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KEY WYDEN-BACKED MEASURE
BLOCKS DOUBLE STANDARDS FOR EXECUTIVES
IN PENSION REFORM LEGISLATION
Senate Finance Committee approves provision
to keep companies
with ailing pension plans from hoarding cash for CEOs
July 26, 2005
Washington, DC – A key provision
championed by U.S. Senator Ron Wyden (D-Ore.) that would keep
companies with significantly under-funded employee pension plans
from locking away retirement funds for top company executives
was included today in pension reform legislation being considered
by the Senate Finance Committee. Specifically, the Wyden-backed
provision would prohibit companies from giving executives deferred
compensation – or retirement funds held in accounts outside
of the same program used for all other company employees –
if the company’s pension plan is less than 80 percent funded.
The provision seeks to eliminate that double standard, holding
executives accountable for the performance of their company’s
pension plans and preventing them from reaping the benefits of
outside retirement programs while company employees are hit with
the burden of significantly under-funded pensions.
“American workers shouldn’t
have to worry that their company executives are asleep at the
wheel with locked-in pensions, while everyone else is stuck with
their money in an ailing program,” said Wyden. “This
provision is an important step toward retirement security for
millions of our citizens.”
Examples of the “double standard”
on pensions for executives and workers abound:
• In March 2002, US Air CEO
Stephen Wolf took a lump sum pension payout of $15 million. Six
months later, the company filed for bankruptcy and terminated
their pilot’s pension plan leaving PBGC with 2.2 billion
in liabilities.
• Three months before United
Airlines filed for bankruptcy in 2002, the company placed 4.5
million dollars in a special, bankruptcy-protected trust for CEO
Glenn Tilton. They then terminated all of their pension plans
in 2005, leaving PBGC with 6.6 billion in liabilities.
• In 2002, Motorola did not
contribute to its pension plan for 70,000 employees and retirees
- a plan that was underfunded by $1.4 billion - but contributed
$38 million in pension perks to its top executives.
• In 1999, IBM’s cash
balance conversion resulted in dramatic pension cuts for older
workers. In 2002, IBM CEO Lou Gerstner, who oversaw the cash balance
conversion, retired with a pension of $1.1 million per year.
As a member of the Finance Committee,
Wyden is working this year to help protect American workers in
all industries from defaults and pension losses. On June 7, Wyden
questioned airline industry executives at a hearing of the Senate
Finance Committee about the drastic pension cuts that hurt rank-and-file
workers while allowing some industry executives to keep their
retirement cash. In particular, Wyden told the story of a United
Airlines employee from Tigard, Ore. whose cash pension income
was cut to $138 per month when the airline defaulted on its pension
obligation. Some experts have warned that other airlines could
soon be in bankruptcy and default on their pension plans as well.