Retiree Leaders Urge Congress to Protect Pension Plan Assets
DETROIT -- The president of the General Motors Retirees Association (GMRA) called on Congressional leaders to protect pension plan assets as part of pending legislation that gives companies temporary relief from funding pension plans.
John Christie, President of GMRA, cosigned a letter asking U.S. House and Senate leaders to ensure the financial security of 30 million American retirees by including pension asset protection in H.R. 4312, pending action in the House.
"We are monitoring the GM pension fund very closely,” Christie said. “The Treasury Department's bailout loan program to GM included restrictions on GM from continuing to use pension assets for non-pension purposes. We believe that companies that take pension funding relief must be prevented from using pension assets for non-pension expenses such as lump sum severance payments, restructuring or other company business," added Christie.
"Actions known as 'back door reversions' represent a growing practice to circumvent the Congressional intent against reverting pension assets for corporate purposes," said Bill Kadereit, NRLN president. "It simply doesn’t make sense for Congress to authorize a pension plan funding hiatus without simultaneously closing this 'back door.'”
Kadereit said the "back door reversions" practices place pension plans at risk and increases the potential that the Pension Benefit Guaranty Corp (PBGC) might have to take over the plan in the future, causing some retirees to lose a significant amount of their pension.
"Surely Congress does not want to offer pension funding relief to GM yet leave the door open for them to remove assets at the same time, as GM did in 2008 during the funding relief period. In 2009, the PBGC was very concerned that General Motors used $2.9 billion in pension assets to make lump sum severance payments that contributed to a $20 billion deficit, based on the PBGC's calculations,” Christie said.
According to Christie, on April 12, 2010, the Government Accountability Office reported that GM will need to add $12.3 billion to its pension fund by 2014.
Kadereit added that research by the NRLN has found that AT&T, Delta Air Lines, Federal Express, Lucent, Qwest and Verizon are among the other companies who have used “back door reversions” to circumvent Congressional intent against reverting pension assets for corporate purposes. "Plan participants later suffered benefit reductions as a result," Kadereit noted. The NRLN has offered proposed legislative language to the House committees that would stop employers who get funding relief from using plan assets to pay severance and layoff allowances during the four or seven-year period they may benefit from pension funding relief.
Retiree organizations co-signing the letter in support of introducing new language to protect pension assets include the presidents of the National Retiree Legislative Network (NRLN), the National Chrysler Retirement Organization (NCRO) and the Detroit Edison Alliance of Retirees (DEAR). The letter was sent to the Speaker of the House, Senate Majority Leader and Chairs of the House's Ways and Means Committee; Education and Labor Committee, and Senate Finance Committee.
