Retirement Heist

How Companies Plunder and Profit from the Nest Eggs of American Workers, Ellen E. Schultz, Portfolio Penguin.

For two decades big corporations have advanced the same tried-and-true arguments to justify cutting the pensions and benefit packages earned by millions of retirees. If it’s not the burden of an aging workforce, it’s the declining stock market, or an outmoded pension system that limits their ability to compete against companies overseas.

In “Retirement Heist,” Wall Street Journal reporter Ellen Schultz makes the case that these arguments are all a smokescreen, and that the so-called retirement crisis was manufactured by top executives at major companies (with an assist from benefits consultants, insurance companies, and banks), who together have “managed to take hundreds of billions of dollars in retirement benefits that were intended for millions of workers and divert them to corporate coffers, shareholders, and their own pockets.” Worse yet, these same executives have been using the “savings” to inflate their own supplemental pensions and deferred compensation packages, which get lumped together with obligations to the rank-and-file. In that way, “executive legacy liabilities” become a large part of the “growing pension costs” companies complain about, thereby providing a convenient excuse to cut further.

Over the course of the book’s twelve chapters, Schultz highlights all the legal and accounting loopholes being used by the likes of Bank of America, IBM, Cigna, General Electric, Comcast, the NFL (and countless others), to trick employees and mislead shareholders. Not only have the masterminds responsible walked away virtually blame free, says Schultz, “employers continue to use the public’s ignorance of accounting and the way retiree benefits work to bamboozle analysts, employees, retirees, unions, Congress, and the courts.” The false alarm about the impact of health care reform is just the latest example, giving large corporations like Caterpillar, Verizon and AT&T a convenient excuse to slash retiree health and prescription drug coverage.

While the focus of “Retirement Heist” is on major corporations, the same tricks are being utilized by smaller companies, public pension plans, and non-profits, leading Schultz to come to a frightening conclusion. “If employers continue to control the retirement system and manage it for their own benefit, then within our lifetimes, ‘retirement’ will inevitably revert to what it was in the 1930s and before,” she writes. “Society—and taxpayers—will be paying for services to support the millions of elderly, formerly middle-class Americans.”