Let’s be clear: Non-qualified benefits are subject to forfeiture, are not protected in bankruptcy, and are the absolute last thing that would be paid if the company were liquidated. If the government takes full ownership, there would be no benefits paid on those non-qualified contracts. They are required to be subject to risk of forfeiture in order to retain their tax-deferred status.

Qualified benefits are the same benefits that anyone — not just executives — covered by a pension plan can earn. They are based on salary paid of $235,000 or less, and are subject to statutory limits. These limits apply whether you are the CEO of AIG or the owner of a vegetable stand on the corner.

Here is the text of a comment I left on Crooks & Liars with regard to this issue:

Before you aim at these plans, you’d better learn about them.

As I said on Twitter, everybody wants to hate AIG. Me, too. But taking aim at their qualified retirement plans because they have to disclose the value of accrued benefits on the balance sheet is an ignorant attack, one that would be far better left alone. For starters, the calculation of benefit values and liabilities for balance sheet purposes bears almost no relationship to reality, or the actuarial requirements for pension funding set by the Internal Revenue Service. Simply put, the FASB standards for pension benefits inflate the numbers by a minimum factor of 2.

All qualified retirement plans, whether AIG, or Granny’s Home-Grown Beet Farm down the street, are subject to the same rules. There wasn’t an exception made for AIG.

[A] comment earlier in this string starts to touch on the problem that AIG and many others (including the UAW, and other “friendly entities” to Dems) have, which is that the value of the assets will be substantially lower to fund those benefits than was reflected on the balance sheets you used for this post. That means that accrued liabilities are likely to double, and if AIG does declare bankruptcy, some (but not all) of those benefits will be insured by the PBGC — the Federal Government’s version of pension insurance, similar to the FDIC.

Don’t stir the pot with this. It’s already a disaster, but if progressives start taking aim at this, and turning up more Congressional hearings, and the House writes a bill aimed at hammering AIG, every single person in this country who is lucky enough to still be covered under a Defined Benefit plan (after they’ve been used as a tax carrot and stick depending on the state of the economy for the past 20 years) will lose future benefits.

A feeding frenzy is unnecessary here. Step back, do some research first, (feel free to email me on pension questions, or contact someone at http://asppa.org for details before going off on this. As one who has worked in this field for nearly 30 years, I guarantee you that attacking qualified benefits will have repercussions that will reach down to union workers and employees of the smallest businesses. It’s ignorant to walk this road.

As one who has navigated 25 years of pension legislation written at the whim of the current mood or revenue need of the day, I seriously hope that we can limit our criticism of AIG to the (many) legitimate issues on the table. The pension liabilities on a balance sheet are not one of those issues.

(As a side note, the FASB standards for reporting and valuing pension benefits bear no relationship to reality. Similar to the mark to market rule, accountants and actuaries seem to have difficulty agreeing on much of anything).

It’s my hope that the court will agree with the arguments made for why Proposition 8 is unconstitutional, though I don’t expect the challenges to stop until it has gone all the way to the United States Supreme Court.

One step at a time. I’ll be watching.

(More information)

Former Bush adviser Karl Rove was a no-show today at his scheduled deposition deadline for the House Judiciary Committee’s ongoing probe into the U.S. attorney firings — setting up a major decision for President Obama on how to respond to congressional subpoenas.

Committee Chairman John Conyers (D-Mich.) subpeonaed Rove to find out what he knows about the Dec. 2006 firings which eventually toppled former Attorney General Alberto Gonzales.

Yep, Rove knows where all the bodies are buried, and continually thumbs his nose at Congressional efforts to get at the truth.

I have been opposed to opening hearings on the warrantless wiretaps and possible war crimes because of the current economic crisis, but I am slowly changing my mind. I think that perhaps there will be no way to restore any trust in our government if we do not shine light on the past, and past transgressions.

It should begin with Mr. Rove and Mr. Cheney.

