Pension Rights Center Wants Halt on De-Risking
October 19, 2012 (PLANSPONSOR.com) – In the wake of moves by several
large companies to de-risk their defined benefit (DB) plans, the Pension
Rights Center (PRC) is calling for a moratorium on such actions.
The Center plans to ask Congress to take steps to put a temporary
stop to pension buyouts and lump-sum offerings to give
policymakers time to examine whether these strategies could result in
sellouts of retirement security.
Verizon has signed a partial pension buyout deal with Prudential
(see gVerizon Signs Partial Pension Buyout Dealh), and other
companies, including auto giants GM and Ford, are offering lump sums to
certain groups of participants (see gPRC Keeping List of Lump Sum Offeringsh). The Center
said it is concerned about the impact of both approaches on current and
future retirees.
gThese employers are looking to cut costs and reduce long-term
liabilities to make their companies more attractive to investors, but
ede-riskingf can be risky for workers and retirees,h said Karen Friedman,
the Centerfs executive vice president and policy director. gInsurance
company annuities backed by State Guaranty Associations could leave
retirees with less protection than the pensions provided by their
companies backed by the insurance provided by the Pension Benefit Guaranty
Corporation. Also, lump sums place the burden on individuals to ensure
that the money lasts throughout retirement. We need to stop, take a
breath, and make sure that the retirement security of the people affected
by these moves is fully protected.h
Friedman
added: gHow secure are the annuities that are being purchased in plan
terminations? What is the exposure of the insurance companies that are
taking on these large group annuity contracts? Do people understand the
consequences of taking a lump sum? These are the types of questions that
we want to make sure are addressed.h
Rebecca Moore
editors@plansponsor.com