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[Commentary] © 2003 Philip Hyde, The Timesizing Wire™, Box 622 Cambridge MA 02143 USA (617) 623-8080

Eroding Retirement, May-June/2003


6/26/2003   eroding retirement, as documented in the Wall Street Journal & NY Times -

  1. Medicare drug plan far from cure-all, irate retirees find - A 'doughnut hole' coverage is rated U (unappetizing), by Sheryl Stolberg, NYT, front page & A25.
    "I don't think they care a rip about the senior citizens," Vela Fox, 85, of Nashville said of Washington lawmakers and their Medicare drug plans. [photo caption]
    ..\.."If I went up there and had that bill written tomorrow, I would fix it to where senior citizens had their prescription drugs paid for. Not partial, but all of it. Now that's Vela's opinion." Mrs. Fox's opinion, passionate though it be, will not become reality for her and countless other elderly people who have spent years waiting for a Medicare prescription drug benefit....

  2. U.S. expected to sue Enron over losses by workers - An effort to recover millions of dollars in retirement savings, by Mary Walsh, NYT, C5.
    The Labor Dept. is expected to sue about 20 officials of the Enron Corp. and its retirement plans today, arguing that they breached their fiduciary duty to protect Enron employees from the huge losses they incurred when the company's stock price collapsed. ...Civil lawsuits that have already been filed say the workers lost more than $1 billion in total.
    [And looking ahead -]
    The Labor Dept.'s lawsuit will also ask the court to bar the defendants from having any control over employee benefit plans in the future. It is expected to be filed in Federal District Court in Houston, where about 20 civil lawsuits involving Enron's retirement plans have already been consolidated....

6/25/2003   eroding retirement, as documented in the Wall Street Journal & NY Times - 6/24/2003   eroding retirement, as documented in the Wall Street Journal & NY Times - 6/21/2003   one good news about retirement for a change (or is it?), as documented in the WSJ & NYT - 6/19/2003   two good newses about retirement for a change (or are they?), as documented in the Wall Street Journal (WSJ) & NY Times -
  1. Company shares help to fund pensions when cash is short ...Several large companies, faced with shortfalls in their defined-benefit pensions, have made contributions in the form of stock, either to supplement, or even in lieu of, cash payments.
    [But it could be just funny money.]
    ..."I think this intermingling of company stock and retirement plans is a terrible idea," said Alicia Munnell, who has studied corporate retirement plans extensively as a professor of management sciences ["sciences"???] at Boston College's Carroll School of Management in Chestnut Hill, Mass. "The people who put together ERISA thought it was a terrible idea too."
    ..\..The Employee Retirement Income Security Act [ERISA] of 1974 limits the amount of employer stock that can be added to a defined-benefit plan to 10% of assets at the time of the contribution....

  2. [well, maybe this one's really good news -]
    GE labor pact sweetens pensions - Proposed accord provides significant retiree gains, expands early retirement, by Kathryn Kranhold, WSJ, B4.
    [ohoh, that expansion of early retirement flashes a little red light]
    ...The contract...provides a number of new benefits to the Fairfield CT company's 24,400 unionized workers that would cost the company an estimated $1.68B over the 4-year life of the agreement, compared with $1.2B for its previous 3-year contract....
    [No big diff.   1.2/3= $0.4B per year.   1.68/4= $0.42 per year. Diff = .42-.4=.02B= $20m/yr = 20000000/24400= $820/person. Sorta like Dubya's first taxcut. And who knows what could slip, twixt cup... and lip?]

6/18/2003   eroding retirement, as documented in the Wall Street Journal (WSJ) & NY Times - 6/14/2003   eroding retirement, as documented in the Wall Street Journal (WSJ) & NY Times -
  1. Some doubts about drug aid, pointer blurb (to B1), NYT, A12.
    The prescription drug plan approved by...Senate [Finance] Committee appears to be more political than economical, experts said.
    [And the indicated article -]
    Some doubts about logic of Senate plan for drug aid, by Daniel Altman, NYT, B1.