More on the US Attorneys’ Scandal

Words can be used to inspire, uplift, discourage, denigrate. They affect markets and moods. Not saying or responding is as powerful as shaking your fist at someone, but ultimately it takes words to create culture wars, wars between nations, wars between people, misunderstandings and missed connections. (This isn’t news to anyone. I just felt the need to say it. Again.)

This week brought a stunning array of some of the most irresponsible use of words I’ve seen in a very long time.

Let’s begin with Rick Santelli over at CNBC. I have long held the opinion that CNBC wields far too much power with regard to how it reports financial news and how that news is received. Watch this week’s Frontline on the financial crisis. CNBC’s participation in the way it happened and the way it was shaped for the viewing public is striking. I don’t think anyone can come away from that report without understanding that part of what ails financial markets can be laid at the feet of CNBC. They are an out of control freight train with no competition to stop them. They need some. Desperately.

Which brings me to Santelli’s rant last Wednesday. Before President Obama had even outlined his plan for people facing foreclosure, Santelli, and other CNBC “hosts” were talking it down. Keep in mind, these are the same people who talked UP the bailout for banks and Wall Street back in October, assuring the public that only a Federal bailout of Fannie Mae, Freddie Mac, and IDG would save us all from ruin.

Here is Santelli in all of his glory:

Do we all feel righteous now, after watching that? Wanna go get some tea and toss it in Boston Harbor? Here are some reasons why you shouldn’t, courtesy of Twitter friend roadkillrefugee. (Hint: Santelli forgot a few key facts and protocols…)

1. Santelli/CNBC never mentions that GE was recipient of $139 B from taxpayers to bailout out its own incompetent management.
2. Santelli/CNBC not outraged GE’s CEO was offered bonus after horrible stewardship of GE. Yes, he declined, but can’t decline w/o an offer…
3. What was GE’s Board/Comp Comm thinking when it decided to give Immelt a bonus with taxpayer dollars?
4. CNBC is following FNC (Fox News) model of adopting an ideological editorial identity. To compete with FBC, it’s feigning Joe Stock Trader populism
5. CNBC uncritically enables the poor governance practices, deregulation and corruption that have fed Wall Street insiders
6. Right now, CNBC is not reporting on Wall Street, it’s cheerleading for Wall Street

In case it didn’t quite sink in, I’m going to repeat it. CNBC’s parent company, GE, was the beneficiary of $139 BILLION in the first bailout, and Rick Santelli has the NERVE — the GALL — to complain about a total foreclosure package of $75 Billion, putting the dog whistle for the reactionaries with the term “moral hazard“.

And finally, this: Santelli was proclaiming the health and soundness of the economy right alongside John McCain last September.

Words in September and February, carelessly used, amplified by the studio hosts and magnified. They do harm.

While there’s no question that we’re in a crisis right now, the most immediate crisis is one of trust and confidence. Period. So when the most powerful voices dog whistle the right-wing reactionaries with loaded words like “moral hazard” and oblique references to communism, what they say matters to people poised to receive those messages.

Like Rush Limbaugh. And Alan Keyes.

Ordinarily I wouldn’t quote them, much less mention them. But what they are doing is so dangerous, so utterly immoral, that I can’t let it pass.

Since President Obama’s inauguration, Limbaugh has repeatedly expressed the hope that his presidency will fail, a repugnant and unpatriotic hope that would mean we all will fail. But last week, he put this call out: “They” must be STOPPED. And this, in the context of telling a listener that understanding a Democrat is like trying to understand a murderer or rapist.

And that pushes the Republicans one step closer to the slime bucket, poised at the edge so Alan Keyes can push them the rest of the way in. Alan Keyes’ commentary was so incredibly loaded with vitriol and hate it was nearly impossible to sit through the whole thing. But be aware: what Keyes said on Friday hovers dangerously close to shouting “Fire” in a crowded theater.

