Congress, protect private pensions
I am deeply concerned that Congress is not taking action to protect defined benefit pensions. The latest menace to retirees is Verizon's $7.5 billion plan which would effectively turn 41,000 defined benefit pensions into annuity contracts with the Prudential insurance company.
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This follows similar actions by General Motors, Ford and other employers. Congress needs to strengthen ERISA in order to make sure that, before companies announce lump sum offers or annuity deals with insurance companies to replace pension plans and the Federal PBGC insurance that protects retirees, there are sufficient regulatory safeguards to ensure that the proposal is in the best interest of retirees.
Verizon management retirees filed a federal lawsuit on Nov. 27, requesting an immediate temporary restraining order to be followed by a hearing to consider a preliminary injunction against Verizon's action. We need to impose a moratorium on Verizon's action in order to determine whether it is harmful to pension plan participants.
Verizon's announced transfer of pension obligations to Prudential strips retirees of all their protections under ERISA, including PBGC guarantees, leaving only the insufficient and varying coverage of $100,000 to $500,000 lifetime per person cap provided under state annuity guaranty associations. By comparison, the PBGC currently protects the benefit of a 65-year-old retiree up to $56,000 per year for life.
What pension plan sponsors and insurance companies are calling "de-risking" is really retirees seeing their former employers avoiding the obligation of properly funding and insuring the payment of promised pension benefits by purchasing third-party annuities and placing future risks on retirees.
Please keep in mind that while Prudential and other top insurance companies are currently financially sound, we have witnessed in recent years the demise or the taxpayer bailouts of firms that also were once considered to be financial powerhouses and "too big to fail."