There's a great story in the Wall Street Journal today which shows that, despite the current crisis of confidence affecting our financial markets, American corporations still have the kind of can-do innovative spirit that has made this the greatest country in the world. Especially when it comes to making sure that executives are able to retire in the style they deserve!
In recent years, companies from Intel Corp. to CenturyTel Inc. collectively have moved hundreds of millions of dollars of obligations for executive benefits into rank-and-file pension plans. This lets companies capture tax breaks intended for pensions of regular workers and use them to pay for executives' supplemental benefits and compensation.
The practice has drawn scant notice. A close examination by The Wall Street Journal shows how it works and reveals that the maneuver, besides being a dubious use of tax law, risks harming regular workers. It can drain assets from pension plans and make them more likely to fail. Now, with the current bear market in stocks weakening many pension plans, this practice could put more in jeopardy.
Whatever, naysayers! This is sharp thinking on companies' parts. Why shouldn't our CEOs—whose careers are based on doing everything they can to increase shareholder value for the greater good—enjoy the same kind guaranteed benefits their lower-earning employees accrue? And if they're somehow reducing the corporate tax burden at the same time, well, don't we all gain? Now, sure, adding these liabilities to a pension fund without increasing any benefits may actually weaken the fund to the point where it goes under, hurting everyone, but doesn't that show that the upper echelons are simply willing to take the same chances as the rest of the company? And, in the case of Intel, it's not really much of a problem anyway! The company said the move aided shareholders and didn't hurt lower-paid employees because most don't benefit from Intel's pension plan. Instead, they receive their retirement benefits mainly from a profit-sharing plan, with the pension plan serving as a backup in case profit-sharing falls short.
See? The pension is only a backup. And what are the odds that both the profit-sharing plan and the backup pension plan, loaded as it is with executive benefits, could be underfunded? Pretty slim, right?
Besides, there's not a lot the IRS can do about it; they're understaffed and don't seem interested in asking a lot of questions. So think about it this way: If we, as taxpayers, are on the hook for these pensions—and as the last couple of months have shown, we're on the hook for pretty much everything—isn't it better that our country's executives don't have to worry about their retirement years and can focus on what they do best? You know, slashing payroll to bump stock price up an eighth of a point for the next quarter? You'd have to be pretty ignorant about economics to say that it isn't.
Back
Bob Herbert Accuses McCain Campaign Of Racism