IMHO: Expectations Set

Thousands of protestors took to the streets this past week—in Wisconsin. 

 

They were protesting legislation that would restrict the scope of collective bargaining power, while at the same time requiring public-sector workers to pay more for their pensions and health care.  Last week, reportedly 40% of Madison, Wisconsin, schoolteachers called in sick (ostensibly they were in attendance at the state capital, and by appearances bringing some of the student body with them).  The protestors (at least the ones on camera) drew comparisons to their actions with those taken recently by those in Egypt protesting for freedom and a democratic system of government.  

But to my eyes, it looked more like Greece. 

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Don’t get me wrong.  The Wisconsin protests were boisterous but appeared to be peaceful, and I’ve heard no reports of the kind of violence and arson that accompanied the protests in Greece a year ago (see IMHO: Grecian Formula).   

But in Wisconsin, as in Greece, a big issue is pensions and benefits1; more specifically, that certain promises had been made to workers by a government that said it was no longer able to meet those obligations, certainly not on the original terms. 

During the Greek protests, I was hard-pressed to find anyone sympathetic to their cause.  Most had read with some incredulity coverage of the sanctioned state retirement age (61, though reports said many retired as early as 53), and considering the enormous financial straits of that nation, most seemed to think the protestors needed to be reintroduced to reality.  Of course, I wasn’t talking to any Greek nationals about this—just associates in this country and others who are living with (and within) a completely different set of economic and retirement expectations. 

Which brings us back to Wisconsin—or New Jersey, or California, or Ohio, or perhaps even your town.  Doubtless some of those protesting workers are overpaid and underworked, as in any workplace, but surely most are undertaking to do an honest day’s work for a fair amount of pay and benefits.  These people are, as President Obama said recently, our friends and neighbors.  Heck, in my case, they are also family members.  And I can promise you that the teachers and/or police officers in my family are NOT overpaid.     

On the other hand, I have plenty of friends and family in the private sector who have lost their jobs through no fault of their own, and had to figure out a way to make ends meet without the protection of tenure, or the safety net of a pension or retiree medical coverage.  They weren’t overpaid before they lost that job, and they surely weren’t afterwards.  Many who still have jobs have had to absorb pay and/or benefit cuts (or had those cut into by higher prices and co-pays).  They have had their pensions frozen, if they ever had one at all, and not a few saw their 401(k) match suspended over the past couple of years.  Many haven’t seen a “regular” cost-of-living increase capable of keeping up with the increases in the cost of living in a very long time. 

They are, quite simply, living with (and within) what appear to be a completely different set of economic and retirement expectations than those now in, and descending upon, the Wisconsin capital.   

And, as a result, I can’t help but wonder if they’ll be sympathetic.    

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See also “IMHO: Promises Premises 

1 Some might argue that the real issue in Wisconsin is proposed changes in collective bargaining rights rather than pensions, but at issue, among other things, is the right to collectively bargain for wages, pensions, and benefits, so…. 

ERIC Argues Stock Drop Dismissal Should Stand on Appeal

The ERISA Industry Committee (ERIC) urged a federal appellate court not to disturb a lower court decision throwing out a stock drop suit against ING.

ERIC took that position in a friend of the court brief filed with the 11th U.S. Circuit Court of Appeals in Sewright v. ING Groep, NV, et al., which is an appeal of the lower court decision. Plaintiffs had argued ING should have no longer allowed stock purchases from within its retirement savings plan since the share price had dropped significantly as a result of the economic downturn.

However, in its brief, ERIC contended that the company was forced to comply with a mandate in its plan document requiring the company shares to be available as an investment option. ERIC argued, therefore, that the decision to continue offering shares was not discretionary and not a fiduciary action subject to sanction under the Employee Retirement Income Security Act (ERISA).

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Litigation of this kind, said ERIC, “places the fiduciaries on the horns of a dilemma.”  They can be sued if they follow the terms of the plan and allow the plan to continue investing in employer stock; they can be sued if they override the terms of the plan by forbidding the purchase of additional employer stock or liquidating the plan’s current holdings of employer stock, and they could be sued if they provide information about the company to plan participants that they do not provide to other shareholders, ERIC argued.

In addressing a brief filed by the Department of Labor (DoL), ERIC argued that the fact a stock has been “overpriced” can only be known in retrospect after a change in circumstance causes the price to drop. “The contention that fiduciaries should allow plan investment in employer stock only when that stock is not going to fall in value would not require them to be merely prudent; it would require them to be clairvoyant,” the brief said. ERIC further argued that there is no justification for creating common-law rules under ERISA to regulate disclosures about company securities since such common-law rules would undermine important objectives of both ERISA and the securities laws. 

ERIC President Mark Ugoretz said “the district court ruling must be allowed to stand, otherwise you will continue to see a deluge of litigation from participants merely second-guessing plan fiduciary decisions, further jeopardizing the employer-sponsored retirement system.”  The ERIC brief is located at http://www.eric.org/forms/uploadFiles/2735000000038.filename.Amicus_Brief_of_ERISA_Industry_Committee_2-14-11.pdf.

In their own friend of the court brief, DoL lawyers filed in Sewright, the DoL argued that the trial judge was wrong in deciding the company was mandated to retain the company stock fund as an option in the ING Savings Plan and that the defendants were not fiduciaries with respect to the company stock (see “DoL Calls for Stock Drop Ruling Reversal“).

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