  2. Medicare advantages argued, pointer summary (to A12), NYT, A2.
    Members of Congress said that a bill to add prescription drug benefits to Medicare would give employers a powerful incentive to curtail the drug coverage that they now provide to retired workers.
    [And the indicated article -]
    Some senators fear employers will drop retirees' drug plans, by Robert Fear, NYT, A12.

6/13/2003   eroding retirement, as documented in the Wall Street Journal (WSJ) & NY Times - 6/02/2003   eroding retirement, as documented in the Wall Street Journal (WSJ) & NY Times - 5/26/2003   eroding retirement, as documented in the Wall Street Journal (WSJ) & NY Times - 5/20/2003   eroding retirement, as documented in the Wall Street Journal (WSJ) & NY Times -
  1. 'Reforming' pension law [our quotes], letter to editor by Pres. Ron Gettelfinger of UAW in Detroit, NYT, A30.
    You report that our union supports changes in pension accounting standards as a tradeoff "for higher wages" (Business Day, May 6). That is not the case. The United Auto Workers [UAW] bargains...for all of our members. We don't pit active workers against retired workers.
    [But it seems the UAW does support these nickel&diming changes anyway, since Ron goes on to try to rationalize them -]
    The legislation you describe will not reduce benefits for any individual worker.
    [But what about workers collectively then, Ron?]
    The issue is how much money must be set aside for defined benefit pension plans, which require employers to make set payments to retirees throughout their lifetimes.
    [Why is that an issue all of a sudden? We have a system that has worked for decades. If it works, why fix it? The answer is that the national underlying labor surplus has increased tremendously since sporadic company, industry, state and regional workweek reduction (1776-1937) and regular nationwide workweek reduction (1938-1940) was discontinued, thanks to union distractibility. The result is that labor power has correspondingly decreased, and employers are correspondingly encroaching on labor's share of the profits, never mind the damage to the consumer base and employers' markets.]
    Many employers have shifted financial risk to workers with individual savings plans that offer no income guarantees. Such plans are inferior to defined plans.
    [So you might expect that defined plans would require a lot more of a money cushion, eh Ron? Executives certainly expect a lot more of a money cushion - see the Delta bullet in the article below. And yet you move right on in the next sentence (what did they pay you, Ron?) to support employers' pennypinching -]
    The UAW supports pension reform [he does not even put the euphemism "reform" in quotes, after depositivizing it to "changes" in his first sentence above] to account for the difference in life expectancy between blue-collar and white-collar workers. Present law allows employers to recognize that women live longer than men; we see no reason additional demographic data should not be added to the factors necessary to develop an actuarially sound pension plan.
    [With this kind of "soundness," who needs additional risk? Many CEOs have tens, even hundreds, of millions of dollars' cushion. What's the matter with employees having the same security? It could be capped at a certain totally ready-for-anything level and the excess used to reduce required employer contributions via a yearly adjustment. But talking about anything for ordinary employees in a age of a vast surplus of human labor hours, daily deepened by inpouring automation and robotization, without an active nationwide worksharing program via workweek reduction (eg: the Timesizing program) is whistling in the wind. Quit wasting your time on losing battles that you then have to spindoctor, Ron, and get back ON ISSUE = flexible adjustment of the workweek vs. unemployment, comprehensively defined, as your predecessor 40 years ago, Walter Reuther, outlined - at the UAW Convention in Atlantic City in 1964. Until you do that, you're just overhead, or worse.]

