Corporate greed and spiraling executive compensation reinforce the growing inequality in our society. In the area of retirement, some companies are shedding their pension plans by declaring bankruptcy, letting CEOs keep their golden parachutes and leaving workers and retirees holding the bag. The long-term health of pension plans, and the retirement security of the workers and families who rely upon them, also are threatened by conflicts of interest on Wall Street and in the boardroom, a lack of accountability of executives to shareholders and outright corporate fraud.
In their assault on retirement security, well-paid chief executives have decided that secure defined-benefit pensions are too expensive for everyone except themselves. In 1980, roughly half of the nation’s private-sector workers were covered by defined-benefit pension plans, with typical employer contributions of about 8 percent of payroll. Today, less than 20 percent of the private-sector workforce participates in such plans. More than 40 percent (according to the Bureau of Labor Statistics) have a 401(k) or other defined-contribution account, with employer contributions averaging less than 3 percent of pay. Hidden in this change is a 5 percent real pay cut.
In the midst of this attack on secure retirement, we now learn that companies are raiding worker pensions to fund already lavish CEO retirement packages. According to a recent news report, companies have “collectively moved hundreds of millions of dollars in obligations for executive benefits into rank-and-file pension plans.” This enables companies to capture tax breaks “intended for pensions of regular workers and use them to pay for executives’ supplemental benefits and compensation.” (The Wall Street Journal, 8/4/08)
This outrageous practice threatens the long-term health of worker’s pension plans and forces taxpayers to finance already excessive executive compensation. According to the same article, companies and their consultants have deliberately sought to hide this practice, and it appears that the IRS and other regulatory authorities have failed to monitor and police this tax dodge.
Workers’ deferred wages in the form of pensions are not piggy banks for tax avoidance by conflicted consultants and overpaid executives. We urge Congress to investigate this practice fully, provide for greater transparency and close loopholes that allow this to occur.
Congress must also adopt measures to preserve and protect existing pension plans, ensure that employees have a voice in governing their own pension assets, prevent corporations from using the bankruptcy courts to escape pension obligations while richly rewarding executives and ensure adequate retirement security and income through a national pension policy.