Companies Tap Pension Plans
To Fund Executive Benefits
Little-Known Move
Uses Tax Break Meant
For Rank and File
By ELLEN E. SCHULTZ and THEO FRANCIS
August 4, 2008; Page A1,

At a time when scores of companies are freezing pensions for their workers, some are quietly converting their pension plans into resources to finance their executives' retirement benefits and pay.

In recent years, companies from Intel Corp. to CenturyTel Inc. collectively have moved hundreds of millions of dollars of obligations for executive benefits into rank-and-file pension plans. This lets companies capture tax breaks intended for pensions of regular workers and use them to pay for executives' supplemental benefits and compensation.


The practice has drawn scant notice. A close examination by The Wall Street Journal shows how it works and reveals that the maneuver, besides being a dubious use of tax law, risks harming regular workers. It can drain assets from pension plans and make them more likely to fail. Now, with the current bear market in stocks weakening many pension plans, this practice could put more in jeopardy.

How many is impossible to tell. Neither the Internal Revenue Service nor other agencies track this maneuver. Employers generally reveal little about it. Some benefits consultants have warned them not to, in order to forestall a backlash by regulators and lower-level workers.

The background: Federal law encourages employers to offer pensions by giving companies a tax deduction when they contribute cash to a pension plan, and by letting the money in the plan grow tax free. Executives, like anyone else, can participate in these plans.

But their benefits can't be disproportionately large. IRS rules say pension plans must not "discriminate in favor of highly compensated employees." If a company wants to give its executives larger pensions -- as most do -- it must provide "supplemental" executive pensions, which don't carry any tax advantages.

The trick is to find a way to move some of the obligations for supplemental pensions into the plan that qualifies for tax breaks. Benefits consultants market sophisticated techniques to help companies do just that, without running afoul of IRS rules against favoring the highly paid.

rest of article:

http://online.wsj.com/article/SB121761989739205497.html...

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"I think the deregulation was probably helpful to the growth of our economy."
-Sen. John McCain 09/22/2008

Not really, I just prefer not to donate to the McCain campaign:

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"I want to stay as close to the edge as I can without going over. Out on the edge you see all kinds of things you can't see from the center." - Kurt Vonnegut

Why won't McCain require oil companies to use their profits to fund alternative energy?

Because McCain knows (hopefully; either that or he just guessed right) that a company will pick whatever gets the highest return for its investments. In the case of energy, energy companies will invest in whatever gets them the highest return. But what defines the "source of energy with the highest return?" It's simple, the source of energy that can be produced using the fewest resources possible to get a unit of energy. In other words, the cheapest source of energy. What does that mean for consumers? Simple, the cheapest source of energy. So what would a requirement for anything do? It would prevent the companies from giving the people the cheapest source of energy. In other words, it would raise the price of energy, seeing as oil is cheapest now. And if oil wasn't the cheapest, then there would be no need for any government requirement.

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"The raw fact is that every successful example of economic development this past century--every case of a poor nation that worked its way up to a more or less decent, or at least dramatically better, standard of living--has taken place via globalization; that is, by producing for the world market rather than trying for self-sufficiency."

-- Paul Krugman

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"I want to stay as close to the edge as I can without going over. Out on the edge you see all kinds of things you can't see from the center." - Kurt Vonnegut

I am just looking for a solution to get through the debate, personally I believe that there is more oil and just the thought of us adding more supply to the world market will burst the speculation bubble.