© 2024 Pension Rights Center. This work is licensed under a Creative Commons Attribution-Non Commercial 2.5 Generic License.
WASHINGTON — In the wake of moves by several large companies to “de-risk” their traditional pension plans, the Pension Rights Center is calling for a moratorium on such actions until Congress can look into the risks posed by these strategies to workers and retirees. Just yesterday, Verizon joined GM in announcing that it is transferring the pensions of certain retirees to an insurance company. In addition, GM, Ford, and several other companies have made lump-sum buyout offers to certain retirees and former employees. The Center is concerned about the impact of both approaches on current and future retirees.
“These employers are looking to cut costs and reduce long-term liabilities to make their companies more attractive to investors, but ‘de-risking’ can be risky for workers and retirees,” said Karen Friedman, the Center’s executive vice president and policy director. “Insurance company annuities backed by State Guaranty Associations could leave retirees with less protection than the pensions provided by their companies backed by the insurance provided by the Pension Benefit Guaranty Corporation. Also, lump sums place the burden on individuals to ensure that the money lasts throughout retirement. We need to stop, take a breath, and make sure that the retirement security of the people affected by these moves is fully protected.”
The Center plans to ask Congress to take steps to put a temporary stop to pension offloading and lump-sum buyouts to give policymakers time to examine whether these strategies could result in sellouts of retirement security.
“How secure are the annuities that are being purchased in plan terminations?,” asked Friedman. “What is the exposure of the insurance companies that are taking on these large group annuity contracts? Do people understand the consequences of taking a lump sum? These are the types of questions that we want to make sure are addressed.”
The Pension Rights Center has fact sheets on what happens when a pension is transferred to an insurance company and on deciding between a lump sum or an annuity. The Center has also compiled a list of companies that are making lump-sum offers. This list joins the Center’s longtime lists of companies that are freezing or terminating their traditional plans and companies that have suspended their 401(k) matching contributions. In addition, the PBGC has a helpful FAQ for workers and retirees whose pensions are transferred to an insurance company.
