Word: pension
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After 33 years with Blue Cross of California, Ray Finan thought his income was secure when he and his wife Lillian, a self-employed medical malpractice attorney, retired in 1984. He never knew that their financial security evaporated when, two years later, Blue Cross terminated its pension plan and instead bought annuities from Executive Life Insurance Co. The checks kept coming all the same. But by the time Ray Finan died in 1988, Executive Life was careering headlong toward financial disaster...
...collapse of Executive Life is only the most spectacular blow currently shaking the security of the American pension system. Last week Dallas-based LTV (1990 sales: $6.1 billion) announced plans to sell off its large aerospace-and-defense company, which helps make Stealth bombers and Boeing jets, to raise enough cash to fund the pensions of its 70,000 retired steelworkers. The firm has been mired in bankruptcy proceedings since 1986, primarily because of those obligations. In Los Angeles, First Capital Holdings, an insurance holding company whose failing California operating division was seized two weeks ago by insurance officials, sought...
What is going on here? For millions of retirees, a pension, along with the requisite gold watch, is a tacit reward for a lifetime of company loyalty, a bedrock foundation against poverty in old age. Suddenly, though, employees and retirees of some of America's largest corporations fear that the pensions they were counting on may not be there when they need them. If Executive Life's failure is not frightening enough for Americans, some 50 large companies, including LTV, Chrysler, Bethlehem Steel and Uniroyal Goodrich, have seriously underfunded their pension plans and jeopardized the security of their own retirees...
...least those plans are covered by federal insurance. But of the 10 million retired U.S. workers, the General Accounting Office has estimated that 3 million to 4 million rely on income from annuity contracts instead of getting their pension checks directly from their companies. Having had no say in their companies' decisions to replace their pensions with insurance-company annuities, these retirees are learning that their former employers shucked all legal responsibility for continued payments to them in the process. Worse, the same switch cut them off from the government's Pension Benefit Guaranty Corporation (PBGC). Instead, annuity holders...
...plans. Employers would have to contribute 2% of an employee's pay, and a worker could contribute up to about $4,200 on a pretax basis, as much as 50% of which could be matched by the employer. The proposal also takes a step toward portable pensions: workers who change jobs could transfer pension benefits by telling their new employer to roll the money into an IRA. Since the plan is more modest than earlier efforts, chances for congressional approval look good...