Workers’ ‘Cash Balance’ Pension Plan Revolt Spreads
The worker rebellion over so-called cash balance pension plans, which started at IBM in the spring, is spreading rapidly to some of the nation’s other corporate giants.
Older workers at AT&T;, Bell Atlantic Corp., Duke Energy Corp. and other big companies have followed angry IBM personnel in flooding the Equal Employment Opportunity Commission with complaints charging that their employers discriminated against them when the firms switched to a new form of pension plan that favors younger workers and penalizes them.
The EEOC has received complaints of discrimination from more than 100 people, Chairwoman Ida Castro said in an interview Tuesday.
And the federal agency, showing sympathy for the workers, has eased its usual policy that says an individual must file a complaint of discrimination with the agency within six months of the event.
“The issues are very complex--these are not ‘who punched who’ kinds of questions,” Castro said. “We don’t know when people were told or when they found out” about the changes in their pensions, she said. Castro would not discuss charges against individual companies, citing EEOC confidentiality rules.
More Than 300 Firms Switch
Under cash balance pension programs, companies make annual contributions into the accounts of individuals and the money builds at a specified interest rate. More than 300 companies have switched to such plans in recent years, arguing that they are needed to attract young workers in an era of mobility and increased competition for workers because of low unemployment.
Younger workers who leave a company before they would have been vested in a conventional pension plan can take money out of a cash balance account. Formerly, they would have forfeited the pension investment by leaving.
Under a traditional plan, an older worker who spends a career at one company, by contrast, enjoys pension benefits that build up rapidly in the last 10 years of a career. Many affected workers had expected to retire in their 50s with full pension benefits after 30-year careers. Instead, the switch to the new cash balance programs often freezes the buildup of benefits for these older workers. And they may never catch up to what they would have gotten under the older pension plans.
Among workers who recently have filed EEOC complaints about such plans are employees of Duke Energy, an electric power company based in Charlotte, N.C., that put a new pension plan in place in 1997.
In Philadelphia, some of the Bell Atlantic workers who were placed in a new pension plan as far back as 1996 recently have filed charges with the EEOC, which enforces federal laws against discrimination on the basis of age covering workers 40 and older.
Anger Voiced on Internet
In addition to workers who have filed complaints with the EEOC, many others are voicing their anger on the Internet, often using Web sites or chat rooms organized with the help of computer experts from the ranks of the IBM protesters.
The Internet sites, all set up in the last four months, have recorded thousands of visitors, with messages from people using such names as “angry spouse,” “pension victim,” “rippedoff,” and “IveBeenMugged.” Internet forums have been established to discuss pension issues at SmithKline Beecham, SBC Communications (parent of Pacific Bell, Southwestern Bell and Ameritech), and other large companies, as well Duke Energy, IBM and Bell Atlantic.
The common element in the wave of protests is an anguished sense of betrayal from veteran workers whose companies have changed their pension expectations late in their careers. Many believe that they would be unable to find work elsewhere.
“We are what you would call career-locked people,” said Janice Winston, a 26-year Bell Atlantic veteran, who calculates that she will lose $169,000 in lifetime benefits under her firm’s revised pension plan. “I have been loyal to the company. If it fails, I fail. I don’t want to bad-mouth the company, but wrong is wrong,” she said in an interview, explaining how she reluctantly went to the EEOC.
Employers point out that pensions are a voluntary benefit provided by companies and emphasize that firms need the flexibility to make changes as the economy shifts and the work force changes. They note that cash balance pensions are more advantageous to younger workers and to many women who may move in and out of the work force when they are at home with young children.
Many new firms, especially in the high-technology field, may have no pensions at all or may have limited plans far less costly than traditional pensions. IBM, for example, has said that it had to change its pension plan because the company is competing with firms without the same pension obligations.
Workers might not realize that they are potential victims of discrimination “until they actually retire or when they heard about the IBM workers making a fuss,” said Laurie McCain, a staff attorney for the AARP (formerly the American Assn. of Retired Persons).
Many companies do not explain to workers what is happening, she said. “We believe companies should operate in complete honesty and tell workers there may be a period when they make no progress at all in building up their pensions,” she said.
Firms are required to notify workers when they change a pension plan, but the complex technical nature of pension calculations can make the explanations incomprehensible to many people.
IBM first imposed its new cash balance plan in May, declaring that workers 50 and older--those within five years of retirement eligibility--could stay in the old plan. After a round of protests, the company lowered the age requirement to 40--workers at that age with at least 10 years with the company could choose between the old and new plans.
IBM workers created a Web site and developed ways to calculate the effect of changes on an individual after the company stopped providing individual estimates. They called news conferences, lobbied in Washington and prompted congressional hearings. The publicity generated by the IBM controversy caused an upsurge of interest among workers who paid little attention before when their employers changed plans.
Meanwhile, the controversy led the Internal Revenue Service to freeze any new approvals of cash balance plans. The IRS has jurisdiction over the finances of such plans because company contributions are tax deductible.
The EEOC, in addition to handling individual complaints, also is studying whether to issue a general policy statement giving guidance to employers on the issue, Castro said.