In the span of about five minutes, Keyes says our President is an “abomination”, that “we have to stop him” or the US will cease to exist. He dredges up the old canard (proven false over and over and over) that President Obama was not born in the US, and suggests that the military not obey his commands because he is not a legitimate President.

Even though Keyes is a nutjob, he’s not alone. What’s most chilling about his words is the violence they contain. Keyes and Limbaugh are spouting a to-do list, using their public figure status as a bully pulpit to put out a call within the sound of their voice to do, feel, and act violently. They offer the reassurance that there is some sort of entitlement to this, because they are being violated by the nasty Democrats in power.

It’s pure bullshit. Any rational thinker knows that. But the problem is, they have a wide-ranging amplifier, and in the case of CNBC, that amplifier is partially funded by taxpayer bailout funds. They are using their voices and their words to summon the troops to violence.

This is a disturbing trend. It is one thing to have legitimate political and policy disagreements, and entirely another to lie to people with the sole intention of fomenting unrest and violence.

God help us all if they succeed. That would be an abomination.

We teach our children to use their words, and to use them wisely. Yet, these men are proving that some people don’t listen to their mothers. Or learn the most basic lessons of fruitful and adequate discourse. They should learn. Or have their amplifiers turned off.

I didn’t mention the New York Post cartoon…but it all falls into what I view as a concerted effort to push racism, hate and violence into the public dialogue.

(Thanks again, @roadkillrefugee, for the inspiration. Visit his blog)

Also, if you needed any evidence that whackos will behave violently when spurred by hate speech, read this.

Watch this video. The key points start coming out at 2:20 or so, and continue on to the end.

I have some huge questions about this, and I’m sure you will too after viewing it. Let’s talk about it in the comments.

(h/t Boing Boing)

…for bringing joy

…for reviving patriotism

…for renewing our belief in ourselves and our country

…for reminding us that we CAN work together toward a common goal.

As you take the oath of office this morning, my faith in our democracy, our country, and my fellow citizens has been affirmed and renewed.

This is a day to remember always, especially in the days ahead, which will not be easy and won’t have instant cures. Yet, the fact of your election confirms that we can find a way out of the current difficulties and begin to find our way back to the road that leads to peace and prosperity.

We can, we did, we will.

I cannot find the right words to say how I feel, what this means to me, what I hope for.

As I watched today’s concert at the Lincoln Memorial with tears streaming down my face, all I could think of was: Yes We Did.

We ARE the new American Majority. All of us. With voices, and tools and communities and a will for change.

Yes we did. Yes we can.

May God bless Barack Obama and his beautiful family and keep them safe.

May we begin the arduous process of rebuilding this country one citizen, one family, one small spark of hope at a time.

Hope is a powerful and amazing motivator. We can, we will, and we did.

Let’s debunk some of his fiction with facts:

An evolving workforce

Here’s the problem: In 1978, when Congress amended the Internal Revenue Code to include Section 401(k), it envisioned the provision mainly as a way for workers to supplement their companies’ traditional defined-benefit pension plans and Social Security. (Secondarily, it also was a nifty hideaway where highly paid executives could shelter income from taxes.)

Well, yes and no. In 1978, Congress understood that the personal savings rate was inadequate, that many baby boomers would not have the funds to retire if they relied upon their corporate pensions and Social Security alone, and IRAs were not getting much traction with the middle class and entry level groups.

Anyone who had their hands on Defined Benefit plans back in 1978 knew exactly what the problem was: Benefits were based on a set of assumptions made by actuaries about what the world would look like in 30 or 40 years, they were offset in one form or another by projected Social Security benefits, and were etched in stone. I can remember feeling incredibly foolish about preparing statements for employees trumpeting the $78.00 per month retirement benefit they were entitled to in 20 years.

Traditional pension plans (what I’ll refer to as DB plans for the rest of this post) were based upon the theory that the employer had an duty and obligation to reward long-term employees with a lifetime income when they retired.