  2. [here's a happier story -]
    Retirees score hits battling executive perks, by Kelly Greene[!] & Nicole Harris, WSJ, B1.
    Corporate retirees have long battled against cutbacks in their own health benefits and pension plans. But lately, some are setting their sights on bigger targets: pay and benefits of top executives.
    [Hey, they're getting a little more strategic. Now they need to ask, (A) why have top execs been getting away with so much more of this grabbing in the last few decades? and (B) what can we do about it? (A= general labor surplus, high under-employment and hidden unemployment, and low labor leverage/bargaining power) (B= fight like hell for workweek reduction in every possible venue and form and squeeze out the vanishing human employment onto many more people until you reduce the labor surplus, including all the under- and hidden un-employment, get a lot closer to full employment, and restore&enhance labor power)]
    Increasingly...retirees' actions - and anger - appear to be fueled by a perception that top executives are protecting their own pay and benefits while asking others to sacrifice....
    [This is the Chesterton trap - the naive assumption that no one will want more than his share and everyone will know what the top share of sustainable range will be (in Timesizing's reallocation of shares-per-person of natural market-demanded human employment, the top of the range is dynamically set by the problem at the bottom of the range, ie: the comprehensively defined unemployment rate). Lincoln Electric of Cleveland has done well with the motto, "Everyone sacrifices together, starting at the top."]
    The recent battles also help explain why retiree groups are increasingly effective: Their ranks often included former managers with time on their hands, close friends still working for the company and the ability to decipher complex securities filings....

5/19/2003   eroding retirement, as documented in the Wall Street Journal (WSJ) & NY Times - 5/14/2003   eroding retirement, as documented in the Wall Street Journal (WSJ) & NY Times - 5/12/2003   eroding retirement, as documented in the Wall Street Journal (WSJ) & NY Times - 5/09/2003   eroding retirement, as documented in the Wall Street Journal (WSJ) & NY Times - 5/06/2003   eroding retirement, as documented in the Wall Street Journal (WSJ) & NY Times -
  1. Pensions bill cuts amounts put aside for union workers, by Mary Walsh, NYT, front page.
    A bill in the House of Representatives would allow businesses with union workers to reduce their company pension obligations by billions of dollars, because statistics show that most blue-collar workers do not live as long as other Americans.
    [Huh? This is gettin weird.]
    The provision, which has gone largely unnoticed in a broad pension bill, is being supported by the United Auto Workers and manufacturing companies whose pension funds now have assets far short of what they are projected to need under previous assumptions about worker longevity....
    [Wouldn't you rather have a union that tried to find out why you didn't live as long as other Americans and change that, rather than just lined up with CEOs and supported it? Whose side is the UAW on these days anyway?]
    But...Edwin Hustead, chairman..\.. of a panel that developed the actuarial data on which the new provision is based...said in an interview he was concerned that the data were being used in an improper way. White-collar workers are shown by statistics to live longer, he said, but the bill would not require companies to factor that into their pension calculations. If it were included, unionized companies with largely white-collar workers would have to set aside more to fulfull their promises to retirees in the future.
    In addition, Mr. Hustead said workers' pay had been shown to be a more powerful predictor of life expenctancy than whether a worker was blue collar or white collar, but the bill did not recognize that higher-paid workers live longer and therefore require longer pension payouts. Many auto workers and airline pilots are classified as blue collar in the bill, because they are covered by collective bargaining agreements, even though they are highly paid....
    [The Republican war on the middle and lower income brackets = the markets for the productivity they expect their own investments to be safe in - opens yet another battlefront. And another group from the middle and lower brackets, the UAW, joins them against its own interests. Unbelievable. It's all part of the labor cluelessness that attended their half-hearted fight against FDR's blocking their best power lever, the 30-hour workweek, in 1933.]

