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Remarks by Karen Ferguson at "Retirement Heist: Overlooked Causes of the Retirement Crisis" (November 7, 2011)

Monday, November 7, 2011

We at the Pension Rights Center are absolutely delighted to be co-sponsoring this event.  We are pleased to be able to discuss Ellen’s book and the extraordinary impact of her reporting over the years.  It has had an amazing effect on the lives of so many employees and retirees.

We are also delighted to once again be able to hear Phyllis’ wise words.  She said so many things that were so important.  I remember that moment, when the IBM spokesperson said at the National Summit on Retirement Savings, “Our role is no longer to be responsible for our employees’ retirement.  We are merely facilitators.”  It struck me the way it did Phyllis. 

Her pointing to the problem of the settlor fiduciary distinction was right on target.  It has always been a problem, it remains a problem, nobody knows quite how to solve it, but she was absolutely on target.  And your remarks about the Pension Protection Act, many of us in this room strongly agree with.  We celebrate your commitment to participants’ concerns over the years.  And Don and Michael have provided incredibly provocative statements.

I am also pleased that we are co-sponsoring this event, because it gave me an excuse to see “Tower Heist” over the weekend!  For those of you who don’t know, it’s a caper movie, it’s great fun, and it shares part of a title with Ellen’s book.  And, like Ellen’s book, it’s about the plundering of pensions.  Most important, the movie – like Ellen’s book -- highlights the critical importance of pensions to people.  If you see the movie, you will never forget Lester the doorman, who learns one year before his retirement that his pension is gone.

What is so striking about Ellen’s reporting over the years, and in this book, is its impact on individuals.  It has helped them help themselves, and it has helped them change the rules for others in the future.

Take just one example: Janice Winston is here today.  When her employer announced that it was changing her pension plan, she was concerned, but she really couldn’t figure out what was going on.  Fortunately, she had a subscription to the Wall Street Journal, and she read an article by Ellen.  It explained what cash balance conversions were and what it would mean to her. She learned that she stood lose almost half the pension that she was counting on getting.  The rest is history.

Janice joined with her fellow workers.  Organized, they convinced their employer (now Verizon) to reverse the decision for them.  And then she went on, working with employees in other companies that had also had cash balance conversions to change the law.  As all of you know, it was changed in 2006 going forward.

The book is already helping people.  We got a call from a GE retiree – we’ve worked with GE retirees over the years to help them to campaign for cost-of-living adjustments.  It wasn’t too difficult when the plan was tremendously overfunded, and now suddenly, it’s underfunded.  When the retiree wrote and said, “Is there any possibility that the unfunded liability of our executives’ pension plan might be contributing to this liability?” I just pointed him to page 2 of Ellen’s book. 

The book highlights so many problems that urgently need to be addressed.  I’d like to mention one that needs to be addressed in the future.

Chuck Ackerman, a retired pilot, was getting his pension check from Raytheon.  As Ellen tells the story, he had cancer, and one day he was notified that he’d been overpaid.  His pension had been overpaid.  Chuck of course had no idea that he had been overpaid, and he had no money to pay it back.  It is an absolutely heartbreaking story, and it is a situation that needs to be addressed.  Our hope is that it will be addressed in the not-too-distant future.

All sorts of questions have been raised about Ellen’s book – among them, “Can this really be true?” – but a more fundamental one is, “Isn’t the situation hopeless?”  Aren’t there too many problems?  Doesn’t each reform lead to new problems?  Should we just forget about this system and just focus on Social Security?  Not a bad idea, but not this year.  

It’s certainly true, as we’ve heard, that well-intentioned reforms – accounting reforms, pay-for-performance reforms -- can have unintended effects and create the incentives that Ellen writes about so eloquently in her book.  But, from our perspective, as long as there are journalists like Ellen to expose these problems, yes, maybe the solutions come too little, too late, but they will come, and they will come from people like Phyllis and others, who care so much about making the system work.

We’ve also been asked:  What are the reforms that can address the problems that Ellen raises?   And you’ve heard some of them from Michael.  There are a great many that are needed.  I’ll just go through a couple.  

  • Reforms relating to the accounting problem.  It’s been suggested that you could create a separate “bucket” on corporate income statements, showing increases and decreases in pension assets and liabilities.  I’m not an accountant, but it sounds good to me.  Keep it on the books, but keep it separate, so people know what those liabilities are so that they don’t create these effects.
  • Reforms that Michael talked about – that address the selling of surplus (or not), in mergers and acquisitions.  In either case, whatever is done, employees are left with a fraction of their benefits they counted on getting.  That can be addressed.  There have been proposals to deal with it.  It should be dealt with.

The Pension Rights Center is committed to making the system work better for people, and to increasing the number of people in plans. We think that pension plans are worth preserving – and that they can be made to work both for employees and employers.


I should say that the pension game really isn’t over.  If you look at the latest statistics from the Bureau of Labor Statistics, you’ll see that, if you look at the total non-federal workforce, 28 percent is still covered by traditional pension plans, and 37 percent covered by 401(k)-type DC plans.  There is overlap, but it’s not over.  Millions and millions are still in pension plans.  We can preserve the system.


But, of course, the ultimate answer isn’t just patching up what we have.  Everyone in this room knows that American workers need and deserve something better.  They need a system that doesn’t place all of the risks and responsibilities on either the employer or on the employees.  Workers need secure and adequate lifetime income.  We owe it to them.  We owe it to our country to work to that end.


The need is great.  All you have to do is look at the polls that say that retirement security is the number one financial concern.  Look at the poll that said that people are more worried about running out of money in retirement than death.  Anxiety is high.  Consumer confidence in retirement security is plummeting.  We need to do something.


Look at the statistics.  They are shocking.  Half of all retirees who are no longer in the workforce receive less than $16,500 a year.  That’s just above the minimum wage.  How are they expected to pay their bills on that?  In this, the most prosperous country in the world, it is amazing.  Even more amazing is that our elderly poverty rate is the fifth highest among 30 industrialized countries.  It just doesn’t make sense.

Even John Bogle, the 82-year-old founder of Vanguard, was quoted last week as calling the U.S. retirement system "a real mess," in need of deep-rooted reforms.  He pointed out that the current average account balance in Vanguard’s 401(k) plans was only about $26,000, and that rose to only about $60,000 for the median account balance of older people.

There are lots of ways of getting to a new system.  It’s not rocket science.  And we’ve already made great progress. Business, actuarial, and retiree groups, unions and others, have all come up with new concepts. There are about 50 proposals for new approaches, with more in the process of being developed.


Ellen has shown us how we got to where we are today, and many of the problems that we are still facing. Now it’s up to the rest of us to figure out where we go from here.  Thank you.

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