But in 1978, the workforce was less stable. The days of going to work for a company and staying until one retired were in the past. Looking back at the difference between my grandmother and my mother’s careers (both for the same company in its various forms – Bell Telephone, Pacific Telephone, Pacific Bell, AT&T), it was clear that there was no longer any expectation on the part of employer or employee of long-term or career-long employment. Job-hopping was expected if anyone actually wanted advancement.

As to Rutten’s assertion that they were also a sweet tax shelter for the highly-paid, I can only say this: They were a sweeter tax shelter for the worker.

The Reagan Years, or the Big Pension Money Grab

Rutten goes on to contend that employers were looking for ways to get out of funding their pension and health plans, and turned to 401k plans as the answer. Again, he misses an entire chapter of Reaganomic revenue neutral pension-killing history in his analysis.

There is a dirty chapter in the history of pensions. When Reagan took office, interest rates were at an all-time high. Rates as high as 21% on short-term certificates of deposit were the norm.

Pension trustees have a duty to invest pension funds as a prudent man familiar with such matters would invest, and you can bet that a prudent man would see an investment in a 21% short-term Certificate of Deposit as a prudent one, particularly when the funds are insured. Right? Investments were made, only sometimes at Savings and Loans rather than banks (remember that the S&Ls were NOT insured..that will play into the scene), and big returns paid on investments.

Actuaries are paid to set assumptions for the long-term. As a consequence, they did not view the high interest rates as reason for an assumptions adjustment, understanding that they were aberrant and would work themselves out in time.

Under Reagan, the IRS was instructed to audit as many pension plans as possible, particularly the plans of small to medium-size employers, and challenge their interest rate assumptions in an effort to disqualify their deductible contribution and pull more revenue into the Treasury.

The audit program was a magnificent failure, but it set the stage for Congress to pass a law legislating a mandate for actuaries to set pension liabilities in lockstep with the movement of interest rates up or down.

In turn, that set the stage for a monumental pension plan meltdown. What happened next set the ball in motion for the rise of 401k plans and the death of the traditional pension.

Congress passed OBRA ’87, which limited the tax deduction allowed for pension plans to an amount calculated using an inflated interest rate. As a consequence, many plans appeared to be overfunded, which made balance sheets look great, but increased tax obligations for nearly everyone, most particularly small to medium-sized businesses.

To sum it up, Congress took the actions of an aggressive and wrong Internal Revenue Service and made laws that pushed pensions from the long-term outlook to the here-and-now for employers, while leaving employees with a theoretical retirement income and nothing real to show for their work.

For the next 20 years, pension legislation became the tax-revenue football, tossed from one side of the field to the next with no long-term idea of what a reasonable outcome should be, and certainly no sense of social responsibility for the worker.

When Rutten makes the claim that there was some conspiracy of opposing ideologies merging to form the 401k’s emergence, he’s got it backwards. The conspiracy of ideology killed traditional pensions, leaving employers with balance sheets that ballooned or shrunk depending on the whims of short term interest rates set by the Fed.

Simplicity and Portability: The New Standards

Here is a simple fact: For traditional pension plans to work, there must be a commitment to a long-term program that remains stable and impervious to the whims of markets and men.

We don’t live in a world or a legislative environment that invites such a commitment. This is the world where the 401k became king.

In Rutten’s world, companies “seized the opportunity to abandon their defined-benefit pension plans”. In actuality, the laws were so complex and the cost to maintain them so prohibitive, with so little return for the investment that employers and employees looked to 401k plans as a middle-of-the-road compromise.

In the eyes of an employee, a traditional pension plan looked like a dinosaur when compared with a 401k plan. The employee controlled the savings rate, the investments, and had access to daily reports if they wanted them.

