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131 of 142 people found the following review helpful
Ellen Schultz's 'Retirement Heist' is both enlightening and aggravating. 'Retirement Heist' is the outgrowth of years of digging through SEC and IRS filings, as well as numerous interviews. The book tells how companies have turned pension plans into piggy banks, tax shelters, and profit centers through exploiting loopholes, ambiguous regulations, and new accounting rules. In doing so they have also exaggerated retiree burdens to lobby for government handouts, secretly cut employee pensions while boosting executive pensions, and mislead employees and shareholders. New flexibility in accounting rules have also turned retiree plans into earnings-management tools, helping to boost stock prices and, thereby, executive pay.

The story begins in 1999 after the stock-market run-up in the 1980s which left corporations with over $250 billion in excess pension fund assets, aided also by years of downsizing and 1990 and 1974 laws limiting raids on fund surpluses and requiring adequate funding. Many of the corporations hadn't contributed to their pensions in over ten years, yet had enough assets to cover all current/future retirees to age 100. Their lobbying then allowed new uses for those monies.

Bell Atlantic then used $3 billion to finance early-retirement benefits for 25,000 managers being let go, and Verizon (its eventual successor) continued the practice - the result, combined with a relatively small market decline, was the surplus fell from $24 billion in 2000 to $1.7 billion in early 2005. It then froze the pensions of its 50,000 management employees, withdrew another $5 billion, and by early 2011, when the market was higher than in 2000, the plan had a $3.4 billion deficit. Delphi, Delta, Ford, G.M., and United acted similarly; most then passed their underfunded plans off to the government's PBGC, which in turn further cut many of the employees' pensions per law.

Companies also tapped pension plans to pay retiree health benefits, previously covered on a pay-as-you-go basis. DePont was the first, folowed by Allegheny Technologies, Florida Power & Light, Prudential, U.S. Steel, and others. Again, two major firms - Allegheny Technologies and U.S. Steel, then dumped their diminished pension funds on the PBGC.

M&A activity, as well as spin-offs have enabled companies to convert surplus pension assets to cash. For example, G.E. sold an aerospace unit to Martin Marietta in 1993, along with its 30,000 employees and $1.2 billion in pension assets - about $531 million overfunded. By getting a better price because of the surplus it was able to pocket the $500 million. After doing this dozens of times, its $24 billion 1991 surplus became a shortage of $6 billion in early 2011 - despite a substantial interim market rise. DOD then sued because it had funded the G.E. workers' retirement funds and was supposed to get a refund if the unit closed (Martin Marietta subsequently closed it, and DOD labeled the transaction a 'sham'). Courts have ruled that even surplus employee contributions can be disposed of this way.

Transferring executive retirement benefit costs to employee pension funds via loopholes is another common technique. Intel saved $200 million doing this; Johnson Controls, Parker Hannifin, PMI Group, and others did so; again, some are now underfunded.

Terminating pension plans via other loopholes that involve setting up a replacement 401(k) has been used to help pay corporate creditors instead of full pensions. Think Enron, Occidental Petroleum, Wards, etc.

AT&T, A&P, Boeing, BofA, Cigna, Dana, IBM, Georgia-Pacific, Hershey, and many others have frozen benefits earned under existing plans, and replaced them with new, reduced plans going forward. Cigna was caught lying, telling employees that pensions were being 'enhanced' and not saving the firm any money - the case is still in court. IBM similarly tried to cover up the impact of its changes - dogged employees, however, proved their case and forced a partial reversal. Shultz also points out that most short-changed employees opting to take a lump-sum payout.

In 1998, over $1 billion of G.E.'s $13.8 billion in pretax profit came from pension plan manipulations (eg. changed assumptions about earnings, reducing pension and health care benefits). Executive pensions at G.E. total $6 billion, hidden in the pensions for regular workers (15% of the total). Utilities have been caught trying to justify rate increases by making unjustified assumptions about the rate of health care cost increases, etc.

Companies buy life insurance on workers because the money grows tax-free, and the benefit payout goes to the company tax-free.

Medicare's prescription drug benefit originally allowed companies to receive a subsidy of 28% of whatever was paid for each retiree (up to $1,330/year/retiree) - even if the retiree paid the entire amount. Many companies also stopped paying the benefit while collecting this subsidy. Regardless, accounting rules required booking the anticipated future subsidies as an asset, and when this practice was stopped (effective 2013) in ObamaCare, they booked large charges to reduce those assets - AT&T - $1 billion, Caterpillar - $240 million, Deere - $220 million, and Verizon - $970 million. Fox News, etc. then alleged these were 'new' costs, which of course they were not.

