Printer
Friendly Version
Statement of U.S. Senator Ron Wyden
On Pension Reform Legislation
July 28, 2005
Mr. President,
there has been a significant development in private pension law
this week, and I've come to the floor to discuss it briefly because
I think it's something that will be of enormous interest to working
families across this country who of course have been reading for
months now about their pension plans going belly up.
These are workers that work hard,
play by the rules, they hope to have a dignified retirement and
have understood that social security was never going to cover
all of their retirement security needs.
So they have sought to have a private
pension and companies across this country have given them the
impression falsely in a number of instances that their private
pension would be secure and there for them when they retire. One
of the aspects of this whole challenge with respect to pension
security has been to eliminate what I believe is a double standard
today in private pension law.
There is, in fact, a double standard
in private pension law because so often the executives' retirement
benefits get hidden away in a lockbox while the worker ends up
getting creamed in the process. What we have done on a bipartisan
basis in the senate finance committee is to say that the double
standard, the standard that protects the executives while it clobbers
the workers, will no longer be tolerated under our private pension
statutes.
As a result of a change that a number
of our colleagues worked on that was backed by Chairman’s
Grassley and Senator Baucus, if this provision that we have developed
becomes law, if a company's pension plan is funded at less than
80%, then the executives' pensions cannot be hidden under the
ruse of deferred compensation.
That's what we have seen come to
light in the past few months that somehow the executives walk
away with millions of dollars' worth of pension benefits under
the guise of it's somehow being something called "deferred
compensation," while the workers end up seeing their pensions
disappear by 40%, 50%, 60%. This provision, in my view, is extremely
important because it will prevent companies whose pension plans
are at risk of going under from protecting the executive pensions
while allowing the employees' pensions to sinks like a stone.
Now, an example of this would be a flight attendant from Tigard,
Oregon, who gave united airlines 16 years of service, saw her
pension fall recently to a net of $138 million while the C.E.O.
of United is going to continue to receive $4.5 million. Now, of
course, the C.E.O. claims it's not really a pension, that this
was compensation worked out before the executive came to United.
But I can tell you, that elderly woman in Tigard, Oregon, would
sure like to have what the United executive has regardless of
what it is technically referred to under pension law. A lot more
needs to be done to ensure that the executives aren't going to
reap these huge gains at the expense of their workers.
Captain Duane Worth of the Airlines'
Pilots Association said it pretty well, in my view, when he said
"while thousands of pilots will retire with only a fraction
of the pension benefits they earned and expected, airline executives
can look forward to retirement knowing that their nest eggs are
solid gold." this was reported in "Fortune" magazine,
Mr. President and there are numerous other examples where generous
executive pensions have been protected at the expense of the workers'
retirement. In March of 2002, for example, U.S. Air C.E.O. Steven
Wolf took a lump-sum pension payout of $15 million including benefits
for 24 years of service that he never actually performed. Six
months later, the company filed for bankruptcy and terminated
its pilots' pension plan leaving the pension benefit guaranty
corporation with $2.2 billion in liabilities. Where is the fairness
in all of that, Mr. President?
The executive takes this huge golden
parachute away while the workers try to figure out how to make
ends meet when the company files for bankruptcy and terminates
the pension plan. Three months before united filed for bankruptcy
in 2002, the company placed $4.5 million in a special bankruptcy-protected
trust for their C.E.O., Mr. Glenn Tillton. United then terminated
all of its pension plans in 2005 leaving the pension benefit guaranty
corporation with $6.6 billion in liabilities.
In 2002, the Motorola Company chose
to not make any contributions to its pension plan for 70,000 employees
and retirees, a plan that was underfunded by $1.4 billion. At
the same time, Motorola found another $38 million to give its
top executives a variety of pension perks. In 1999, I.B.M.'s cash
balance conversion resulted in dramatic pension cuts for the older
workers. It's still be litigated in the courts, but in 2002, I.B.M.
C.E.O. retired with a pension of $1.1 million per year. In November
of 2002, Delta began its traditional defined benefit plan for
56,000 employees and replaced it with a cash balance pension plan.
As delta was shorting its workers, their former C.E.O. got a generous
guaranteed pension plan of $1 million per year that will be available
to him when he turns 65. These are just a few examples, Mr. President,
of excessive executive generosity, and they have been particularly
egregious in the airline sector, where there have been numerous
threats of bankruptcy and actual problems with respect to keeping
the workers' pensions intact or even a portion of them secure.
So I'm pleased that the finance committee took a significant first
step yesterday towards cutting off this corporate spigot that
has been gushing millions of dollars for executive pensions but
produced less than a trickle of funds for tens of thousands of
hard-working Americans.
There is more to do, Mr. President,
and certainly the first step that began yesterday in the Senate
Finance Committee at ending this double standard came about because
Chairman Grassley and Senator Baucus worked in a bipartisan fashion
and Senator Bingaman, Senator Kerry, Senator Schumer and others
joined me in pressing for this change, but suffice it to say,
there is more to do in this area. Certainly the question of what
companies are required to do in terms of making their premium
payments is important.
in the days ahead, the Finance Committee
and eventually the Senate as a body will have to take up these
issues. What I wanted to bring to the Senate's attention today
is that I think that this is an important start. It's a start
that keeps faith with American workers who have come to my town
hall meetings. I see the president of the senate, of course, from
Georgia representing a number of workers who have been affected
by the financial problems of Delta Airlines. People come to our
town meetings and say, "how is it that the executives get
off scot-free with respect to these pension issues while we're
getting clobbered?
I'm tired of reading about how the
executives have somehow been able under the guise of deferred
compensation or special retirement benefits that are protected
from bankruptcy proceedings, I'm tired of seeing how the executives
always come out hunky-dory while the workers try to find out how
they're going to make ends meet when their pension has been slashed
by 40% or 50% or 60%." So there is more to do, Mr. President,
in terms of reforming private pension law but I think that this
effort to eliminate the double standard, where executives get
protected and workers get hurt, that eliminating that double standard
is right at the center of what good bipartisan pension reform
ought to be all about.
Fortunately the Senate Finance Committee
took a big step in the right direction yesterday by saying if
a company's pension plan isn't actually funded, then the executives
can't find their way to yet another lockbox and protect themselves
with these deferred compensation arrangements.
Mr. President, with that, I yield
the floor and Mr. President, I would note the absence of a quorum.
###