'Sneaky' Loophole Boosts Execs' Pensions

Through lump-sum payments, executives net millions extra
By Clay Dillow,  Newser Staff
Posted Jan 23, 2009 11:55 AM CST
'Sneaky' Loophole Boosts Execs' Pensions
CEO's have found yet another way to increase their payouts.   (Index Stock)

A change in federal disclosure requirements has revealed that some companies are inflating the value of retirement plans for—guess who?—top executives. By converting pensions, which generally pay out in installments over a retired employee’s lifetime, to a lump-sum payment, CEOs can increase the value by 10% to 40%, netting millions of extra dollars even as average workers’ 401(k)s plummet alongside the markets, the Wall Street Journal reports.

“It’s a sneaky way to give executives larger pay,” says one Senate pension expert. For instance, one Hartford Insurance exec whose pension is valued at $27 million could boost his lump-sum payout to $37 million. Companies run pensions through a complicated formula by which they can legally manipulate certain variables, producing outsize payouts. The inflation serves to compensate for increased taxes associated with lump-sum offerings, they say.
(Read more pensions stories.)

We use cookies. By Clicking "OK" or any content on this site, you agree to allow cookies to be placed. Read more in our privacy policy.
Get the news faster.
Tap to install our app.
X
Install the Newser News app
in two easy steps:
1. Tap in your navigation bar.
2. Tap to Add to Home Screen.

X