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PENSION RIGHTS CENTER APPLAUDS TREASURY RULING BARRING PENSION PLAN BUYOUTS

For Immediate ReleaseContact: Joellen Leavelle, 202-296-3776
August 07, 2008www.pensionrights.org

WASHINGTON – In a clear victory for workers and retirees, the Department of the Treasury has issued a ruling ensuring that pension money will continue to be invested solely in the interests of workers, retirees and their families – and not to the benefit of financial institutions.

Over the past year, a number of large Wall Street financial institutions and consulting firms – including JP Morgan Chase, Citigroup, Aon and Palisades Capital Advisors – have lobbied Congress and government regulators to permit them to acquire pension plans that have been frozen by companies.  In Revenue Ruling 2008-45 the Treasury Department unequivocally states that allowing financial institutions to take over frozen pension plans would violate federal tax and pension laws which require that pension plans must be maintained by employers exclusively for the benefit of their workers and retirees.

"We applaud the Treasury Department for ensuring that the retirement security of workers isn't endangered by financial institutions that care only about making profits, and not about the retirement security of workers" said Karen Friedman, policy director of the Pension Rights Center.   "In the wake of the sub-prime mortgage crisis, it would be risky and imprudent to allow financial institutions, desperate for new capital, to get their hands on billions of dollars of pension assets.  Given today's economic crunch, these institutions, which would have no employment relationship with the plans' participants and beneficiaries, would have every reason to invest pension money as aggressively as possible to make the biggest profits possible.  Paying benefits to workers and retirees would be incidental."

While concluding that this practice is unlawful, the Treasury Department issued some guidelines for proposed legislation which could allow the transfer of frozen plan assets to a third-party entity in the future.  The Pension Rights Center would oppose any legislation that tries to legalize such a scheme, says Friedman. "We think the idea of financial institutions taking over frozen pension plan assets is a bad idea that should be buried now." 

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