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WATCH! MR Conversations: The Labor Guide to Retirement Plans

The Labor Guide to Retirement Plans

During what some have called “Striketober,” James W. Russell, author of The Labor Guide to Retirement Plans for Union Organizers and Employees invited three guests into conversation — Nari Rhee, Alice Embree, and Steve Early — to combats myths such as:

*The pension system is completely broken…
*It’s your fault you don’t have solid retirement savings – you just didn’t put enough aside…

*401ks are inevitable…

*Why didn’t you invest your retirement away?

*You will never be able to retire…Yes, you will!

As a strike wave spread from Catholic Health Mercy Hospital to Kaiser Permanente, to John Deere, to Kellogg’s to Warrior Met Coal, to Amazon (Staten Island) and beyond, these long-time fighters for workers’ pensions got together for a conversation that has never been more timely…

Watch above or find the recording at MR’s newly relaunched YouTube page.

Who was in conversation on October 28th?

James Russell is an authority on retirement policy in the United States, Europe, and Latin America, He led one of the first employee movements to successfully challenge the dominant trend and replace a 401(k)-like plan with a more secure traditional pension plan. He has taught at universities in the United States and as a Fulbright professor in Mexico and the Czech Republic. He is the author of A Labor Guide to Retirement Plans and eight previous books.

Nari Rhee is Director of the Retirement Security program at UC Berkeley Labor Center. Rhee’s current research focuses on the retirement crisis facing California and the U.S. in the context of declining pension coverage, and policies to improve the retirement income prospects of low- and middle-wage workers.

Steve Early has been active in the labor movement since 1972. For 27 years, Early was a Boston-based staff member of the Communications Workers of America. Early aided CWA organizing, bargaining, and/or major strikes involving NYNEX, Bell Atlantic, AT&T, Verizon, Southern New England Tel, SBC, Cingular, and Verizon Wireless. Recently, he authored “Refinery Town,” along with “Save Our Unions: Dispatches from a Movement in Distress,” published by Monthly Review Press.

Alice Embree is a lifelong activist from Austin, Texas, and author of the recently published movement memoir, ‘Voice Lessons.’ She is a retiree and member of the Texas State Employees Union TSEU-CWA 6186 and the Texas Alliance for Retired Americans.


From Part Three:
An Autopsy of a Retirement Plan

When I was still in a 401(k)-like plan and approaching age sixty-five after thirty-seven years of university teaching, I took stock of my future retirement income. I wanted to know what it would look like in terms of achieving the 70 percent of pre-retirement income that retirement experts state is necessary to maintain one’s standard of living. I ran the numbers for my Social Security and my employer’s defined-contribution plan, in which I had participated for thirty-one years. This 401(a) plan, which functioned in the same way as a 401(k), had at various times TIAA, ING, and Prudential as administrators.

Together, my projected Social Security and employee retirement plan would amount to just 43.5 percent of my final income. The monthly Social Security check accounted for 19.5 percent, the annuity income option for my defined-contribution plan, 24 percent.

Something had gone terribly wrong. Despite having accumulated almost a half-million dollars, which is much more than the $109,000 median for people approaching retirement, I did not have enough to finance a retirement that would allow me and my family to maintain the middle-class standard of living that my $117,615 final salary as a university professor afforded.

I didn’t expect much sympathy from others who earned or had saved less. I had a good job that supported a better standard of living than most, and I was about to lose some of that middle-class privilege.

I’m aware that, as a tenured professor, I had considerable relative privilege within an academic labor force with severe salary inequities. Faculty members holding contingent positions are far less likely to have any retirement plan at all. If they do have defined-contribution plans, their contributions are likely to be lower and more of a sacrifice to make than those for tenured and tenure-track colleagues. Those with higher incomes can have higher savings rates that have less impact on their ability to afford housing, food, health care, and other necessary expenses. Nonetheless, there is a lot for others to learn from my experience. If I had a good income that wasn’t going to turn into a good retirement, then anyone with a defined-contribution retirement plan could be in danger.

But why my experience alone? Aren’t there already studies of these plans? Yes, but they are studies based on projections, assumptions, and modeling or indirect indicators. TIAA, for example, deceptively claimed that “on average, participants in TIAA-administered plans are on track to replace over ninety percent of their income in retirement.” Why wasn’t that my experience?

Despite decades of experience with these types of plans and trillions of dollars running through them, there is a dearth of available research about actual rather than hypothetical experiences. I suspect that the financial services companies that administer these plans have performance data they do not share with the public because the resulting retirement incomes are too depressing and contrary to their rosy advertising campaigns.

