Monday, February 11, 2008

The Treasury and the Working Class

"Under pressure from employers, the Treasury issued a ruling that allows companies to freeze the pensions of older workers in certain cases without running afoul of laws meant to protect employees' nest eggs. In addition to validating some pension rollbacks that could save companies billions of dollars, the Treasury's action also could tip the outcome of long-running lawsuits alleging age discrimination by pension plans at AT&T Inc., Cigna Corp., Dun & Bradstreet Corp., El Paso Corp., and other major companies. The stakes are huge: In just the AT&T case, nearly 24,000 current and former workers had opted into a class action as of December, with potential claims exceeding $2 billion. ... The crux of the issue is whether employers that change from traditional pension plans to so-called cash-balance plans can freeze the growth of older workers' pensions for months or years following the change. ... The Treasury ruled that decades-old 'backloading' laws that effectively prohibit companies from temporarily freezing pension growth don't apply when the freeze is delayed, even if it is eventually implemented. ... 'The agency charged with enforcing a law to protect older workers has blown a hole in it,' says Laurie McCann [LM], a senior attorney at the elder-advocacy group AARP. The Treasury says that it is just interpreting the law. ... With Friday's ruling, the Treasury and the IRS are now agreeing that employers aren't violating backloading laws when they give employees a pension option that delays wearaway but doesn't eliminate it", WSJ, 4 February 2008.

A company tells an employee if he works for it for say, 30 years, he will get a pension of $X when he gets to 55 based on his last five years wages. After working for the company for 25 years it says, "Oh we didn't mean that. We'll give you a pension based on your earnings in years 15-20". I conclude: either you defrauded the employee when you hired him since you never intended to pay him his pension as agreed, or you broke an existing contract with him and should get sued for damages. Amazing, the plutocrat-run Treasury sides with employers on this. I say: if an employer can't pay, it has a place to go: bankruptcy court. Using Treasury reasoning, after I borrow from a bank I can say: I'll pay you in two years and not pay any interest during that time. It's interest wearaway? I don't think so.

I agree with LM. This is another example of "regulatory capture", where the regulator works for the regulated. It's Alice in Wonderland at Treasury. "In class society, everyone lives as a member of a particular class, and every kind of thinking, without exception, is stamped with the brand of a class. ... The ruthless economic exploitation and political oppression of the peasants by the landlord class forced them into numerous uprisings against its rule. ... It was the class struggles of the peasants, the peasant uprisings and peasant wars that constituted the real motive force of historical development in Chinese feudal society", Mao Zedong, Little Red Book, chapter 2. The Bush Administration (BA) undermines the rule of law and respect for America's courts daily. Mao explains the BA's actions, i.e., each class has its own logic, and the BA's is that of China's 1900 landlord class. Why is Hank Paulson (HP) the BA's "Man on China"? Because HP exemplifies the thinking of China's landlord class of 1900. I add HP is busy exporting that thinking to the US. Seize the peasants' savings to support Wall Street rentiers.


Anonymous said...

Did you look at Judge Chesler's ruling on the AT&T case (Enger's vs. AT&T)? He dismissed the report from the employees' actuary saying the "output" of your pension doesn't matter only the "inputs." As long as the inputs are increasing it doesn't matter what funny stuff the company is doing with the pension calculation to produce no increase for years. A truly amazing ruling. It will be appealed.

Independent Accountant said...

The degree of judicial economic ignorance used to shock me. Now it just leaves me numb.