You’d be surprised how many do want them. Employees are not the idiots Rutten describes here:

Today, more than 60% of all U.S. workers rely on 401(k)s as their primary retirement fund. They’re not eager to “choose” their own retirement program, nor are they enthusiastic “owners” of American business. They’re draftees. Essentially, millions of us have been conscripted into the equities markets, where we have helped fuel stock prices and provided a bonanza for the financial services companies that manage and sell investment funds.

Oh, no. The employees are not the victims, not by a long shot. I should probably remind Rutten that if 401k plans had not risen as they had, those same investment managers and insurance companies would have made just as much, if not more money and had more control of expanded and bloated contributions to traditional pensions if they had continued on through the last 15 years or so. If you think the unemployment numbers are bad now, try doubling them when employers have to balance pension obligations against workforce.

The issue isn’t whether dollars would go into the system; the issue is how and by whom those dollars would be contributed.

IBM tried to mitigate the problem by putting a cash balance approach in place. That approach set a defined benefit for all workers in place and offset the cost of the benefit with the 401k balance. It was an idea ahead of its time, because it allowed for the market variance to increase an employee’s pension while still keeping the baseline guarantee in place.

Ultimately IBM was sued for their attempt to ‘rob employees of their pensions’ and was forced to reinstate their traditional program just long enough to meet their obligations before it was terminated. The 2006 Pension Protection Act resurrected the cash balance plan as a viable way to balance guaranteed benefits against equity growth options, but it may still be an endangered species.

Reality bites. Reality is that pensions in this country are not provided by a few large corporations. Small business fuels a much larger sector of our working population, and small business cannot possibly assume the incredibly complex and often expensive obligations that come with the traditional pension model.

On the employee side, there was a clamor rising. Employees were barred from deductible IRA contributions if they were covered by an employer pension plan, but the benefits they were earning were inadequate to provide a decent retirement, even when combined with Social Security. There was a rising clamor among employees, demanding that they have the right to save for retirement through their employer, that they receive tax-favored treatment for those savings, and because it was “their money”, they wanted control.

Further, they wanted to take it with them to the next employer and the next, rather than risk losing part of their retirement if a former employer went out of business.

Employees weren’t asked because employees were asking. In the 90′s, particularly the mid to late 90′s, the ones asking for the 401k plan were the employees, not the other way around. Most employers were neutral about it, but employees were absolute: They wanted control, they wanted choice, they wanted the opportunity to manage their own retirement plans. To be a competitive employer, a 401k was a must in the benefit package mix.

What happens when all the rules break? Or are broken?

Enter 2008, the year that everything everyone knew to be true was proven false. In investment policy land, there are a few basic rules. We all know them. If stocks drop, bonds are the fail-safe to hold steady. If interest rates rise, invest in mortgages for the return. If all else fails, keep your money in cash investments where you won’t make much but you won’t lose much either.

Every one of those rules broke in 2008. Every investment manager I know, including the one I live with, was left on a floor trying to sweep up the shards and put them back together in some sort of meaningful order. Bernard Madoff’s enormous scam aside, all of us have to accept that the collapse of the markets last year broke every single rule taken as gospel by the majority of those who manage investments, analyze markets, understand how investing and capital markets work.

You will hear theories for years and years. I believe we will eventually discover a deep well of greed and avarice on a global and mind-bending scale at the genesis of this crisis.

What you will not hear: the 401k experiment fueled the crisis or bankrupted our populace. It simply isn’t true. It’s Rutten being hysterical about his own losses, but the fact is that 401k plans remain viable, and are one of our best pathways out of the mess going forward (provided employees ignore hysterics like Rutten and think logically).

My 401k has lost about $10,000 since last year. That’s a significant hit for me, but it’s all on paper. I have continued to contribute and actually increased my savings rate right now, keeping my focus on the long-term and my retirement years 20 years down the road. I didn’t liquidate anything nor do I plan to. Not only that, but when I find another job, I can take my 401k balance with me.

So I haven’t lost a darn thing. Not one penny.

