Posted on 27 November 2012.
WASHINGTON — A group of high-profile corporate CEOs are lobbying Capitol Hill this week to put Social Security and Medicare cuts at the forefront of deficit reduction negotiations. Their own retirement funds, however, are secure: The coalition includes 54 CEOs who have amassed combined pension assets of more than $ 649 million from their companies’ executive retirement plans, according to a new report from the Institute for Policy Studies, titled “A Pension Deficit Disorder: The Massive CEO Retirement Funds and Underfunded Worker Pensions at Firms Pushing Social Security Cuts.”
The CEOs’ employees are much less secure in their retirement than the CEOs. According to the report, less than 60 percent of the 71 public companies offer pension plans for their employees. Of the 41 companies that do, 39 of them haven’t contributed enough to their workers’ pension funds to enable the plans to pay out their anticipated obligations. Among the companies with employee pension funds in the red, these deficits exceed $ 100 billion.
The CEOs are among 71 chief executives of publicly traded companies who belong to the Fiscal Leadership Council of the influential Campaign to Fix the Debt, a group which has raised more than $ 60 million to lobby for a debt deal driven by cuts to “entitlements.” The coalition will meet Wednesday morning with congressional leaders, according to sources familiar with the group’s lobbying activities. The group, funded in part by former private equity magnate Peter G. Peterson’s foundation, has pledged to push for austerity during the lame duck congressional session, and beyond. Peterson has spent nearly half a billion dollars in recent years pushing his austerity agenda.
As the debate heats up over whether to cut Medicare, Social Security or Medicaid in order to maintain federal spending and corporate tax breaks, companies with well-compensated CEOs who preside over underfunded employee pension funds invite a new round of questions about the motives, and methods, of the CEOs pressuring Congress and the White House to cut programs for the middle class.
The companies in arrears on their pension funds include defense giant Boeing, which paid CEO Jim McNerney $ 23 million last year; Honeywell, where CEO Dave Cote earned more than $ 55 million in compensation in 2011; and AT&T, which docked CEO Randall Stephenson’s pay by $ 2 million last year after he orchestrated a failed takeover of T-Mobile. The $ 2 million penalty meant that Stephenson made only $ 22 million total that year, as opposed to the $ 24 million he would otherwise have been paid.
Boeing, Honeywell, and AT&T represent just three of the dozen companies who are cited in the IPS report as having CEOs with individual retirement assets totaling more than $ 20 million each, despite the fact that their companies have underfunded pension funds for their employees.
If each of these 12 CEOs were to convert his retirement accounts into annuities at age 65, the report shows each would receive a monthly check for at least $ 110,000 for life. By contrast, the average montly Social Security payment was $ 1,237 in October. Still, the CEOs argue that Social Security benefits are too generous.
Jon Romano, a spokesman for the Campaign to Fix the Debt, highlighted the group’s overall willingness to compromise.
“Our focus is on tackling the debt issues that threaten our economic recovery and endanger America’s long term vitality,” he said, “and the campaign recognizes that getting consensus on these issues requires compromise. Our supporters are prepared to do their part to get a deal done for the good of the country.”
But the CEOs have emphasized austerity measures and cuts to the social safety net in recent interviews as the keys to a long-term deal.
“You’re going to have to do something, undoubtedly, to lower people’s expectations of what they’re going to get [in Social Security and Medicare benefits], Goldman Sachs CEO Lloyd Blankfein, a member of the CEO Fiscal Leadership Council, told CBS last week. “The entitlements, and what people think they’re going to get [need to be lowered], because you’re not going to get it.”
In an interview the following day, Dave Cote, the Honeywell CEO said, “The big nut is going to have to be [cuts to] Medicare/Medicaid … especially with the baby boomer generation retiring. It’s going to literally crush the system.”
With $ 78 million set aside in Honeywell retirement accounts, Cote’s executive retirement benefits exceed those of any other CEO in the report, which estimated that Cote’s current account would provide him with $ 428,000 a month, were he to retire at 65.
But 65 years old is too young for American workers to retire, Cote insists. Cote said in an interview this fall on CNBC that the retirement age should be raised soon, and he mocked seniors’ groups and social welfare organizations that recommend other alternatives, including a gradual rise in the retirement age. “When you recommend something like that you raise the retirement age by a year 75 years from now,” Cote said, “when my grandchildren will already be retired – and the outcry begins – say this is ridiculous.”
Another Fix the Debt CEO, Aetna’s Mark Bertolini, made a similar case for raising the retirement age at a Wall Street Journal event this month. But unlike Cote, Bertolini laced his persuasion with a blatant threat, in the event that Congress and the White House don’t meet their Dec. 31 deadline.
“The solutions [to the fiscal cliff] are –- it’s the retirement age; means testing Social Security and Medicare; it’s a whole host of things that are known,” Bertolini said. But if no deal is reached, then “the American people are going to suffer because we’ll lay them off — because we know how to respond to these kinds of situations.” According to the IPS report, Bertolini’s current retirement assets from Aetna total $ 1.5 million.
Romano, the Campaign to Fix the Debt spokesman, said the report represents “the very type of divisive attack that is causing the gridlock our group is trying to break. It’s not a time for gotcha politics, it’s a time for constructive dialogue,” he said.
CEOs on the council are increasingly getting the opportunity to engage in dialogue at the very highest levels of government in recent weeks, both at the White House and in Congress.
The campaign plans to hold a number of events in Washington on Wednesday designed to draw attention to the urgency of a deficit reduction deal, and this past weekend, President Barack Obama telephoned two members of the Fix the Debt CEO council, JPMorgan Chase CEO Jamie Dimon and Jim McNerney of Boeing, to talk about the fiscal cliff.
But for many older Americans, the time for friendly discussions of retirement options has long since passed. In the past 30 years, the decline of pensions and employer-sponsored retirement plans has left the nation’s seniors more dependent than ever on Social Security and Medicare.
Since 1980, the percentage of private sector workers with traditional pensions has dropped from 83 percent to 34 percent in 2006. By 2011, just 15 percent of private sector employees had traditional pensions.
The IPS report concludes with three recommendations for what the group classifies as “Fair Retirement Fund Reforms.” They include eliminating the cap on wages subject to Social Security taxes, currently set at $ 110,100; ending the ability of highly paid executives to contribute unlimited amounts to their retirement funds; and backing a plan proposed by Democratic Iowa Sen. Tom Harkin, which seeks to evenly distribute the burden of retirement funding between employers, employees, and the federal government.
Full News here – Politics on HuffingtonPost.com