Wednesday, August 15, 2012

You say that you want to negotiate with thieves? (A letter from Ken Previti)

A horrible mistake is being made by the We Are One Illinois (WAOI) coalition. Everyone wants to seem reasonable and present a reasonable public image. The danger is in offering what seems reasonable while the offer itself has unintended disastrous consequences.

“With a guarantee that the state would pay its portion, the members who are reliant on the pension systems for their retirement security would offer to help the state by paying more even though they have contributed their portion over the years. [This increase may differ for the various pension plans]” (WAOI).

This is a successful, common, legal trap used by lawyers for over a decade. Once a retiree accepts a different pension plan, no matter how minor the change, the one providing the pension is legally recognized as having the right to alter the new pension plan in any way it deems necessary. All past plans are null and void. Courts have decided on this repeatedly.

Even offering to have retirees pay more could be used in court to prove the desire of retirees to have a new pension agreement due to what they themselves deem an excessive financial claim.

The full explanation and legal references are available for your reading in Retirement Heist by Ellen E. Schultz. Excerpt from page 170: “To enhance their chances of success… [Employers] started to use a strategy outlined by [various] managers: creeping take-aways. This involves taking small steps – increase premiums a small amount, or perhaps start changing premiums in the future… Then, a few years later, the [employer/state] cuts benefits in a big way, saying the retirees’ prior lack of legal action signaled tacit agreement that the [employer] could change the plan.”


- Ken Previti

Other pertinent quotations from Retirement Heist by Ellen E. Schultz to consider:

“The same crowd that created this mess—employers [legislators], consultants, and  financial firms [the Civic Committee]—are now the primary architects of the ‘reforms’ that will supposedly clean it up” (6).

“The irony is that all these employers [legislators], and many others, had already been quietly siphoning billions from… pension plans for years. They were merely seeking ‘reforms’ that would open the spigots even further” (12).

“…401(k)s [are] merely the bastard stepchildren of dead pensions” (25).

“[Employers/legislators] blame investment losses for their plight, as well as their aging workforces, union contracts, regulation, and global competition. But their funding problems were largely self-inflicted. Had they not siphoned off the assets, they would have had a cushion that could have withstood even the market crash that troughed in March 2009… [Their] solution when funds run low remains the same: Cut pensions” (27-8).

“[Reform] wasn’t designed to save money, just redistribute it” (33).

“The cash-balance plan… was a pension plan ‘masquerading as a defined contribution’ savings plan… ‘It’s [a] way to disguise the cutbacks in [public employees’] benefits’” (36-7).

“’…Corporate America uses cash-balance plans to mask significant reductions in pension benefits and costs’” (47).

“Pension plans weren’t just piggy banks to tap for cash. They were also cookie jars of potential earnings enhancements” (55).

“[Employers/legislators] claimed to be shocked to find that costs [are] so high. This, they said, call[s] for hard choices, and regretfully, they…have to cut benefits [to public pensions]. It [is] a matter of survival” (66).

“Employers [legislators] continue to use the public’s ignorance of accounting and the way retiree benefits work to bamboozle analysts, employees, retirees, unions… and the courts” (197).

“Employers [in this case, legislators, the Civic Committee and the Chicago Tribune] have used the opaque retiree accounting rules to dupe a gullible public. When it comes to retiree benefits, stirring people into a frenzy about supposed problems has always been an effective way to distract them from real problems and disguise the purpose of the proposed solutions” (202).

“The architects of today’s retirement mess—[legislators,] consultants and financial firms—have also played a non-starring role in the public pension debacle… [In Illinois, legislators] drained assets from pension plans… enabling [themselves] to conjure up cash for popular projects, without raising taxes, and look like community heroes” (213).

“The scapegoat game continues. [Employers/legislators] are still blaming aging workers, retire ‘legacy costs’ and ‘spiraling’ retiree health care costs for their financial woes—not their own actions that squandered billions of dollars in [public] pension assets, their thinly masked desire to convert benefits earned by and promised to retirees into [funds for others]…, and their willingness to sacrifice retiree plans and the well-being of retirees, for short-term gains” (214).

“In the public sector, the scapegoats are the public employees and retirees, who are beginning to have the haunted look of victims of Salem witch hunts. The real culprits are the self-serving politicians and officials who passed the funding buck to future generations, the consulting firms that helped them do this, and the investment banks that conned local governments into investing taxpayer-funded pensions in risky, abusive investments” (214).

“[In Illinois,] the [public] pensions people have earned are legally-earned delayed compensation, protected by law… Retiree…benefits…are protected by negotiated contracts” (215).

-- Schultz, Ellen E. Retirement Heist, How Companies Plunder and Profit from the Nest Eggs of American Workers. New York: Penguin Group, 2011.

No comments:

Post a Comment