Retirement-account balances are like poker hands. Their owners treat them as closely held secrets. Coworkers are unlikely to discuss how much they have accumulated in their accounts openly. It’s like asking people how much they have in their checking accounts: none of your business. The problem, though, is that it is the business of all of us to know what’s going on with defined-contribution plans.

Was I at fault? Had I not saved enough or made poor investment choices? Or was the game rigged against me and, by implication, anyone else participating in such plans? Was it possible that even if I had saved and invested more responsibly, I would have still ended up without enough retirement income?

I was not alone. Increasing numbers of Americans with defined-contribution plans are coming up short for retirement, and this was especially true after the 2008 recession. James Ridgeway wrote a 2009 Rolling Stone article in which he recounted how miserably his plan was doing and lambasted the whole approach. He started with the bitter faux riddle: “What starts with ‘f,’ ends with ‘k,’ and means ‘screw your workers’? That’s right, —401(k).”

I am focusing on my defined-contribution plan. But since Social Security is also a significant part of my retirement income, a few words about my experience with it are in order.

Social Security, unlike a defined-contribution plan, as we know, is not a retirement savings plan. Instead, participants and their employers pay contributions into a social insurance fund to protect themselves from loss of income in retirement. The contributions go into a collective pool, out of which comes benefits for individuals. They do not go into individual accounts like savings or defined-contribution retirement plan accounts. Participants don’t own their contributions. They accumulate instead guaranteed rights toward income replacement in retirement.

We also know that Social Security has a progressive distribution of its benefits so that lower-income participants have more of their preretirement incomes replaced than do higher-income participants. My salary put me in the higher-income category that, according to Social Security reports, has 27.1 percent of its income replaced.

That statistic immediately raised the question for me of why I was having just 19.5 percent replaced. The answer, I realized, was simple. My 19.5 percent was a percentage of my final salary, whereas Social Security’s statistic is of the average of the thirty-five years of highest contributions. I quickly calculated my average career salary and found the replacement value of it, using Social Security’s methodology, to be closer to 44 percent.

But having 44 percent replacement of a career average salary is still much less than having 44 percent replacement of my final salary. My replacement value of 19.1 percent of the final salary was so low because of my career pattern. For about twenty-four of my highest thirty-five earning years, my salaries were in the middle and, in some cases, low range. Then they began to take off sharply due to promotions to end in the high-income range. Had they been in the high income for the entire thirty-five years, I would have had close to the 27.1 percent replacement rate that Social Security reports for that class.

Examining my Social Security statement earnings record further revealed some sources of very low or nonexistent contributions. For eight years, I had public academic employers who did not participate in Social Security. Had contributions been made for four of those years, which would have been among my thirty-five highest-earning ones, my retirement income would have been higher. This lack of contributory years is similar to the problem caregivers face if they take time out to tend for children or other family members. I would have happily paid the contributions during those years, but I did not have that choice. My experience raises questions about whether Social Security should allow participants to pay concurrently or retroactively for noncontributing years.

Financial-service companies have taken advantage of the Social Security practice of expressing replacement rates in terms of average rather than final salaries. TIAA, the leading provider of retirement plans for academics, had the earlier-cited advertising campaign in which it claimed that more than 90 percent of its plan participants were on track to replace more than 90 percent of their income, combined with Social Security, in retirement. This claim makes it look like participants will clear the 70 percent hurdle with ease. The fact that these figures refer to average, not final, career income was in a fine-print footnote to the advertisement. They, like me, will come up far short of 70 percent of final income. Such marketing lulls participants into complacency during their working years. They are in for a rude awakening when they approach retirement with much less than anticipated income for the future and can do little about it.

From the conclusion:
The Pension Wars

Jeff Bezos “Rescues” the Washington Post at the Expense of its Employees

For eighty years, the Graham family owned the Washington Post. It developed a defined benefit pension plan that covered, as of 2008, its nearly one thousand employees. It included everyone from editors and reporters to the truck drivers who delivered the papers to newsstands. Like other owners of private businesses, though, the Graham family succumbed to the trend and closed the plan to new employees—a soft freeze—in 2009. Veteran employees were unaffected. For new employees, a cash balance plan was substituted. Employees would still get a defined benefit pension, but it would be less favorable than the one it replaced.

