|
||||||
|
|
|
|
|
|
|
|
|
 |
 |
 |
 |
Want to support Global Action on Aging? Click below: Thanks! |
|
Federal
Pension Provider Overwhelmed
By
Kirstin Downey
Based
on what they describe as their own rocky experiences, retirees Dale
"Bud" Leppard and Richie Brooks view with apprehension the growing
workload of the Pension Benefit Guaranty Corp., the federal agency charged
with ensuring that workers from bankrupt companies get their pensions. Leppard,
of Morristown, N.J., lost his pilot's job at age 54 when Eastern Air Lines
Inc. failed in 1991. Because he started drawing benefits right away, he
learned he would get only one-fourth of the $6,000-a-month pension he was
expecting at age 60. Then, three years ago, the PBGC told him it had
overpaid him for nine years and wanted $36,000 back. So he reluctantly
agreed to fork over $140 a month from his $16,661 annual pension -- a
payment he will make until he turns 80 in 2017. Brooks,
59, of Lake Worth, Fla., a machinist at Pan American World Airways Inc.,
which stopped flying in 1991, is part of a group of Pan Am employees suing
the agency to get more pension money. "We're not trying to get rid of
the PBGC," Brooks said. "I wouldn't get my $263 a month if they
weren't there." He thinks he and other beneficiaries are getting
shortchanged because the agency is acting too much like a business trying to
control costs rather than a government protector of retirees. The
PBGC serves as financial trustee for nearly 1 million individual pensioners
-- up from 346,000 in 1993 -- and pays out $2.5 billion a year. It expects
more customers by next year and has already inherited more than 100,000 new
customers in the past six months, including 95,000 from Bethlehem Steel
Corp., 20,000 of whom are in the Washington-Baltimore region; 7,000 pilots
from US Airways Inc.; and 1,004 health care workers from Columbia Hospital
for Women in the District. Some
are already disappointed by administrative delays and rules that limit their
pensions. Advocates
for retirees and agency officials defend the PBGC, saying the agency is
performing admirably overall at a time when the nation's pension corporate
system is under severe stress amid a sagging stock market, with underfunding
now about $35 billion. Forced to take over a record number of bankrupt
pension plans, most notably in the steel and aviation industries, the agency
now faces a $5.4 billion deficit, the largest in its history. "The
PBGC by and large is a good system, and it saves people for the most
part," said John Hotz, deputy director of the nonprofit Pension Rights
Center. "But like everything in pension law, it's incredibly
complicated, and there are lots of little wrinkles that can have a negative
effect on folks." Set up
in 1974 after Studebaker's failure left some retirees destitute, the agency
operates under complex guidelines designed to maximize the number of people
covered when their employers' plans go broke. The pension insurer has about
850 employees and even more contract workers and is supported by fees paid
by companies that operate pension plans. Generally
speaking, workers who retire at age 60 face a statutory pension limit of
$28,600 a year, while those who retire at 65 are limited to pensions of
about $44,000. The
average 65-year-old retiree in the United States gets a pension of about
$12,000 a year. According to the PBGC, which covers about 44 million
Americans, working and retired, 90 percent of its recipients, including
everyone at Columbia Hospital for Women, will get the full amount they were
promised. Meanwhile,
workers who have only 401(k)s, or other plans that require them to invest on
their own behalf, are not insured by the government program and thus have no
guarantee of benefits at all -- as chagrined workers from Enron Corp. and
other corporate giants discovered. Airline
veterans Leppard and Brooks aren't the only ones asking for more from the
PBGC. Hundreds of LTV Corp.'s steelworkers in the Cleveland area took early
retirement in early 2002 under company pension rules when the steel plant
shut down, and then they learned their pensions would be reduced by the
agency. In the Washington area, pilots at US Airways, which emerged from
bankruptcy protection this spring, have protested reductions in their
retirement benefits and the loss of lump-sum retirement packages they had
counted on receiving. One
common complaint by PBGC-covered workers is a delay in learning what their
payments will be. Recipients usually start receiving checks from the agency
right away, but the amounts are based on an estimate. As Leppard found out
after nine years of receiving checks, he ended up owing the government
money. Some
other recipients discover they have been underpaid for years and get bonus
payments -- though the pleasant surprise can be tempered by a large tax
bill. In fiscal 2002, 10 percent of recipients learned they were underpaid
and got checks, and about 6 percent found out they owed the government
money. An
agency inspector general's report in 1999 found that in one group of cases
studied, it took, on average, nine years and eight months to process the
final determinations of benefits. In one case, it took 18 years and four
months. One retiree was overpaid for 14 years, for a total of $152,526.