Bottom-Line: Politicians and CEOs claim entitlement spending in America is out of control and dragging down our economy. 'Retirement Heist' debunks that allegation; the near disappearance of defined benefit private-sector pension plans didn't HAVE to occur. Readers will be amazed at how important financial engineering of pension and health-care benefit funds are to corporate profits, and the gaming that goes on, at employee expense.
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39 of 40 people found the following review helpful
on October 12, 2011
First, read RETIREMENT HEIST to understand how executives in corporations and their hired enablers and strategists, benefits consulting firms, use accounting tricks, legal loopholes, deception, and outright lying to rob people -- maybe you -- of their pensions.

Second, read it to understand how these same executives have and continue to transfer wealth, if you can call employee nest eggs that, from their workers to themselves to fund their ludicrously inflated pensions.

Third, read it to understand how executives are burdening their companies with huge unfunded deferred compensation packages that may prove costly to employees and investors in the future. And given recent trends, let's include all taxpayers.

Fourth, read it to understand the new meaning of financial management and how executives use financial maneuvers to deceive not just their employees and government monitors but also investment analysts and investors.

For an overview of the book, scroll up to the book description and also read Lloyd Eskildson's excellent review. And don't immediately assume Schultz is talking about obviously shady operators. She's talking about and citing the shenanigans of executives in corporations widely held by investors and leaders in their business sectors. Among those covered are AT&T, Bank of America, American Greetings, Cigna, Delta Airlines, IBM, the National Football League, and many more, perhaps your employer or stock investment among them.

Schultz writes clearly about even the most complex tactics and supplies plenty of examples to illustrate her points. After finishing, you will understand the games executives play with retirement and healthcare benefits, as well as their own compensation packages.

You'll also find yourself extrapolating to other issues. For instance, under ERISA (Employee Retirement Income Security Act), while aggrieved employees or retirees may sue over pension disputes, they may not collect punitive or pain and suffering damages, just unpaid pension funds if they win. Sounds fair enough, except corporations typically drag these cases on for years until plaintiffs give up, exhaust their meager resources, or die. Bringing suit isn't easy, though, because without a payoff of punitive and pain and suffering damages, finding representation is challenging. As you read the section on ERISA and thwarted suitor efforts, consider the effect tort reform might have in other areas of civil law. We love to malign tort attorneys -- I'm not one, by the way -- but they can effectively police bad behavior; and it may not be in our best interest to cap judgments.

Finally, I might add that the information in the book reflects an unsettling development in business; in particular, the way executives manage. Perhaps I'm a bit idealistic, however, as I see it, top management manages -- or used to manage -- for three broad constituencies: for the well being and prosperity of the company, to provide their markets with useful products and services, and for the general good of society as a whole. Of course, they weren't always successful but, for the most part, they appeared to make an effort. Not so today. As RETIREMENT HEIST and other recent books illustrate, since perhaps the 1980s, top management has shifted the focus to themselves, managing for their own personal gain, often as Schultz and others show, to the determent of their companies, employees, and the economy at large. It's a sad state of affairs that came to a disastrous head in 2008, and the situation isn't at all better today. You have to wonder how these corporate leaders face their own families after a day at the office.
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44 of 46 people found the following review helpful
on October 1, 2011
Excellent, excellent book! I highly recommend this book to anyone who is part of a pension plan or collects a pension.

I could not put this book down and read it in two evenings. I then ordered three copies to give to coworkers.

This book explains in plain English how companies manipulate pension plans for their profit to the detriment of the plan participants and retired pensioners. Truly an eye opener with real life examples from Caterpillar, ATT, Verizon, US Steel, and on and on. The author even lists some of the court cases brought by pensioners for those who want to dig a little deeper.

Definitely worth a read.
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70 of 88 people found the following review helpful
on September 25, 2011
Retirees and long-term employees good. Big corporations and pension consultants bad. Executives greedy. That's the driver. But don't we already know that? The gist of the book -- anecdotes showing how any number of large corporations have "used" tax-qualifed defined benefit pension plan assests, the cutback and termination of retiree medical benefits and the accounting rules, legally, for the most part, to boost accounting profits, secure executive retirement benefits after-the-fact, and terminate or freeze defined benefit plans, all to the detriment of rank and file employess. Much of what the author says is completely true, but she doesn't hesitate to use half-truths (truthiness) to make her points either. There are at least a couple of apparent errors of fact and law, but not enough to do any harm, given the non-technical nature of the book. So, if you're a layman who knows little about the retirement benefits industry, this book would be a good eye-opener. Just remember that it's only one side and one small part of the story, presented from the underdog standpoint.

