I don’t really have time or the brain cells at 1:00 AM to write about the latest AIG feeding frenzy, but I do feel compelled to put something out there to counter the Boston.com article suggesting that the taxpayers are now funding outrageous pension benefits.
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).
Go read the heartbreaking story over on The Political Carnival of a recently-returned soldier from Iraq.
I spent the past year comforting Tiffani as best I could, knowing full well he had been assigned one of this fraudulent, bloody occupation’s deadliest missions. She knew that, too. There were so many days that I’d see her dissolve into tears, terrified that she would never see her dad again. She’d hover over her cell phone waiting for a pre-arranged call, and when it didn’t come, she’d worry herself sick until she got word that he was still alive. Recently, his Humvee got hit by a roadside bomb, but he made it out alive. His friend didn’t.
He’s home, and his young daughter is seeing the ravages of war, up close and personal:
All I can do is give Tiffani hugs and words of encouragement. All she can do is hope her dad returns to someone who resembles his old self… and offer him every bit of love and encouragement a terrified 15-year-old can.
Thank you, George W. Bush. Anyone who feels anything for Tiffani should remember that John Sidney McCain promises her, and the rest of us, more of the same.
PTSD is real, visceral, and if not treated, can lead to depression, suicide, divorce, alcoholism and substance abuse.
The Bush Administration created the circumstances that caused Tiffani’s dad to suffer, but the Bush Administration wants nothing to do with the services needed to treat it. The current Army policy dictating denial of the condition wherever possible, leaves men and women who have done their duty adrift, with no pathway to treatment and healing.
Senator McCain argues that increasing benefits for veterans discourages retention. Yes, retention. Bring these stressed, traumatized soldiers back and keep ‘em in the military. Way to go, Senator McCain.
While I have respect for Senator McCain’s service and experience in Vietnam, his refusal to support suffering soldiers returning from Iraq is detestable, in my opinion. There are some things we just do because they’re the right thing to do, whether or not they cost money. If my child needs medical treatment, I get it and figure out how to pay for it after the fact.
If my country sends young men and women into battle, it damn well better expect to take care of them when they come home. Is patriotism a flag pin, or a commitment to those who were on the front lines making the sacrifice?