Eight percent of recipients surveyed said they thought the delays "had
caused illness:" They feared having their benefits cut or being told
they needed to repay the government. Things
weren't much better in 2000, according to a follow-up report. In a sample of
60 pension plans, more than half the participants had to wait six to 20
years to receive their final determinations of benefits. In
recent interviews, PBGC officials said the agency has modernized its
procedures and cut the waiting game. All pensioners now receive a final
determination of benefits within three years, they said. "We've
fairly dramatically increased the number of decisions issued within a year,
and we've eliminated the backlog" of older plans waiting to be
processed, said Joseph H. Grant, the PBGC's deputy executive director and
chief operating officer. ". . . We've made good strides in speeding
that process up." Some
delays are inevitable because corporate bankruptcy proceedings can drag out
for years, officials explained. And the agency can't calculate exactly how
much recipients should receive until they know how much they can collect as
a creditor of the failed enterprise. Mary
Ellen Signorile, an AARP lawyer specializing in employee benefits, said the
agency sometimes confronts a paperwork nightmare when it takes over a
pension plan. "When a company starts to go into bankruptcy, they let
their recordkeeping slide," she said. "PBGC frequently needs to go
in and reconstruct the records." Even
short delays can be costly to retirees. For instance, many middle-aged LTV
steelworkers rushed to retire early last year, as permitted by their plan,
after the company announced it would shut down its Cleveland plant and
liquidate, said pipe fitter Mark Granakis, 55, a plant employee for 33
years. The PBGC stepped in to take over the workers' pension plans. Granakis
received a pension of $3,200 a month, which was what LTV had promised. But
four months later, after reviewing his papers, the PBGC informed him that
because he was 55, he qualified for a pension of only $1,425 a month, and he
owed the federal government the difference, or $7,100. "The
way it's structured is extremely unfair," Granakis said, even as he
acknowledged the age limitations were set by Congress, not by the agency.
The LTV plan was swamped with such early retiree claims, said the PBGC's
Grant. "LTV was never geared up to put 7,000 workers into retirement at
one time," he said. "Our goal is to pay people the correct
amount" under rules set by Congress, Grant added. David
Robbins, a pilot at US Airways, which terminated its pension plan after
going bankrupt, retired in February when he reached age 60, the mandatory
age for pilots. He had sold his house in Florida and bought property in
Rosman, N.C., planning to use part of his expected $810,000 lump-sum pension
payment to build a home on the site. Instead,
when he called the airline, he found that others who retired in November, a
month before the bankruptcy, had gotten their checks. But under agency
rules, which don't allow lump sums, he would not. Instead, he will receive a
regular check -- about $2,800 a month. "The
whole thing is so frustrating," Robbins said. "You play by the
rules, and then people won't give you the time of day." "If
we paid lump sums, it would come out of the pockets of other
participants," said Randy Clerihue, a PBGC spokesman. He said that many
US Airways pilots, in fact, will receive larger pensions than they were told
earlier this year, because there was more cash in the US Airways pension
fund and fewer participants than some other larger plans the agency ran. One
78-year-old pilot who retired in 1985, for example, will receive about
$69,700 -- only about 15 percent less than he had been promised, the
spokesman said. "Most people are satisfied with the determination we've
made," Grant said. John Biedermann, an attorney for the Pan Am retirees, disagrees. "People are left at the mercy of the PBGC," he said. Copyright ©
2002 Global Action on Aging
|
