A new book from Wall Street Journal columnist Ellen Schultz “Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers” (hat tip Peter) takes a hard look at the math behind failing corporate pension plans today. Corporations have been increasingly shutting down pension plans for more than a decade now, citing poor asset market returns, a billowing number of retirees, and competition from cheaper foreign labor.
But the real story is more complex than just this. The real story is that corporations used excess profits during market boom periods to extract billions to the company bottom line in order to boost earnings that executives then took credit for and bonuses from. Rather than storing excess gains in the kitty for future pension needs, many companies simply underfunded and even stopped funding contributions to workers’ pension plans while making generous contributions to the pension and benefit programs of the companies c-suite managers.
Companies failed their fiduciary duty to set aside money for employee medical benefits and pension plans. Now the fix is multi-faceted: corporate profits will be lower as companies begin the process of catching up their funding shortfalls, benefits will be lowered, retirement ages will be extended, c-suite perks and benefits must also face the same restructuring. On the medical benefits front, workers must begin to take personal responsibility for maintaining their own health through improved pro-active care, diet and exercise as well as increased contributions to their beneifts and savings plans.
The math can work again, but it requires shared discipline and present consumption restrictions on all sides in order to meet funding needs for the future.
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