For reasons that had nothing to do with either pension plan, the newspaper had financial difficulties. In 2013, the Graham family put the Post up for sale. If the paper was bleeding red, the final salary pension fund was a different story. Not only was it not in trouble, it was overfunded to the tune of 140 percent. Its trustees had followed an exceptionally successful investment strategy. Also, the Graham family, in a generous gesture of support for its workers, had made a substantial extra contribution to the fund. The family wanted veteran workers to have the stability and security of the promised pension they had earned. Nevertheless, the newspaper was failing financially even if the pension fund was thriving, and they wanted out.

If some banks are too big to fail, some newspapers are too important to fold. The Post was one of them. True, there were other newspapers in Washington, but none with the reputation of the Post. Someone or some corporation was needed to save it. That someone turned out to be Jeff Bezos, the founder of Amazon and the richest man in the world. He bought the newspaper on October 1, 2013, for $250 million.

There was a collective gasp from many people. Would he do to the newspaper business what he had done to the brick-and-mortar bookstore business?

Dubious Free Choice

…In 1980, Joy Lindsey started a new job as an English as a Second Language instructor at Houston Community College. At the Human Resources office, she picked up her new office keys and filled out forms for a parking pass and health insurance. Then she came to the form for her retirement benefit. It required her to make an irre- vocable choice between the Teachers Retirement System, a defined benefit pension plan sponsored by the state of Texas, and a defined contribution Optional Retirement Plan. She didn’t know what to do. She asked the HR employee for advice. He said that the ORP plan was better because its investments had outperformed those of the TRS. That settled it and she signed up for the ORP plan.

Twenty-five years later, a number of co-workers that had begun when she had were retiring. She was fifty-nine, a little early to retire. But so were a number of them around that age. Feeling somewhat burned out by the job herself, she decided to join them. She then investigated what her retirement income would be and was shocked to learn that it would not be nearly enough to meet her monthly expenses. Making matters worse, Houston Community College did not participate in the Social Security system. She received no Social Security credits for the highest earning years of her career. Her Social Security check would be minimal, based only on contributions from earlier, lower-paying jobs.

Lacking the income to fully retire, she began a series of part- time jobs. Meanwhile, she was hearing from co-workers who had retired at the same time that they were not having to take part-time work. Instead, they were making plans to travel abroad for extended vacations. How was it possible for them to afford that comfortable retirement lifestyle and not her? The answer, she found out, was simple. They had opted for the pension plan when she had taken the individual savings and investment account option.

Many pensioners feared that they too were vulnerable to losing part of their payments in the future, causing them to be nervous about the finances of their plans. Knowing that most participants are safe from pension cuts provides no solace if you are in the minority that are not. Among them was Kelly Stillwell, for twenty-five years a construction worker and Laborers Union activist in Las Vegas. He was approaching retirement and depending on his union-sponsored multi-employer pension when he heard that Congress was debating that bill. He had worked for a number of different construction companies in the Las Vegas area, all of which had contributed to his union-sponsored pen- sion plan over the years of his career. Now he feared that he might not be getting as much of a pension as he assumed was coming and what he needed. He talked to fellow participants about his fears. He made inquiries through his union. He tried to get information from the plan trustees.

Was his pension vulnerable? It was unclear. The answer was not easy to find. But after a great deal of effort, he determined that his pension plan had a 52 percent funding ratio, which was less than the 65 percent ratio that permitted plan trustees to file for “critical and declining status.” He thought they were in real danger and stepped up his campaign among fellow participants.

When Congress passed the Multiemployer Pension Reform Act, Stillwell put up a website with pension information for people in his situation ( So far, the trustees have not filed for critical and declining status and have not announced any intention to do so. Stillwell thinks that the attention he drew to the issue may have discouraged them from pursuing that strategy.….

What differentiates The Labor Guide to Retirement Plans?

If you search for “books on retirement plans,” you’ll come across:

  • Books written for experts
  • Deceptive books claiming you can use a 401(k) plan to get rich
  • Solid books dedicated exclusively to the topic of Social Security
  • Surveys of available retirement plans that take no stance and offer no clear advice to working people

This book is not neutral toward the predominant form of employer-sponsored retirement plan: As in, it is not pro-401(k). It is radically and consistently critical toward them. At the same time, it offers advice to employees who have no other options. Ultimately, what we all need to understand, however, is that the pension system actually works rather well. Don’t let anyone dupe you into thinking otherwise.

Researching retirement plans should not take the rest of your life, even if deciphering the relevant paperwork seems to have become a full-time job. Deliberately elaborate legalese is obscuring the efforts of financial elites to seize control of workers’ collective retirement savings—and The Labor Guide to Retirement Plans is here to translate.

If you are a rank and file labor organizer, this book is written for you. If you even “hover around labor unions,” as James Russell likes to say – this book is also for you.

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