Schultz is a Wall Street Journal investigative reporter and acknowledges that "[m]any of the stories in this book first appeared in some form in The Wall Street Journal . . . ." Moreover, that's exactly how the book reads, like an extended newspaper article. Here are my gripes.

One. No footnotes to sources. There are a few references to page numbers in the "Notes" section at the rear of the book, but most "facts" are uncited. Also in the "Notes" chapter, the author says "To simplify matters, I have omitted specific citations of pages and dates [from SEC Form 11-K reports], but figures for a specific year come from filings made the following calendar year." I had to chuckle a bit at this point given that that the author gets on companies that limit explanations of plan changes to employees on the grounds that they (the companies) don't want to confuse the employees with too much detail. That's not a perfect analogy, but is a bit ironic.

Two. No historical, regulatory (SEC, IRS, Labor Department), business or legal overview of the retirement plan landscape as a whole. This is not a problem for the reader if you're an industry insider, but for the lay reader I can see it being an issue. This is why I've titled this review "Just the tip of the iceberg." The causes of today's retirement plan mess, which is what I call it, are a lot more complex, and a lot worse, with more players to blame, than Schultz would have you believe. Moreover, Schultz doesn't look to the future, the 401(k) so-called retirement plan. Granted, that's not the primary focus of the book, and she does recommend to the reader a number of books that have been written about -- critical of -- 401(k) plans, but even those that I've read miss the major point [that 401(k) plans are not in fact retirement plans at all]. Maybe someone will write that book . . . before it's too late.
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10 of 11 people found the following review helpful
on October 18, 2011
Disclosure: I am a market participant and trade financial products.

When I was a young teenager in the 80's I used to read my father's Business Week. And in one particular series Business Week talked about how corporations were battling to take ownership of the corporate pension funds. The reasons were obvious as the wealth in the pension funds were gigantic. I thought as a young teenager that this is a bad idea. Well due to lax regulations pension funds have been raided and now corporations are saying, "we have no money." Well DUH...

I am surprised that this book was not written earlier, in fact I am sad that this book was written at all because it shows how bad those pension funds were plundered. For me this book was a bit boring because I already knew and suspected what was going on. Thus I mostly sped read this book. However if you are now just trying to understand the situation by all means PLEASE read this book. It is not fiction, it is fact and thus might anger you for a number of reasons. But read it and try to understand the ramifications of what is going on.
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6 of 6 people found the following review helpful
on February 12, 2012
Tired of hearing, "These difficult times have forced us to cut benefits for our valued employees?" This book sets the record straight and informs the reader what really happened to all that money.

Five examples:

1. Redistributing the Wealth. Corporations willfully froze fully vested benefits plans and routed that money to unfunded executive benefit obligations.

2. Life Insurance Taken Out on Employees. Though this tax shelter loophole was partly closed, it didn't take long for companies to find a way around new rules. Life example: A manager at a bank, recently recouping from cancer surgery, returned to his old job only to be demoted due to diminished abilities due to that illness. Accepting that, the manager was then offered a meager life insurance policy by the bank to benefit his family on the condition that the bank would also take out a similar policy on his life. Months after signing for that second policy, the manager was fired. When he eventually passed, no insurance windfall was forthcoming to his family. Why? It was nullified when he was fired. The bank did well though, as it picked up the windfall from its policy on the manager's life. You've probably heard of this "phenomenon". In the "benefits consultation" biz, it's known as "Dead Peasants' Insurance". Funds from pension plans helped pay for these "policies".

3. Who's the Owner Today? A retiree suffering from cancer had been receiving a pension from his company for years, only he didn't know it had been sold several times. So, when he got a notice from an unknown entity claiming he had been receiving his pension by mistake for years and needed to refund them a sum worth the cost of an SUV within a few weeks time, that got him to investigate. Sure enough, the law was on the side of the company, even though it made the error. After haggling with various company reps for months on the phone, the retiree finally relented and took on a job despite being emaciated by cancer. The company did give in a little and allowed him to repay in monthly installments. The company eventually got its money and the retiree lost his life.

4. Changing the Game. How did this start? Back in The '80s and '90s, pension funds were overflowing, and corp execs didn't like the fact that accounting rules and standards were disallowing them to play with the surpluses. "The money is just sitting there, doing nothing!" Enter legislators and gov't agencies sympathetic to corporate interests. Since these changes put more value into their bottom lines, companies began playing with these funds in ernest. When the recession hit, there were no cushions available to soften the blows to their bottom lines.

