77 Companies could also adopt “more aggressive assumptions”: Enrolled Actuaries meeting, Washington, D.C., March 1998.
78 The flexibility built into the accounting rules: For a detailed examination, see Julia D’Souza et al., “Accounting Flexibility and Income Management: The Case of OPEB Recognition,” Johnson School of Management, Cornell University, 1999.
CHAPTER 5 : PORTFOLIO MANAGEMENT
80 “I guess I’m going to have to die before then”: Author interview with Margaret Jelly.
81 Ackerman had flown corporate jets: Author interview.
83 Justin Freeborn, a legal-aid lawyer: Author interview.
84 found a note from the retired executive, with a personal: Author interview with Audrey Ackerman.
85 Fidelity… concluded that 316 retirees had mistakenly been paid: Author interview with BP official.
85 Craven, a widower with macular degeneration: Author interview.
91 Schacht made a presentation to a group: Interviews with Lucent retirees, Henry Schacht.
92 Howard O’Neil, who was ninety at the time: Author interview.
93 Parano… sued Lucent in small claims court: Author interview with Joseph Parano, California; Joseph and Susan Parano v. AT & T Corp., Case No. SCS 114017 and 114097, Small Claims Court, San Mateo, 2004.
94 Connie Sharpe, a widow in Las Cruces, New Mexico: Author interview.
96 Walt Ehmer… chief executive of Lucent Technologies Denmark: Author interview.
97 Schacht later defended the bonuses: Author interview.
CHAPTER 6 : WEALTH TRANSFER
104 GM has often claimed that its U.S. pension plans: Ellen E. Schultz and Theo Francis, “Hidden Burden: As Workers’ Pensions Wither, Those for Executives Flourish—Companies Run Up Big IOUs,” The Wall Street Journal, June 23, 2006.
104 board of directors of Mercantile Stores met: Transcripts of Mercantile board meetings.
108 total retirement payout was more than $130 million: estimate of total by Theo Francis, Footnoted.org.
113 executives were receiving more than one-third of all pay: This and other details in this section are based on the author’s calculations and analysis, which were confirmed by Stephen Goss, chief actuary of the Social Security Administration.
114 “The most important contributor to higher profit margins over the past five years”: Steven Greenhouse and David Leonhardt, “Real Wages Fail to Match a Rise in Productivity,” The New York Times, August 28, 2006. Thanks to colleague Tom McGinty for pointing this out.
CHAPTER 7: DEATH BENEFITS
116 Just before Christmas 2008, Irma Johnson: Irma Johnson v. Amegy Bank, No. 4:2009cv01424 (Southern District of Texas, 2009).
117 “dead peasants insurance”: The memos were exhibits in a lawsuit in which the United States Court of Appeals for the Eleventh Circuit held that Winn-Dixie’s COLI policies were a sham transaction for federal income tax purposes. Winn-Dixie Stores, Inc. v. Commissioner of Internal Revenue, No. 00-11828 (U.S. Court of Appeals, Eleventh Circuit, 2001).
121 “Without these suicides, NCC would be running at 33%”: Exhibits provided by Mike Myers, of McClanahan, Myers, and Espey, a Houston law firm that has handled numerous COLI cases.
121 To keep track of when employees and retirees die: Ellen E. Schultz and Theo Francis, “Companies Tap Pension Plans to Fund Executive Benefits—Little-Known Move Uses Tax Break Meant for Rank and File,” The Wall Street Journal, August 4, 2008.
122 His mother died in 1998 at age sixty-two. Her family received a $21,000 benefit: Author interview with John Reynolds.
123 a brown envelope was left on the desk of Ken Kies: Ellen E. Schultz and Theo Francis, “Death Benefit: How Corporations Built Finance Tool Out of Life Insurance,” The Wall Street Journal, December 20, 2002.
