As pensions dried up, four firms paid top execs $49.5M
Top executives at four companies that jettisoned their employee pension plans received $49.5 million in retirement and severance benefits in the years before the companies filed for bankruptcy, while retirees saw their benefits cut by as much as two thirds, congressional investigators conclude in a report released Thursday.
The Government Accountability Office (GAO) reports that pensions at the companies, United Airlines, US Airways, Polaroid and Reliance Insurance, were underfunded by more than $11 billion when the companies turned them over to a government-backed insurance fund. The report says executives at those four companies and six others that abandoned their pension plans took in a total of $350 million in pay and perks in the years leading up to the bankruptcies.
"If the pension is getting deeper into trouble and the executives are getting richer, there's something wrong with that picture," said House Education and Labor Committee Chairman George Miller, D-Calif.
Miller requested the report as part of an examination of the troubles facing the Pension Benefit Guaranty Corp., the federal pension plan insurer. The PBGC, which insures pension plans covering 44 million people, warned this month that it has a deficit of nearly $22 billion.
Miller is sponsoring one of three proposals to let struggling companies take a break from their required pension contributions while the economy improves. He said he is considering how to craft a provision to "tie executive compensation to the status of the pension plan."
Other legislation Miller said he is considering is a plan to freeze executive compensation if a company's rank-and-file pension plan becomes significantly underfunded.
Restrictions on retirement pay could deter executives from joining a troubled company or encourage them to quit, said executive compensation expert Ira Kay of the Watson Wyatt consulting firm. "Retaining and motivating executives to run their companies as best as possible is the best outcome for all participants in a pension," Kay said.
The GAO examined compensation for executives at 10 of the largest companies that turned their pensions over to the government in the past decade. At United, for example, CEO Glenn Tilton and two other executives got $7.6 million in retirement benefits from 2002 through 2006, during which time the airline shed four pension plans covering 122,000 workers. A retired United pilot told the GAO he gets only a third of the pension he had expected. PBGC benefits are limited to $4,500 per month.
United spokeswoman Jean Medina said Tilton's $4.5 million retirement trust replaced benefits he lost by leaving Chevron and "had nothing to do with a United pension plan." The trust was approved by the company's board of directors and its bankruptcy creditors, she said.
Currently, the GAO says, the PBGC is a low-priority creditor and would be unlikely to get any money if a bankruptcy judge ordered executives to repay or forgo their retirement packages.
Deficit plagues pension insurer
Pension Benefit Guaranty Corp.'s financial activity:
|
Year |
Deficit |
Pensions terminated |
Workers covered |
Benefits paid |
|
2005 |
$23.1 billion |
120 |
1.3 million |
$3.7 billion |
|
|
||||
|
2006 |
$18.9 billion |
94 |
1.3 million |
$4.1 billion |
|
|
||||
|
2007 |
$14.1 billion |
110 |
1.3 million |
$4.3 billion |
|
|
||||
|
2008 |
$11.2 billion |
67 |
1.3 million |
$4.3 billion |
|
|
||||
|
2009 |
$21.9 billion |
144 |
1.5 million |
$4.5 billion |
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