Spurred by reports that some companies may have misled employees about their pension benefits, the White House unveiled a proposal yesterday to require employers to provide much more complete information to workers when the companies change their pension plans.
Among other things, companies would have to provide examples of what typical workers would have gotten under the old pension system and what they would receive under the new plan. In some cases, particularly for older workers with many years of service, the difference can amount to tens of thousands or even hundreds of thousands of dollars.
Current law requires only that employees be given a copy of the pension "amendment," official language that even some experts say can be so complicated that it is impossible for workers to figure out what will happen to their benefits.
"Too many workers are left in the dark when their pension plans change," said President Clinton. "Every worker deserves meaningful and timely information about changes to their retirement benefits."
The White House unveiled its proposal just as tax-writing committees in the House and Senate geared up to produce broad new tax bills that are set to include pension provisions. Although those tax bills could ultimately founder in the larger fight over tax cuts between Clinton and the GOP Congress, analysts said some sort of pension "right to know" legislation is highly likely to emerge from Congress this session, even if it has to ride on a separate bill later.
Congress and the White House have both been moved to act by reports of worker anger at companies that change their pension plans and then make it difficult or impossible for employees to figure out whether they will win or lose under the new plan. In some cases, pension consultants apparently advised companies that they could reduce pension costs but keep workers in the dark about the benefit cuts that result.
Private companies generally have the right to change or even end their pension plans as long as they agree to pay current workers their earned benefits and provide at least minimal information about the switch. The most common change is from a defined benefit plan -- which provides retirees with specific monthly payments based on factors such as salary and length of service -- to a "cash balance" plan, which pays cash contributions and interest into employee accounts and gives them the resulting balance when they retire.
Cash-balance plans build up at a steady rate over time and can be a better deal for younger workers who may move from job to job, since workers can take the cash with them once they're vested. Traditional plans are back-loaded to give workers increasing benefits the longer they work at a company, and they can be advantageous for older workers who have put in many years at the same firm.
In an illustration of the bipartisan urge to force companies to be more forthcoming, Sen. Daniel Patrick Moynihan (D-N.Y.) and Rep. Gerald "Jerry" Weller (R-Ill.) earlier this year sponsored identical bills that would have forced companies to provide individualized before-andafter benefit comparisons for every employee at least 15 days before the pension plan changed.
Businesses complained that this would generate huge costs and force them to assemble data they did not have. In response to those complaints, the White House sought a slightly less aggressive course.
The Clinton plan requires companies to provide illustrative comparisons for typical workers 45 days before the pension change. Further, companies would have 15 days to respond to an individual worker's request for a formula that would allow the worker to calculate his or her own likely benefits.
Like Moynihan-Weller, the Clinton plan would also require companies to provide individualized pension comparisons -- but only three months after the pension change, and only to those workers who requested them, instead of to all workers ahead of time.
Business did not rush to embrace the Clinton plan -- but didn't reject it, either.
"Some enhanced disclosure would be appropriate in these situations, but we think it needs to be a very careful balancing of additional help to workers and burdens on our pension system generally," said James Delaplane, vice president for retirement policy with the Association of Private Pension and Welfare Plans. "Looking at the fine print of this is going to be very important."