124 Ways and Means chairman Bill Archer, who had criticized janitors insurance: Clark/Bardes Inc. proxy statement.
127 The mass death of heavily insured executives: Society of Actuaries meeting, Washington, D.C., 2003.
128 The twenty-year-old was working at a Stop N Go: Schultz and Francis, “Death Benefit.”
130 Banks took out billions of dollars’ worth of this life insurance: Bank “call reports” filed with the Federal Financial Institutions Examination Council.
131 Insurance regulators, who often accommodate the wishes of the industry: Disclosure information based on interviews with regulators and industry representatives.
CHAPTER 8: UNFAIR SHARES
135 The company’s effective guaranteed return on the contribution in the first year: Schultz and Francis, “Companies Tap Pension Plans”; calculation by Theo Francis.
141 Lorenzo Walker, one of the warehouse workers at Hugo Boss: Author interview.
143 One employee got a pension increase: Gromala v. Royal & Sun Alliance.
CHAPTER 9: PROJECT SUNSHINE
148 “The Company is not committed to maintenance of a retiree’s standard of living”: Internal company memos, Ellen E. Schultz, “Retirees Found Varity Untruthful,” The Wall Street Journal, November 6, 2000.
148 “death of all existing retirees”: Company memo.
CHAPTER 10: TWILIGHT ZONE
160 He thought the job was pretty decent: Author interviews with GenCorp retirees, including Ed Peksa, Kenneth Bottolfs, Mabel Kramer, and John Van Dyke; court records in Wotus v. Gencorp, 5:00 cv 2604 (N.D. Ohio).
170 Asarco, was suing him and other retirees in federal court: Asarco v. United Steelworkers of America, 03-CV-1297-PHX-FJM, 2005 U.S. Dist. Lexis 20873 (D. Ariz. 2005); Author interview with Edward C. Yarter et al.
172 Rexam, a maker of cans for beverages: Rexam, Inc. v. United Steelworkers of America, No. 03-2998, 31 E.B.C. 2562 (D. Minn. 2003), later proceedings, 2005 WL 2318957 (D. Minn. 2005).
174 “They shopped more than we did, Judge”: Crown Cork & Seal v. United Steelworkers of America, 03-CV-1381, 32 E.B.C 1950, 2004 U.S. Dist. Lexis 760 (W. D. Pa. 2004), related to Lawhorn v. Crown, No. 1:03-CV-461 (S.D. Ohio 2003).
175 “We will file in federal court against you bastards”: ACF Industries v. Chapman, 4:03CV1765 HEA, reported decision at 2004 U.S. Dist. Lexis 27245 (E.D. Mo. 2004), related to Chapman v. ACF Indus., 3:04-0062, 430 F. Supp. 2d 570 (D. W. Va. 2006).
CHAPTER 11: IN DENIAL
177 but the company denied his claim: Brief of Amici Curiae, National Black Lung Association and Appalachian Citizens’ Law Center, Inc., Lawyer Disciplinary Board v. Douglas A. Smoot, Supreme Court of Appeals of West Virginia, No. 34724.
180 protected by steel fences: Ken Ward Jr., “The Dark Lord of Coal Country,” Rolling Stone, November 30, 2010.
180 And he gets to keep a 1965 blue Chevrolet truck: Compensation details from the company proxy statement.
182 “I took every play like it was my last play”: Author interview.
183 Focusing on the word “a,” the arbitrator said: Victor A. Washington v. Bert Bell/Pete Rozelle NFL Player Retirement Plan, et al., Nos. 05-16366, 05-16533, 05-16845 (U.S. Court of Appeals, Ninth Circuit, 2007).
185 only ninety… former pro players covered by the NFL disability plan: Ellen E. Schultz, “A Hobbled Star Battles the NFL: Doctors Say Football Left Victor Washington ‘Totally Disabled.’ Two Decades Later, the League Still Disagrees,” The Wall Street Journal, December 3, 2005.
186 “Injuries may not put you in a wheelchair for the rest of your life”: Author interview with Randy Beisler.
186 Mike Webster had been a center on the offensive line: Sunny Jani, as Administrator of the Estate of Michael L. Webster, deceased, v. Bert Bell/Pete Rozelle NFL Player Retirement Plan, et al., No. 1:04-cv-01606-WDQ U.S. District Court for the District of Maryland, 2005.
