Firms Gamble Pensions to Fund Exec Perks

Rank-and-file benefits may be at risk as companies use tax loophole
By Jim O'Neill,  Newser User
Posted Aug 4, 2008 9:18 AM CDT
"I look at it as greed and taking care of the top echelons," said a man whose yearly pension was halved after a company using the practice went bankrupt.   (KRT Photos)
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(Newser) – Companies from CenturyTel to Intel are funneling pension benefits to retired executives at the expense of workers, using a practice that potentially violates tax rules and puts pension plans at risk, reports the Wall Street Journal. Hundreds of millions of dollars in long-term benefits pegged for executives are draining plans at the expense of the rank and file.

IRS rules prohibit company pension plans from giving disproportionately large shares to executives; companies can give supplemental benefits, but those don’t carry the tax benefits general plans have. IRS officials say they have no idea how many companies are skirting the regulations, and admit they probably can’t do anything about it anyway.