On the other hand, if Rutten had his way, we’d all liquidate and make those losses real in the name of a ‘failed experiment’. It’s laughable to hear him quote Robyn Credico’s sudden epiphany on the failure of 401k plans, given her recommendation just over a year ago that employees be allowed to invest 401k funds in annuities at a time where the insurance industry teetered on the brink of being the loss leaders of our modern time.

401k plans may be the way back. At the bottom of this crisis is a crisis of confidence. We have the choice to pick up our toys and go hide in a cave, or to boldly use the combined leverage of our 401k investments to fund a future where we can retire comfortably. It’s risky, but 401k participants have been taking the risk for the past 25 years or so, every time they allow part of their paycheck to be invested.

Before writing 401k plans off as a failed experiment, I’d suggest that Tim Rutten get in touch with his facts and the reality of our times. There will be no return to the days where benevolent employers gave us our gold watch and lifetime pension. On the other hand, we now have the clout and the ability to shape what our future will be. We are not at the mercy of financiers; we ARE the financiers. We need confidence and integrity returned to our regulatory system to complete the picture.

Change is coming.

In the Bush years, all was dogma, rigid, unbending (among other things). Barack Obama spent 11 months telling us that change is coming, change we can believe in, change we NEED.

Change isn’t something that happens with the stroke of a pen. It emerges out of need, dialogue, and consensus.

I understand the anger over Rick Warren’s selection to give the invocation at the inaugural. But what you aren’t getting is that Warren represents a large chunk of our country — evangelical Christians who believe that the Bible prohibits gay marriage.

I disagree with them. You disagree with them. I wrote extensively about how hurt I was to see the hateful speech coming from them during the Proposition 8 campaign. That hurt hasn’t gone anywhere, but it seems unproductive and useless to shout Warren down, call for him to be disinvited, and in the process, alienate that segment of the population YOU all need to move the agenda forward.

I want you to consider Lee Stranahan’s viewpoint here. It’s worth thinking about.

Rick Warren has laid out arguments and views that you may not agree with but they are actually shared by millions of people. The majority of people, really. They’ve been quoted all over the place and that’s part of the gift.

There are weeks to listen to his arguments and not just quote them but actually refute them in an organized way. You could try out your counter-arguements on people who disagree with you, rather than just nodding in agreement at the people who you already agree with. You can try to answer the arguments with civil discourse and without the use of any broad generalizations meant to obscure the other side’s position. You could answer without insults. I mean – without a single one.

It’s harder, no doubt. It’s easy to wave your own team’s flag while sitting comfortably in your own team’s bleachers. But Barack Obama has been argued for doing the easy thing. The challenge is to do the right thing and that means actually trying to win by fighting well and fairly in the marketplace of ideas.

Barack Obama is handing the country the gift of civil discourse on difficult and emotional subjects. Happy holidays.

If you want change, start by changing the tone of discourse. I agree with Lee. We’re not used to it, but Barack Obama is offering an opportunity for an exchange of ideas in a civil tone. We don’t have to shout at each other anymore. That’s a hallmark of the past. We don’t have to suffer rallies shouting down opposing views, but can come together and try to get a clear understanding of what exactly the issues are.

It takes one voice in a room. Are we going to use that voice to try to persuade, or alienate?

As an aside, I have met Rick Warren and talked with him. He is not a raving homophobe nor is he a dogmatic type who has to be right. He is thoughtful, bases his beliefs on what he understands the Bible to say, but is open to discussion and debate. Further, he is a man with heart for all people, gay, straight, rich, poor, and otherwise. He is not a hellfire and brimstone preacher and has angered the diehards on the side of the Religious Right far more than he has you.

The man is saying a prayer. He is not shaping policy, nor is he running for office. Let him pray. And listen. And talk. But do it with the goal of persuasion and openness, not exclusion and anger. Please. Let’s be the change we believe in and voted for.