188 Douglas Ell, who has handled—and won: Author interview with Douglas Ell.
189 The NFL paid Groom Law Group $2.9 million: IRS Form 5500.
190 Delvin Williams, a former 49ers and Miami Dolphins running back: Author interview with Delvin Williams.
191 As a teenager
in France, he had joined the partisans: Author interview with Loewy.
191 Instead of an answer, the next month the administrator sent: Fred Loewy et al. v. Motorola, Inc. Pension Plan et al., No. CV 03-2284 (District of Arizona, 2004).
CHAPTER 12: EPITAPH
198 happy dance: Homage to Gail Collins.
198 companies maintained they could receive the subsidy: Ellen E. Schultz and Theo Francis, “U.S. Drug Subsidy Benefits Employers,” The Wall Street Journal, January 4, 2004.
204 shift the risk to the PBGC: For a detailed look at the most prominent instances of companies passing the buck to the PBGC, see Fran Hawthorn, Pension Dumping: The Reasons, the Wreckage, the Stakes for Wall Street (New York: Bloomberg, 2008), and articles by Mary Williams Walsh of The New York Times, who has also provided extensive coverage of the fate of pension plans in bankruptcies, particularly at automakers and airlines.
206 Many excellent books have been written: Among them: Teresa Ghilarducci, When I’m Sixty-four: The Plot Against Pensions and the Plan to Save Them (Princeton: Princeton University Press, 2008); Karen Ferguson and Kate Blackwell, Pensions in Crisis: Why the System Is Failing America and How You Can Protect Your Future (New York: Arcade Publishing, 1995). This lucid and readable book focuses on pensions, but it has an excellent discussion of the problems with 401(k)s and other defined contribution plans, and it clearly explains “discrimination” rules. Recent reports on 401(k)s include The Failure of the 401(k), a report by Robert Hiltonsmith, a policy analyst at Demos, November 2010: http://www.demos.org/pubs/thefailureofthe401(k).pdf. See also Private Pensions: Some Key Features Lead to an Uneven Distribution of Benefits, GAO-11-333, March 2011, http://www.gao.gov/new.items/d11333.pdf. The Congressional Research Service has done a number of studies on 401(k)s, including 401(k) Plans and Retirement Savings: Issues for Congress, July 2009. Its reports can be found on the CRS Web site: http://www.pensionrights.org/report-topic-areas/defined-contribution-plans-such-401ks-and-iras.
209 reducing borrowing costs by as much as 40 percent: Analysis by Theo Francis; Ellen E. Schultz and Theo Francis, “Companies’ Hot Tax Break: 401(k)s—Why Firms Stuff Plans with Stock,” The Wall Street Journal, February 11, 2002.
210 fifty million workers lost a total of at least $1 trillion in their 401(k)s: Center on Retirement Research, Boston College.
210 D’Andrea, forty-eight, cashed out her account: Author interview.
210 one-quarter of top executives at major U.S. companies had gains: Analysis by Tom McGinty, based on Compustat data; Ellen E. Schultz and Tom McGinty, “Executives Enjoy ‘Sure Thing’ Retirement Plans, The Wall Street Journal, December 16, 2009.
211 “executives in fixed plans were happier than hogs”: Bob Nienaber, director, benefit RFP, Sacramento, California, telephone conversation with author.
214 In the public plan sector: For a history and analysis of how public plans can become seriously underfunded, see Roger Lowenstein, While America Aged: How Pension Debts Ruined General Motors, Stopped the NYC Subways, Bankrupted San Diego, and Loom as the Next Financial Crisis (New York: Penguin Press, 2008). See also Mary Williams Walsh’s extensive coverage of public pensions in The New York Times.
Index
A
AARP
accounting issues
health plans and
investing pension assets and
pension income and
see also Financial Accounting Standards Board
ACF Industries
Ackerman, Chuck
Actuarial Sciences Associates (ASA)
Advantage Medical Services (AMS)
Aetna
Aging Diagnostic
Air Transportation Stabilization Board
Alcatel SA
Allied-Signal
Alltel Corp.
