AIG Terminates Deferred Comp Plans – to Keep Workers

November 14, 2008 ( - One of the reasons commonly cited behind the sponsorship of deferred compensation programs is to attract and retain valued workers.

It was more than a little ironic, therefore, that American International Group, Inc. said that it is terminating 14 voluntary deferred compensation programs involving 5,600 employees and independent agents and representatives – “to remove the incentive for employees to leave in order to obtain their deferred pay.” Approximately $500 million in earned but deferred pay will be distributed in the first quarter of 2009, according to the firm.

“This deferred compensation is all pay that an individual earned but volunteered to defer receiving until a later date. In each case, an employee could leave AIG for any reason and be entitled to this deferred pay,” according to the firm.

“Many AIG employees have seen their life savings wiped out in the financial crisis,” Andrew Kaslow, Senior Vice President, Human Resources said, according to a press release . “Employees are now concerned about obtaining the pay they have earned but deferred so they can pay for retirement, college tuition or other expenses.”

Under the majority of AIG’s deferred pay plans, participants can only access deferred pay when they retire or leave the company. And, in view of the current turmoil involving not only the markets but AIG’s longer-term viability, the giant insurer was obviously concerned that employees will leave AIG so they can obtain their deferred pay. “This is a concern at a time when AIG is working to maintain the value of its businesses, whether those businesses are to be sold to repay AIG’s Federal Reserve loan or to be continued as part of a restructured AIG,” according to the firm.