In these worst of times, your goals should be to combat powerlessness or hopelessness and learn as … [+]
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During the best of times, workers and retirees counting on pensions for their retirement security have had good reason to worry that the sponsors of these plans—their current or past employers—were consulting with experts plotting how to screw them out of any benefits promised.
After all, pensions cost money and corporations and governments are forever searching for ways to save money. Workers have discovered that all-too-often the so-called “promises” of retirement security their employers have made are at best shaky, or even illusory—worthless.
The 11-year historic bull market from 2008 through 2019 was arguably “the best of times.”
During this period, companies such as General Electric
GE
—the largest company in the world in 2010, which dropped out of the Dow Jones Industrial Average for the first time in 110 years—tried to boost company bottom lines by offering retirees stingy lump-sum payments to give up their valuable pensions.
Thousands of pensions were dumped by America’s corporations at the doorstep of the Pension Benefit Guaranty Corporation, the federal agency that supposedly insures private pensions, often resulting in massive benefit cuts to pensioners. At the end of fiscal year 2019, the PBGC—the insurer of failed pensions—itself had a deficit of $56.5 billion.
The federal “insurer” is in need of a long-overdue taxpayer bailout.
State and local pensions in the United States hold almost $4 trillion in assets and provide retirement benefits for roughly 21 million current and former state and local employees. More than half of these governments reduced those benefits since the 2008 recession.
Worse still, in a desperate last-ditch effort to solve severe underfunding, government pensions have shifted over $1 trillion in assets to the costliest, riskiest investments ever devised by Wall Street. Reckless gambling will only accelerate insolvency.
In the best times, America’s pensions—both private and public are grossly mismanaged by people who lack investment expertise, adding massive costs and undermining investment performance.
With so much money being squandered, pensions struggle—even in the best of times.
We are no longer in the best of times.
By many metrics that I need not list, we are in the worst of times. Workers and retirees are, understandably, more concerned than ever about their pensions and retirement security. In Coronavirus lock-down or near-lockdown, where you may be working from home or retired and socially isolated, it may be difficult to avoid worrying about your pension nestegg.
As usual, our nation’s leaders have not been helpful.
When Kentucky senior Senator and Majority Leader Mitch McConnell recently said he would be in favor of allowing states to use the bankruptcy route to deal with their underfunded public pensions amid the pandemic emergency, state workers and retirees—already struggling with the economic and health crisis—were alarmed.
McConnell hails from Kentucky—the state with the worst-funded pension system in the nation.
While there is every reason to believe that your pension may be more in danger than ever, there are steps you can take in Coronavirus lockdown that can be helpful both in terms of restoring your emotional equilibrium and preparing for the future.
Think of pandemic downtime as an opportunity to learn more about your pension and prepare for any impending onslaughts.
As I pointed out earlier this year in Who Stole My Pension?, now is the time to take action to protect pensions by ensuring that promises made are, in fact, kept.
1. Get familiar with any website your pension maintains. All state and most local government pensions have websites that provide information regarding asset allocation, investment performance and fees, the investment firms and experts retained, as well as information regarding board members. While much of this information may be incomplete or inaccurate, it’s a great place to start. It takes time to make sense of any new website, so commit to navigating through its sections.
2. Review Minutes of meetings of your pension’s board (which may be viewable on the website). Often Minutes are intentionally brief but they’re worth a look.
3. Consider starting or joining a Facebook group for participants in your pension. Join together with others to increase scrutiny of your pension. As I recently discovered, there are hundreds of such pension groups globally. Some I belong to include: Mississippi Committee to Protect Our Pensions; We Paid In, You Pay Out! Your State Pension Is Under Threat; Teamsters Pension Crisis Poll & Discussion Group; Teamster Retirees; Californians for Pension Reform; Florida-Jacksonville Committee to Protect Pensions, UK Mineworkers Pension Justice and Truth Campaign, East Nebraska Committee to Protect Our Pensions and Concerned Teamsters Local 707 Retirees.
4. If you are in a corporate pension, request a Summary Plan Description and a Form 5500. Says the Department of Labor:
The Employee Retirement Income Security Act (ERISA) requires plan administrators – the people who run plans – to give plan participants in writing the most important facts they need to know about their retirement plans including plan rules, financial information, and documents on the operation and management of the plan. Some of these facts must be provided to participants regularly and automatically by the plan administrator. Others are available upon request, free-of-charge, or for copying fees. The request should be made in writing.
One of the most important documents participants are entitled to receive automatically when becoming a participant of an ERISA-covered retirement plan or a beneficiary receiving benefits under such a plan, is a summary of the plan, called the summary plan description or SPD. The plan administrator is legally obligated to provide to participants, free of charge, the SPD. The summary plan description is an important document that tells participants what the plan provides and how it operates. It provides information on when an employee can begin to participate in the plan, how service and benefits are calculated, when benefits becomes vested, when and in what form benefits are paid, and how to file a claim for benefits. If a plan is changed, participants must be informed, either through a revised summary plan description, or in a separate document, called a summary of material modifications, which also must be given to participants free of charge.
In addition to the summary plan description, the plan administrator must automatically give participants a copy of the plan’s summary annual report each year. This is a summary of the annual financial report that most plans must file with the Department of Labor. These reports are filed on government forms called the Form 5500. The summary annual report is available at no cost. To learn more about the plan assets, participants may ask the plan administrator for a copy of the annual report in its entirety.
5. Reach out to experts of your own for their opinions about your pension. If you have a financial advisor, ask her opinion. You may also wish to reach out to national experts. Consider crowdfunding a forensic investigation of your pension by a national expert of your own choosing. You need a second opinion about how your pension is being run.
6. If you are a member of a local or national worker’s or retirees association or union, ask leadership about what is being done to protect pension benefits. Often unions, while aware of their members’ pension concerns have failed to put together a plan of action to protect the plan.
In these worst of times, your goals should be to combat any sense of powerlessness or hopelessness and learn as much as you can about your pension in preparation for its defense. Doing nothing, confident your check is “in the mail” is not an option. That’s a risk you can’t afford to take.