-balance" system.
The results: House Speaker Dennis Hastert's (R-Ill.) lump-sum benefit would fall from $540,572 to $164,455. House Republican leader Tom DeLay (R-Texas) would suffer a loss of nearly 60 percent, knocking the value of his pension to $251,086, down from $608,143 under the current system. Sanders' own benefit would be cut by 72 percent under a cash-balance formula.
"If members of Congress think that cash-balance payments are good for American workers, then they must believe that cash-balance pensions are good for themselves!" Sanders declared at a sparsely attended news conference.
He is sponsoring legislation that would force Congress to switch its own pensions to cash-balance plans if the Bush administration rules go through for everyone else. It is quite unlikely to pass.
The Treasury Department now ponders whether, or how, to change its proposed regulations. Some businesses with traditional plans are concerned the language of the rules would undercut them, even if they don't want them abolished. Once employers start complaining about the same things workers do, change becomes altogether more likely. Yesterday's stories tend to take on new urgency once the lobbyists get involved.
Copyright © 2003, Newsday, Inc.
Marie Cocco
April 15, 2003
Theirs is yesterday's story. They are ordinary, middle-aged, middle-class people whose complaints were once considered extraordinary enough to make it into the news and congressional hearing rooms. For a while, it seemed, everyone thought they deserved better. Now war has erased their images. Nothing has changed their circumstances.
The workers who were caught up in the latest corporate craze - converting old-style, defined-benefit pensions to less costly "cash-balance" plans that give older workers smaller pension checks than they were promised - are still caught. They still hope to convince the Treasury Department to change a proposed regulation that would make it easier for companies to make this switch.
They still hope the regulation does not halt the age-discrimination lawsuits they've already brought - about 800 so far. They hope to convince Congress to let workers over 40 have a choice between the pensions they were promised and the new system that benefits their younger colleagues.
"At age 65, under cash-balance, I would receive approximately $25,000 - about half what I would have received under the former plan," said Jane Banfield of Bernardsville, N.J.
She was, for two decades, in technical marketing and sales at AT&T. She was the type companies used to want - a shareholder concerned about profits, not just her paycheck. She fretted about whether new hires were as dedicated to AT&T as she'd always been.
Banfield learned in 1998 that the company was converting her pension to a "cash-balance" plan. Under its terms, if she retired at 55 she would suffer a 61-percent cut in her promised benefit. If she stayed on until age 65, she would manage to get about half her previously set benefit. Then Banfield got stuck in the great telecomm meltdown. Now 54, she was laid off in November.
Under defined-benefit plans, workers build the biggest part of their pension in the years just before they retire. The idea is to reward a value corporate America used to admire: loyalty. Under cash-balance plans, workers earn benefits more evenly over their tenure. This rewards younger workers who hop from job to job and might depart with a bigger "lump sum" than they would have received under the old system. It rewards another value corporate America admires: cost-cutting. Some big companies have saved more than $100 million a year by switching plans.
"It's the middle management, basically the mainstream worker in the United States, who's going to get harmed," said Banfield.
She and others who've been thrown off-balance by cash-balance testified at an IRS hearing last week on the proposed regulation. They walked the corridors of Congress in search of sympathetic lawmakers, wearing stickers with a giant red slash through the words "Pension Theft."
Rep. Bernie Sanders (I-Vt.), long an ally, tried a new tactic in the long-running battle. He had the Congressional Research Service calculate what members of Congress would lose if their current pension plan were converted to a "cash-balance" system.
The results: House Speaker Dennis Hastert's (R-Ill.) lump-sum benefit would fall from $540,572 to $164,455. House Republican leader Tom DeLay (R-Texas) would suffer a loss of nearly 60 percent, knocking the value of his pension to $251,086, down from $608,143 under the current system. Sanders' own benefit would be cut by 72 percent under a cash-balance formula.
"If members of Congress think that cash-balance payments are good for American workers, then they must believe that cash-balance pensions are good for themselves!" Sanders declared at a sparsely attended news conference.
He is sponsoring legislation that would force Congress to switch its own pensions to cash-balance plans if the Bush administration rules go through for everyone else. It is quite unlikely to pass.
The Treasury Department now ponders whether, or how, to change its proposed regulations. Some businesses with traditional plans are concerned the language of the rules would undercut them, even if they don't want them abolished. Once employers start complaining about the same things workers do, change becomes altogether more likely. Yesterday's stories tend to take on new urgency once the lobbyists get involved.
Copyright © 2003, Newsday, Inc.