5. The Revolving Door. A whistle-blower had evidence that those aforementioned life insurance policies were nothing more than tax shelters and neatly assembled these into a packet that found its way to the desk of a head of the iRS. The investigator was less interested in the ethical nature of the practice than the fact that the gov't was losing tax revenue, so he pursued the leads. When the loophole was closed, that same guy leaves for a job for a PAC lobbying to reopen that loophole.

If the US had three top financial crises to solve, the retirement problem would be among them. If you want more details about legal pension theft, read this book.

And, to those who continue to perpetuate this ruse, I have a message for you. A large guy with horns and a pitchfork wants your number.
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6 of 6 people found the following review helpful
TOP 1000 REVIEWERVINE VOICEon October 2, 2011
The author relates stories told to her by retirees that in the 1990's they were getting letters that the companies had to cut benefits. The companies were upset that they couldn't use the pension money for themselves. They influenced Congress to change the laws. Companies were now bought to get the pension money and then the companies filed bankruptcy. In the 90's companies offered retirement buyouts so they would not have to pay the full amount. They also used the pension money for restructuring. Pension assets were sold, the money spent, and then bankruptcy eliminated the obligation. 401k plans replaced pensions. At first employers contributed 3%, now most are 0%.

Accounting rules required the pensions to be listed as a debt. As cuts were made in future pensions, they were now listed as profits that could be used as bonuses for executives. If they deferred taking the money they were building a time bomb that would reduce the pool for the worker's pension. The stock price rose.

Lucent (formerly part of AT&T) started with enough for all the pensions. They cut benefits, that boosted profits (sometimes the only profit the company had), including death benefits. $400 million went to bonuses that year.

Companies took out life insurance on their workers so they would get paid when the person died. (Sounds like Goldman Sachs betting on the default of the mortgages they financed.)
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9 of 10 people found the following review helpful
on November 11, 2011
A Ken Burns-style documentary on this subject would benefit a lot of people. It needs to be explained carefully and disseminated to a larger audience. Actuarial science is as baffling to me as string theory but if we could get the accounting equivalent of Dr. Michio Kaku to explain this in a series that breaks down the history of this criminal misconduct it would help out all of us "peasants". If we lowly peasants are to protect ourselves from the modern robber barons we need to know.
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9 of 10 people found the following review helpful
on October 11, 2011
This book is a must read for anyone that thinks there is any kind of a "level playing field" in our current business environment. The author reveals the theft that has been going on where corporations and their executives set up a false view of the world then hide behind it to just legally steal from the American citizen. Formerly great US companies have chosen to pursue the path of greed for the executives rather then partner with employees.
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7 of 8 people found the following review helpful
on December 3, 2011
As good as this book is , it is difficult to review.
For over twenty years corporations have employed numerous means, from the merely mean spirited to the deliberately illegal to convert retirement systems into income for the few. Clearly, one of the reason why the corporate right is so afraid of the term "income redistribution" is that they have to demonize the term even as they focus on "income distribution" meaning the ongoing process of pushing ever more of the planet's wealth into ever fewer hands. Somehow the same Americans who take pride in not believing corporation advertisements, eat up every word the same corporations pump-out when the subject is regulations, anti-unionism or just delivering on the promise of trickle-down.

This book details some of the more smarmy efforts that have been employed to "Profit and Plunder form the Nest Eggs of American Workers". To repeat them here is to emphasize my politics over the reading experience inherent to the book.

The book itself is a fairly easy read. Some explanations are complex, but even if you miss the details you can grasp the import of the concept. Others have noted that this book should have some examples of the equations used in tax law or determining retirement benefit amounts. This is a valid point. My suggestion that they should be in an annex, leaving the less technically adept reader with an uninterrupted read.

This helps to emphasize that this is not a technicians book. The irony here is that recounted examples of employees fighting back frequently revolve around individuals who had or learned the arcane ways of retirement calculations. In the case of IBM, the assumption by leadership that employees were not skilled in this type of problem solving was as ridicules as it sounds and cost IBM leadership more than some discomfort.

Given the tone of the national political debate, it may be that political right will ignore this book in droves. For those who want to hear more than what is already in their respective political echo chambers, this is a book to read before you vote.

Some one else has said it in an Amazon review: Corporations Bad, People Good. This is a valid summery. If you want examples, without getting drowned in the math, this is a good book.
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