Key Wyden-Backed Measure Blocks Double Standards for Executives in Pension Reform Legislation
Senate Finance Committee approves provision to keep companieswith ailing pension plans from hoarding cash for CEOs
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.