Retirement Heist

Journal, to which I owe the greatest debt. Every editor I worked with embraced the paper’s high standards for both accuracy and fairness, including its “no surprises” policy, which requires reporters to fully apprise companies and individuals of the content about them in stories before they run.

Dan Hertzberg, the deputy managing editor of The Wall Street Journal for many years, was an early supporter of these stories, which “looked out for the little guy.”

Dan Kelly, The Wall Street Journal’s only part-time Iowa farmer and full-time editor, scrutinized most of my page-one stories, which benefitted immeasurably from his intellectual nimbleness, ability to locate flaws in reasoning, and skills as a devil’s advocate. (“You say here, ‘They ate kittens for dinner.’ What’s wrong with that? Is there a law against it? Did you get their side?”) If the facts and analyses got past Dan, the paper knew it had little to fear.

This book owes a huge debt to Theo Francis, who teamed with me on many of these stories, including our investigation of “dead peasant” insurance and executive compensation. Theo did groundbreaking work in mapping out and measuring the size of CEOs’ deferred compensation, thanks to his unmatched ability to drill into proxy filings to extract well-hidden tidbits. A journalist of catholic interests, he actually found postretirement benefits accounting interesting.

My colleague Tom McGinty joint-ventured on several projects, which could not have been done without his data-mining mastery. I feel dumb just being around him. Thanks also to Elyse Tanouye, my one-time bureau chief, who provided unstinting support and pretends to be interested when I talk about my dog.

Dedicated to the memory of Jersey Gilbert, husband and friend. Je had gelijk in het einde.

Notes

A NOTE ON SOURCES

UNLESS OTHERWISE INDICATED, all financial figures are derived from Securities and Exchange Commission and Internal Revenue Service filings. The pension figures come primarily from the pension footnotes in annual reports (Form 10-K), which include annual data on assets, liabilities, costs, assumptions, and other pertinent figures.

Form 5500, which companies file with the IRS, was the source of some of the liability figures and participant information for qualified (i.e., employee) pension plans.

Executive pensions and deferred-compensation figures and facts come from annual proxy statements (Schedule 14A). Liability figures for deferred compensation at individual companies are extrapolated from deferred tax assets in the 10-Ks and (for banks) from reports filed with the Federal Financial Institutions Examination Council (FFIEC). Liability figures for executive pension liabilities at individual companies come from, or are extrapolated from, pension data in the 10-Ks. Estimates of total executive pay obligations at U.S. companies are derived from Social Security payroll data and were confirmed.

Data for 401(k) plans at individual companies come from Form 11-Ks.

To simplify matters, I have omitted specific citations of pages and dates, but figures for a specific year come from filings made the following calendar year. For example, a figure about GE’s pension obligation in 2009 will be found in the 10-K filed in 2010, just as details about the size of pensions for GE’s top officers in 2010 come from the proxy filed in 2011.

I used Morningstar Document Research (formerly 10-K Wizard) for the securities filings; the IRS 5500s were obtained from the Department of Labor. A free, though somewhat limited, database of 5500s, for both pensions and 401(k) plans, is available at freeerisa.com.

As noted below, other generally nonpublic figures and facts come from court documents.

Unless indicated, comments from individuals are from interviews with the author.

CHAPTER 1: SIPHON

10 “Rigid and irrational legal restrictions”: ERISA Advisory Council, “Report of the Working Group Studying Exploring the Possibility of Using Surplus Pension Assets to Secure Retiree Health Benefits,” November 10, 1999, http://www.dol.gov/ebsa/publications/gulotta.htm.

11 “We believe making excess pension assets”: Ibid.

14 “This restructuring reflects”: PR Newswire, “Verizon Communications Announces Restructuring of Management Retirement Benefits,” news release, December 6, 2005, http://goliath.ecnext.com/coms2/gi_0199-5008432/Verizon-Communications-Announces-Restructuring- of.html.

15 Mark Zellers: “Hardship Testimonies,” gathered by the National Retiree Legislative Network.

16 which are called “420 transfers”: IRS.gov.

16 In the deal, it transferred thirty thousand employees: Ellen E. Schultz, “Raw Deals: Companies Quietly Use Mergers, Spinoffs to Cut Worker Benefits,” The Wall Street Journal, December 27, 2000.

17 GE countersued the U.S. government: Ibid.

18 Don’t put it in writing: “Consulting in Mergers & Acquisitions,” Conference on Consulting Actuaries, annual meeting, Colorado Springs, Colorado, 1996. 19 Royal & Sun Alliance, a global London-based insurer: Gromala v. Royal & Sun Alliance, No. 01-72196 (U.S. Court of Appeals, Sixth Circuit, 2004).

19 got an additional $5,270 a month for life: Ibid.

19 Fruehauf Trailer Corp. used a trickier maneuver: Fruehauf Trailer Corp., Debtor Pension Transfer Corp. v. Beneficiaries Under the Third Amendment to Fruehauf Trailer Corporation Retirement Plan No. 003, No. 05-1374 (U.S. Court of Appeals, Fourth Circuit, 2006).

20 by cutting the benefits of more than 46,000 long-tenured employees: Engers v. AT&T Management Pension Plan, No. C.A. 98- 3660 (District of New Jersey, 2005).

20 provided ASA managers with 200 percent to 400 percent: Ibid.

20 more than twice the amount needed to cover the pensions: Ibid.

22 Florida real estate developer: Footnoted.org, March 2, 2011.

23 Occidental Petroleum terminated its pension in 1983: “Non-Traditional Pension Plan Terminations,” Record of the Society of Actuaries, 1983, Vol. 9, No. 4.

23 Ronald Perelman, who took over Revlon: Ellen E. Schultz, “Pension Terminations: 80s Replay,” The Wall Street Journal, June 15, 1999.

23 Congress slapped a 50 percent excise tax: Omnibus Budget Reconciliation Act of 1990.

25 “the future of the airline is at stake”: Ellen E. Schultz, Theo Francis, and Susan Carey, “Two Airlines Press Workers for Deeper Cost Cuts—US Airways’ Termination of Pilots’ Pensions Could Set Example for Industry,” The Wall Street Journal, March 18, 2003. Quote reported by Susan Carey.