Posted 5 years ago on Nov. 13, 2011, 5:07 p.m. EST by qazxsw123
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Who killed private pensions?
Corporations often blame pension shortfalls on out-of-control factors such as the large number of retirees and anemic investment returns. But a new book suggests other possible causes.
Financing executive pay
Employers' ability to generate profits by cutting retiree benefits coincided with the trend of tying executive pay to performance. Intentionally or not, top officers who green-lighted massive retiree cuts were indirectly boosting their own compensation.
As their pay grew, executives deferred more of it. Supplemental executive pensions, which are based on pay, also ballooned. These executive liabilities account for much of the "spiraling" pension costs many companies complain about.
Many companies -- especially large banks in the past few year -- have taken out billions of dollars of life insurance on their employees. The policies function as tax-sheltered investment pools that can be used to offset the cost of executive benefits. The companies also collect tax-free death benefits when employees, former employees and retirees die.
What to watch for: Your employer -- and former employers -- doesn't have to tell you if it bought a policy on your life before 2006. If your employer has taken out insurance on you in recent years, it must get your consent, but it doesn't have to tell you how much the policy is for. It is up to you whether you want to be a human resource to finance executive pay.