  2. Airlines seek right to put off catch-up pension contributions, by Ellen Schultz & Theo Francis, WSJ, A3.
    The financially struggling airline industry is quietly seeking legislation that will allow commercial airlines to put off making any catch-up contributions to their underfunded pension plans for almost 5 years....
5/01/2003   eroding retirement, as documented in the Wall Street Journal (WSJ) & NY Times -
  1. The shattered 401K dream, pointer blurb (to D1), WSJ, front page.
    Some employers have cut or suspended contributions to retirement accounts,
    [and, 'speak of the devil', check out the story below!]
    while holders have raided them for cash, invested disastrously or simply opted out. The results could darken retirement for millions.
    [and the indicated article -]
    Why even a rally won't save you - Host of deep problems raises doubts about role of 401Ks; Time to turn over the reins?, by Ruth Simon, WSJ, D1.
    ...The result is that the 401k is looking increasingly like a tattered promise, and there is growing concern that millions of Americans won't have enough for retirement.... For many workers, the 401k and Social Security are all that stands between them and a bleak retirement.
    [And that's a blindered assessment. For most workers, only Social Security stands between them and a bleak retirement.]
    The 401k was created two decades ago as a way to let employees save for retirement while deferring taxes. The effect has been to turn employees into their own pension managers.... A 401k works well for the "15-20% of the population that has the knowhow and desire" to take control of their retirement savings, says Brigitte Madrian, an assoc. prof. of economics at the UChic's Grad School of Business. "But they don't work well for the majority of the population."
    [But the Republicans still want to privatize Social Security, despite the erratic stock market and the dysfunctionality of self-management for the majority of Americans? Short-term capitalism strikes again! (Click here for long-term capitalism.)]
    One response gaining momentum is to reverse a basic principle of 401Ks and take saving and investment decisions out of employees' hands.
    [But that's what Social Security does, so why not just beef that up?!]
    In March, Fidelity Investments introduced a new service [in other words, an old service provided by Soc Sec] that lets workers turn over management of their accounts to a professional for an extra fee....
    [Reduplicative makework alert!]

  2. Employer groups ask Congress to decrease pension liabilities, by Theo Francis & Ellen Schultz, WSJ, A4.
    Employer groups lobbied Congress to allow them to make pensions appear better-funded without contributing more money, saying many companies can't afford to make enough contributions under the old rules....
    [Not when they're been totally shaken down by their CEOs. The sleaze goes on....]
    Tens of billions of dollars in pension liabilities would vanish under the provision, already proposed as part of broad legislation changing pension rules. It would let employers use a higher discount rate to determine the contributions they must make to their pension plans, freeing up money for other investments. Opponents say such a move would put employees' pensions at higher risk.
    In a hearing before the House Ways and Means Committee panel, employer groups [e.g., the American Benefits Council, an employer trade group] testified that the 30-year Treasury bond rate, now used to measure their pension obligations, needs to be replaced....
    [Always the same argument. "It's outdated." - But the economy WORKED back then. It isn't working now. Back then, these "outdated" elements centrifuged spending power out to the people who actually had time and need to spend it. The velocity of circulation boogeyed. Today the velocity of circulation relative to our volume of money is "from poverty." It's all concentrated in the top income brackets where people have no time or need to activate it by spending it. The top brackets have consolidated sooo much of the spending power of the nation in their own relatively few hands that they're actually suctioning the markets away from their own investments. So there are no safe investments because there are no strong markets. We go from investment bubble to investment bubble - from prison building to dot-coms to real estate to war....]
    ...Said Steven Kandarian, exec. director of the Pension Benefit Guaranty Corp., a quasipublic pension insurer, in testimony, "This proposal would allow [pension-]plan funding to fall below the already low levels permitted under current law."...
    [And he should know. He's been picking up the pieces of all the underfunded company pension plans. This is the problem with labor surplus - employers get softer and softer, more and more spoiled. They want more and more, they whine more and more. They've forgotten what real management is. They just want tax breaks and write-offs and the whole pie, markets be damned. Then they turn around and act surprised when their own markets are weak. Whence the labor surplus? Decades of work-saving automation nad robotization without decades of workweek reduction. You want to know what is reallyl outdated and destructively so? Our 63-year-old forty-hour workweek, that's what. And we don't enforce that! Result? A stagnating concentration of skills and employment and wages and incomes. And more and more consumers lost to forced part-time, early retirement, unemployment, welfare, disability, homelessness, prison, and suicide.]


For earlier retirement stories, click on the desired date -

  • April, 2003.
  • March, 2003.
  • Jan-Feb, 2003.
  • Oct-Dec, 2002.
  • July-Sept, 2002.
  • June, 2002 & previous.
    For more details, see our laypersons' guide Timesizing, Not Downsizing, which is available online from *Amazon.com and at bookstores in Harvard and Porter Squares, Cambridge, Mass.

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