Alarmed by reports of widespread pension underpayments, the chairman of the Senate Aging Committee said Monday he may promote legislation requiring companies to send workers statements detailing the pensions they have earned and how the benefits are calculated.
Nearly 14 percent of pensioners receive less than they are entitled to from their pension plans, according to an audit from the federal Pension Benefit Guaranty Corp. Of those underpaid, one in three was shortchanged more than $1,000 in the 1994-95 audit cycle.
A detailed pension report for each worker before retirement should become as “routine” as the W-2 tax forms mailed by companies to their employees, Sen. Charles Grassley, R-Iowa, said after a committee hearing.
Grassley also said he would support an expansion of federal funding for local projects that help retirees with pension problems, and the creation of a nationwide 800 number for advice.
Under current law, personalized pension reports are available only if a worker specifically requests the information from the employer.
The problem of pension uncertainty affects millions of workers because the complexity of the current law and calculation methods lead to numerous errors, according to government audits.
To make things worse, there is only a limited amount of free or inexpensive advice available for low-income pension recipients.
“There are hundreds of thousands of people looking for answers and help,” said Karen Ferguson, director of the Pension Rights Center, an advocacy group for retirees based in Washington, D.C.
“It is a fact that pension laws are complicated, but it’s a bigger problem that there’s no government agency where people go to get answers.”
Joining in a bipartisan exhortation to workers, Sen. John Breaux, D-La., the committee’s ranking Democrat, said the committee wants to “send a warning to all pension recipients” to ask questions. “What do they have in their pension plan? Where is it? When can they get it?”
Grassley and Breaux said they would prefer not to impose new laws or rules on the already complex structure of federal pension regulations. But it may take a mandatory requirement in law to assure that workers are educated about their pension benefits, Grassley said.
Paul Francione, who worked for Pan Am for 14 years before leaving the job with total medical disability because of rheumatoid arthritis, told the committee about his struggles to get his pension.
He was living on Social Security disability payments and in 1992, at age 62, he tried to find out what he would receive as a pension.
Pan Am filed for bankruptcy and didn’t respond to his letters. Neither did his former union, the Teamsters.
The Pension Benefit Guaranty Corp. - the federal agency that assures payments to workers when plans go broke - reviewed his case twice and said he was entitled to nothing. With help from the Pima Council on Aging, an Arizona group, and a third letter to the federal agency, it said he was entitled to $309 a month.
Another witness, Edwin Witort of Hot Springs, Ark., was looking forward to a retirement pension of more than $300 per month - or so he thought - after 40 years working as a merchandise manager in the metal industry.
But when the first check arrived Witort was surprised and upset to see it was only $103. He wrote to his employer and asked about the difference. The company told him he was wrong. But after years of wrangling, Witort finally won.
“You work a lot of years, wait, get a payment, and - lo and behold - it’s not right,” he told the Senate panel. “You try and get the error fixed, and you run up against a brick wall.”
But he got a $10,000 lump sum payment and an increase in his monthly payment to $220 after hiring the so-called “pension detectives,” a private company named the National Center for Retirement Benefits in Northbrook, Ill. Its fee is 30 percent of the amount recovered, which cost Witort $9,677.44.
“I congratulate both of you for your perseverance,” Breaux told Francione and Witort. “Thousands of people may have gotten the same letter you did and put it away and are now struggling unnecessarily.”
Even when companies provide individual statements, they are often written in technical language that is hard to understand, said Ferguson of the Pension Rights Center in her testimony.
The Labor Department should provide a model form in plain English, she said.
The existing disclosure rule requiring a company to provide a statement when asked for one applies to private employers.
However, multiemployer plans, such as the ones operated by unions and employers in the construction and garment industries, are exempt from any reporting at all.
MEMO: This sidebar appeared with the story: Protecting your benefits Knight-Ridder WASHINGTON Here are some things to do to avoid being shortchanged on your pension benefits: Maintain a file of all your pension-related documents. Before leaving the company, request, in writing, a copy of the pension plan. After receiving benefits, contact a financial planner or pension consultant to determine if benefits are correct. If you are uncertain about the fairness of a pension decision made by your plan administrator, contact the Labor Department’s Pension and Welfare Benefits Administration at 200 Constitution Ave. NW, Room N5625, Washington, DC 20210. Telephone: 202-219-8776. If an employer has gone out of business or stopped paying benefits, you can determine what partial benefits you may be eligible for (if any) by contacting the Pension Benefit Guaranty Corp. at 1200 K Street NW, Washington, DC 20005. Telephone: 202-326-4000. Pension help also is available on the Internet at the Pension Rights Center site (http://www.spry.org/prcfile.htm) or at the Pension and Welfare Benefits Administration site (http://www.nceo.org/library/pension.html)
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