July 28, 2005

Statement of U.S. Senator Ron Wyden On Pension Reform Legislation

Mr. President, there has been a significant development in private pension law this week, and I've come to the floor to discuss it briefly because I think it's something that will be of enormous interest to working families across this country who of course have been reading for months now about their pension plans going belly up.These are workers that work hard, play by the rules, they hope to have a dignified retirement and have understood that social security was never going to cover all of their retirement security needs.So they have sought to have a private pension and companies across this country have given them the impression falsely in a number of instances that their private pension would be secure and there for them when they retire. One of the aspects of this whole challenge with respect to pension security has been to eliminate what I believe is a double standard today in private pension law.There is, in fact, a double standard in private pension law because so often the executives' retirement benefits get hidden away in a lockbox while the worker ends up getting creamed in the process. What we have done on a bipartisan basis in the senate finance committee is to say that the double standard, the standard that protects the executives while it clobbers the workers, will no longer be tolerated under our private pension statutes.As a result of a change that a number of our colleagues worked on that was backed by Chairman's Grassley and Senator Baucus, if this provision that we have developed becomes law, if a company's pension plan is funded at less than 80%, then the executives' pensions cannot be hidden under the ruse of deferred compensation.That's what we have seen come to light in the past few months that somehow the executives walk away with millions of dollars' worth of pension benefits under the guise of it's somehow being something called "deferred compensation," while the workers end up seeing their pensions disappear by 40%, 50%, 60%. This provision, in my view, is extremely important because it will prevent companies whose pension plans are at risk of going under from protecting the executive pensions while allowing the employees' pensions to sinks like a stone. Now, an example of this would be a flight attendant from Tigard, Oregon, who gave united airlines 16 years of service, saw her pension fall recently to a net of $138 million while the C.E.O. of United is going to continue to receive $4.5 million. Now, of course, the C.E.O. claims it's not really a pension, that this was compensation worked out before the executive came to United. But I can tell you, that elderly woman in Tigard, Oregon, would sure like to have what the United executive has regardless of what it is technically referred to under pension law. A lot more needs to be done to ensure that the executives aren't going to reap these huge gains at the expense of their workers.Captain Duane Worth of the Airlines' Pilots Association said it pretty well, in my view, when he said "while thousands of pilots will retire with only a fraction of the pension benefits they earned and expected, airline executives can look forward to retirement knowing that their nest eggs are solid gold." this was reported in "Fortune" magazine, Mr. President and there are numerous other examples where generous executive pensions have been protected at the expense of the workers' retirement. In March of 2002, for example, U.S. Air C.E.O. Steven Wolf took a lump-sum pension payout of $15 million including benefits for 24 years of service that he never actually performed. Six months later, the company filed for bankruptcy and terminated its pilots' pension plan leaving the pension benefit guaranty corporation with $2.2 billion in liabilities. Where is the fairness in all of that, Mr. President?The executive takes this huge golden parachute away while the workers try to figure out how to make ends meet when the company files for bankruptcy and terminates the pension plan. Three months before united filed for bankruptcy in 2002, the company placed $4.5 million in a special bankruptcy-protected trust for their C.E.O., Mr. Glenn Tillton. United then terminated all of its pension plans in 2005 leaving the pension benefit guaranty corporation with $6.6 billion in liabilities.In 2002, the Motorola Company chose to not make any contributions to its pension plan for 70,000 employees and retirees, a plan that was underfunded by $1.4 billion. At the same time, Motorola found another $38 million to give its top executives a variety of pension perks. In 1999, I.B.M.'s cash balance conversion resulted in dramatic pension cuts for the older workers. It's still be litigated in the courts, but in 2002, I.B.M. C.E.O. retired with a pension of $1.1 million per year. In November of 2002, Delta began its traditional defined benefit plan for 56,000 employees and replaced it with a cash balance pension plan. As delta was shorting its workers, their former C.E.O. got a generous guaranteed pension plan of $1 million per year that will be available to him when he turns 65. These are just a few examples, Mr. President, of excessive executive generosity, and they have been particularly egregious in the airline sector, where there have been numerous threats of bankruptcy and actual problems with respect to keeping the workers' pensions intact or even a portion of them secure. So I'm pleased that the finance committee took a significant first step yesterday towards cutting off this corporate spigot that has been gushing millions of dollars for executive pensions but produced less than a trickle of funds for tens of thousands of hard-working Americans.There is more to do, Mr. President, and certainly the first step that began yesterday in the Senate Finance Committee at ending this double standard came about because Chairman Grassley and Senator Baucus worked in a bipartisan fashion and Senator Bingaman, Senator Kerry, Senator Schumer and others joined me in pressing for this change, but suffice it to say, there is more to do in this area. Certainly the question of what companies are required to do in terms of making their premium payments is important.in the days ahead, the Finance Committee and eventually the Senate as a body will have to take up these issues. What I wanted to bring to the Senate's attention today is that I think that this is an important start. It's a start that keeps faith with American workers who have come to my town hall meetings. I see the president of the senate, of course, from Georgia representing a number of workers who have been affected by the financial problems of Delta Airlines. People come to our town meetings and say, "how is it that the executives get off scot-free with respect to these pension issues while we're getting clobbered?I'm tired of reading about how the executives have somehow been able under the guise of deferred compensation or special retirement benefits that are protected from bankruptcy proceedings, I'm tired of seeing how the executives always come out hunky-dory while the workers try to find out how they're going to make ends meet when their pension has been slashed by 40% or 50% or 60%." So there is more to do, Mr. President, in terms of reforming private pension law but I think that this effort to eliminate the double standard, where executives get protected and workers get hurt, that eliminating that double standard is right at the center of what good bipartisan pension reform ought to be all about.Fortunately the Senate Finance Committee took a big step in the right direction yesterday by saying if a company's pension plan isn't actually funded, then the executives can't find their way to yet another lockbox and protect themselves with these deferred compensation arrangements.Mr. President, with that, I yield the floor and Mr. President, I would note the absence of a quorum.