October 19, 2012
--- 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 “Verizon Signs Partial Pension Buyout Deal”), and
other companies, including auto giants GM and Ford, are offering lump sums to
certain groups of participants (see “PRC Keeping List of Lump Sum Offerings”). The
Center said it is concerned about the impact of both approaches on current and
future retirees.
“These employers
are looking to cut costs and reduce long-term liabilities to make their
companies more attractive to investors, but ‘de-risking’ can be risky for
workers and retirees,” said Karen Friedman, the Center’s executive vice
president and policy director. “Insurance 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.”
Friedman added:
“How 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.”
Rebecca Moore