Amara, Janice
Amegy Bank
American Benefits Council
American Council of Life Insurers
American Electric Power
American Greetings
American National Can
American Society of Pension Actuaries
Amoco Corp.
Aon Corp.
Archer, Bill
Asarco
AT&T
excess pension assets of
health care reform and
Lucent and
pension cutting at
prescription drug benefits at
Automatic enrollment
B
Bankers Life and Casualty
Bank of America
BOLI at
bank-owned life insurance (BOLI)
banks
Beisler, Randy
Bell Atlantic Corp.
benefits test
Bert Bell/Pete Rozelle NFL Player Retirement Plan
Black, Conrad
black lung disease plans
Blankenship, Don
Boeing
BP
Brown, Kyle
Bruggeman, Jim
Buffett, Warren
Bureau of Labor Statistics
Burke, Stephen
Bush, George W.
Byrne, Robert S.
C
California Public Utilities Commission
Carlson, Gretchen
cash-balance plans
comparisons between 401(k)s and
lump-sum feature of
in pension cutting
CAST Management Consultants
Caterpillar Inc.
Centers for Medicare & Medicaid Services
Central and South West (CSW)
CenturyTel
Certner, David
Chapman, Basil
Chesapeake Energy
Ciesielski, Jack
Cigna:
pension cutting at
Supreme Court case involving
Citigroup Inc.
Clark, Richard T.
Clark/Bardes
Clausen, Norman
CM Holdings
Comcast
Congress, U.S.
COLI in
ERISA in
executive compensation in
health care reform in
pension assets in
pension cutting in
pension disclosure in
prescription drug benefits in
ConocoPhillips
Conseco
Consol Energy
Consolidated Freightways Corp. (CFC)
Constellation Energy
Continental Can
corporate-owned life insurance (COLI)
BOLI and
as cash-value policies
death benefits of
death rates and
disclosure on
executive liabilities and
in funding retiree benefits
insurable interest issue in
lawsuits on
on middle managers
obtaining employees’ consent for
payouts of
rules on
coverage test
Covington & Burling
Craven, Charlie
Crown Cork & Seal
Cummins Inc.
Cyprus Mines
D
D’Andrea, Jacqueline
Darbee, Peter
Daugherty, Elmer
death audits
death benefits
of COLI
cutting of
Lucent and
“Death Run,”
Deere & Co.
Defense Department, U.S.
in lawsuit with GE
deferred compensation, deferred-compensation plans
COLI and
executive compensation and
financing of
401(k)s and
retiree benefits as
risks of
rules on
defined benefit plans
defined contribution plans
comparisons between cash-balance plans and
Dell
Del
oitte & Touche
Delphi
Delta Air Lines
dental coverage
cutting of
detrimental reliance standard
Diebold
Dillard’s Inc.
disability benefits
denial of
lawsuits on
rules on
discrimination
executive liabilities and
401(k)s and
against lower-paid employees
Dolan, Jack
Dow Chemical
D’Souza, Julia
DuPont
E
early-retirement subsidies
lump-sum payouts and
pension assets for
pension cutting and
retiree health plans and
Edison Brothers Stores
Eggleston, Robert
Ehmer, Walt
Ell, Douglas
Emley, Ruth
Employee Retirement Income Security Act (ERISA)
disability benefits and
pension assets and
pension disclosure rules and
punitive damages and
retiree health plans and
employee stock ownership plans (ESOPs)
Enron
ERISA Advisory Council
executive liabilities
COLI and
discrimination issue and
financing of
health benefits and
risks in
shadow plans for
valuation of
executives
bonuses of
COLI on
compensation of
dissolving retiree benefits and
employee pension cutting and
401(k)s and
health benefits and
pension assets and
pension income and
pensions of, see supplemental executive retirement plans
ExxonMobil
F
Retirement Heist Page 24