By now I’m sure you realize you got the shaft with your pension. I thought you might like to know a little of the details. First a little Pension 101. The money for your pension is deferred compensation. Money you normally would receive in your weekly paycheck but instead is set aside by the company in a pool for you and your fellow employees for when your retire. You agree to this when you hire on. You were told, (at least it was told to me), that “this wonderful pension and other benefits are why FedEx doesn’t pay nearly as much as the folks at Big Brown.” The pension is then managed like any other account with it’s own investments, it’s assets and it’s liabilities. The assets consisted of the money being contributed, the money on hand and returns on it’s investments. It’s liabilities were you the employees who would be retiring or had already retired and would be drawing from the pension. Using actuarial tables etc, they could fairly accurately predict just how much employee liability the pension faced. Just like your own finances. You know how much you have on hand and invested, how much is coming in with earnings and how much you owe down the road. A basic balance sheet if you will. In the fall of 1999 US corporate pensions were over funded to the tune of 25 billion dollars. This means if they paid every employee what the fund would be required to pay them on retirement, there would still be a quarter of a trillion bucks sitting in the old checking account. This was due to several factors, corporate downsizing, a hot stock market, and a 1974 law that required companies to adequately fund their pensions. Things were going so well that many companies hadn’t needed to contribute to their pension in over a decade and they could still meet the obligations to the pensioners. Now you would think an excess is a good thing right? Having a cushion for when the market inevitably tanks or interest rates fall still allows you to protect those worker until things get better. But it’s not a good thing if you are blinded by greed. So here’s what happened next. A bunch of our corporate captains (including execs from Dupont, Northrop Grumman, AT&T and a host of others) got together with their lobbyist to petition the labor department to get the rules changed. They claimed it was un-American to let that money just sit there. If the government would just change the rules and let those big brained corporate leaders have access, it would strengthen their companies and make the benefits to the retirees even more secure. Besides the market can only go up and the pension plans would only get more bloated. There were only a few dissenters to the plan, notably representatives of the AFL-CIO and AARP. Sadly they were up against a powerful lobby, (The ones who greases the politician’s pockets) and the forces of greed won out, the rules were changed. Now this still leaves management with some issues on how to get to the cash. Don’t worry though. They are a creative bunch when it comes to stealing. Layoffs are good and would be the first order of the day. Layoffs of older workers would take priority and would produce the most bang for the buck. You may remember in some of that paperwork that your pension payout is calculated on the average of your last 5 years salary. This is important since with the leverage of traditional pension formulas, as much as half of your pension would be earned in your final 5 years on the job. When you are laid off, your pension stops growing. Now FedEx with it’s no layoff policy couldn’t do this. (Their normal tactic of displacing employees for 90 days wouldn’t work either.) There had to be a better way. They couldn’t cut the pensions outright. The law still forbids them from cutting money already being paid out to retirees and they can’t rescind benefits the employees had locked in up to that point. There was however a third option. Bring on…. The Freeze There were some variables on how each company implemented pension freezes but the basic scam works like this. On a set date the plan is frozen. No new workers can join and no new money will be added. For those in the plan, your payouts will be based on your salary for the 5 years leading up to the freeze date. Based on actuary tables the company will retain enough money in the plan to cover the predicted liabilities, (retirees). The company will then retain the entire surplus to add to the bottom line. A cash balance plan would be offered as a better option. (It’s not BTW). The main function is to disguise the pension cuts. Now lets have a look at a typical FedEx worker. Jeff hired on as a driver in 82’ at the tender age on 23. He did well, worked hard and bled purple for the company. In 2008 He is 49 years old. A little slowed from humping freight but still a great employee. Based on his salary from 2003 to 2008, upon his retirement, Jeff would get a monthly pension check for 1,723.17. Not much but Jeff knows it should grow much larger, (As much as 80% more based on the plan’s leveraging and the fact that he is only 49 and plans to stick around to at least 55. (Maybe longer if his legs hold out.) Jeff knows it’s those last 5 years when he is 55+ that are really going to pay the bills. Now with the freeze in place Jeff will receive 1,723.17 a month and not a penny more. This means for all of Jeff’s dedication, he can look forward to a retirement of dog food dinners and dumpster diving for aluminum cans. (He need to buy pain meds for all the damaged he did to his body moving Fred’s packages.) There is plenty more to this sordid tale, (Mostly how they enriched themselves in the process), but that’s the basic facts. If you want a more in depth study, I suggest you pick up a copy of “Retirement Heist” by Ellen E. Schultz. It will break your heart.