HR and Employment Law News
Category
Topic
Free Special Reports
Get Your FREE HR Management Special Report. Download Any One Of These FREE Special Reports, Instantly!
Featured Special Report
Claim Your Free Copy of
Top 10 Best Practices in HR Management
HR professionals have the opportunity to play a more strategic role in the business by keeping up to date with the latest HR innovations--technological, legal, and otherwise. This special report will discuss how HR managers can anticipate and address some of the most challenging HR issues this year.
Topics in this special report include:
- Healthcare in 2012
- FMLA Paid Leave Initiatives
- Ethics
- Social Media
- Environmental Responsibility
- Workplace Wellness
- Classifying Employees
- Retirement of Baby Boomers
- Identity Theft
- Communications
Make sure you have the information you need to know about these current HR challenges and how to most effectively manage them in your workplace.
Download Now!
March 06, 2002
Growing Disparity in Retirement Packages
PenFor a Limited Time receive a
FREE HR Report "Top 10 Best Practices in HR Management." This comprehensive special report will give you the information you need to know about these current HR challenges and how to most effectively manage them in your workplace.
Download Now
For the sake of greater profits, companies have cut retirement benefits for most employees, leaving many members of the baby boom generation unprepared for life after age 65, despite the long bull market, economists tell the Times.
Executives, meanwhile, have persuaded their directors to reward them with ever-larger pay packages. On top of millions in salary, bonus and stock options, many top managers have received pensions that are more generous than they once were, the Times reports.
Moreover, they're often devoid of the risk inherent in the typical 401(k) plans that have replaced the old company pension for many workers.
The Times gives these examples of the disparity:
- General Electric allows its top executives to contribute money to a retirement fund on which the company recently guaranteed an annual return of at least 10 percent, far better than a typical G.E. worker saving money in the company's 401(k) plan can expect.
- Tenneco Automotive, which makes shock absorbers, permits its executives to receive a full pension at age 55, seven years before the company's other employees can.
- When Louis V. Gerstner retired as IBM's chief executive last week, he became eligible for an annual pension of at least $1.1 million, precisely what the company promised in his contract when he joined eight years ago. As part of a 1999 cost-cutting program, however, many IBM employees are set to receive smaller pensions and retirement health insurance benefits than they were promised when they were hired.
- Some companies, including Bank of America and Estée Lauder, pay the premiums on life insurance policies for executives, allowing them, or their heirs, to collect cash payments decades after retirement.
- Delta Air Lines and the AMR Corporation, the parent of American Airlines, are among the companies that give executives credit for many more years of service than they actually have, increasing their pensions.
From 1983 to 1998, the last year for which the government has published data, the amount of retirement money held by the typical household with people from age 47 to 64 fell 11 percent after being adjusted for inflation, according to a recent study by Prof. Edward N. Wolff, an economist at New York University. That number includes private pensions and the value of anticipated Social Security benefits.
The decline occurred as many companies replaced traditional pensions, which pay a predetermined annual benefit, with voluntary savings programs like the 401(k). While higher-income workers were able to save a significant part of their salaries and benefit from the stock market's run-up, many other workers found it hard to set aside money for retirement. At the same time, companies were cutting their retirement contributions as they switched to 401(k) programs.
Expected Social Security benefits have also declined since the early 1980s, because inflation-adjusted earnings have fallen for most workers.
"A lot of families are going to have to work more years to build up their pension accounts and generate enough income for retirement," Professor Wolff told the Times. "It's basically a decrease in living standards."
To read the New York Times article, click here. Registration is required.
Participate in this week's HR.BLR.com poll and discussion!