The list from US Representative Bernie Sanders, (I-Vermont), came from the DoL Inspector General’s office. The DoL official investigated the extent to which workers didn’t get pension money they deserved, after their employers switched from a traditional pension to a cash-balance plan, a Wall Street Journal news report said (see Cash Balance Audit Conclusions Drawn, Questioned ).
Underpayment of $17 million
The DoL report said 13 of the companies had underpaid retirees by an estimated total of $17 million each year, by making errors in their pension calculations such as using incorrect interest-rate figures. The DoL report didn’t identify the 13 companies; it found the remaining 47 to be in compliance with pension regulations.
The report estimated 300 to 700 defined-benefit plans that have been converted to cash-balance plans in the US may be underpaying retirees by between $85 million and $199 million annually.
Call for Enforcement
Representative Sanders has introduced legislation with backing from members of both parties that would require the DoL to enforce existing rules on cash-balance plans and to take enforcement action against the 13 plans.
The DoL had said in response to the Inspector General’s report it doesn’t have jurisdiction covering cash-balance plans, and it passed along data on the 13 plans to the Internal Revenue Service and Treasury Department.
According to Sanders’ office, the “most egregious” cases listed in the report include BOC Group Inc., a UK industrial-gases company with US headquarters in Murray Hill, New Jersey, which allegedly underpaid workers by as much as $59,242 each.
Others were Markem Corp. of Keene, New Hampshire, which allegedly underpaid workers by as much as $55,629 each, and Steel Heddle Inc. of Greenville, South Carolina. which allegedly underpaid workers by as much as $42,266 each, the office said.
The three companies had no comment when contacted by the Journal.
A number of the companies listed said they are looking into the issue or denied violating pension rules. “I’d like to reserve comment until all the facts are in,” said Ron Kurtz, a spokesman for ABB Inc., Zurich, which employs 14,000 in the US.
Wake Medical Center in Raleigh, North Carolina, which has 5,000 employees and switched to a cash-balance plan in 1990, said it received a list of questions from the DoL last fall pertaining to its cash-balance plan and how it calculates its lump-sum payments.
The hospital responded to the questions, but never heard back from the agency, said Mike DeVaughn, the hospital’s finance chief. “We are confident that we are in compliance with these regulations,” DeVaughn told the Journal.
Cash-balance plan conversions are an increasingly common practice as employers try to adapt their pension plans to the needs of a more mobile work force. A defined benefit pension plan usually is based on a worker’s pay in the last few years before retirement.
Cash Balance Conversion Companies
The following companies were identified as illegally cutting pension benefits after shifting to cash-balance plans, according to a list released Tuesday by US Representative Bernie Sanders, (I-Vermont).
- BOC Group, Murray Hill, NJ
- Markem, Keene, NH
- Steel Heddle Manufacturing, Greenville, SC
- ABB, Norwalk, CT
- Wake Medical Center, Raleigh, NC
- Accuride, Evansville, IN
- Formosa Plastics, Livingston, NJ
- Chesapeake Directory Sales, East Greenbelt, MD
- Amoco Fabrics & Fibers, Atlanta, GA
- Robbins & Myers, Dayton, OH
- Burns and Roe Enterprises, Oradell, NJ
- General Atomics, San Diego, CA
- First Allmerica Financial Life Insurance, Worcester, MA