Retirement Heist: how companies plunder and profit from the nest eggs of American workers

Lucent couldn’t unilaterally reduce benefits for the union retirees, because their benefits were protected by negotiated contracts. The retired managers and salaried employees were another matter, however. This dynamic is endemic: Companies go after salaried retirees’ benefits first, since they have fewer legal protections. Among those who suddenly had their benefits cut were managers who had been induced to retire two years before, with the promise of subsidized health coverage. Lucent told them this was a shame but pointed out that the fine print gave the company the right to change their coverage. Most companies have these “reservation of rights” clauses in their benefits documents, so even if the retirees had been promised the benefits—orally, by the human resources managers, or in writing—the plan documents would override them. Lawsuits were futile. The odds of winning this type of benefits case are about on a par with the Chicago Cubs winning the World Series. The cases are heard in federal court. Retirees rarely bring them and rarely prevail. And even when cases make it to court, they take years to resolve.

Joseph Parano, a retired engineer and manager for the Bell System with Stage IV colon cancer, knew he didn’t have time to make a federal case out of it. So he tried something creative. Shortly after Schacht’s road show, Parano went to superior court in San Mateo, California, paid his $30 filing fee, and sued Lucent in small claims court. Normally the battleground for neighborhood spats and debt collectors, small claims courts are not a venue for federal benefits cases. But Parano had successfully sued both a moving company that lost his sister’s belongings and a bank for not paying interest on a dead relative’s passbook savings account, so he thought it was worth a shot. In his complaint, Parano sought $5,000 (the maximum amount recoverable under a small claims action) “for loss of spousal death benefits” and also had a claim for $2,300 in medical bills he said should have been paid from Lucent’s retiree health plan.

Lucent’s big-league lawyers were flummoxed, and in February 2004 they settled the claim for an undisclosed amount. “But it was a lot more than $10,000,” Parano said afterward, with a certain amount of satisfaction. He also got his digs in one last time, in his self-published obituary, which ran in the San Francisco Chronicle in February 2006:

He retired from AT&T after 32 years of service with a secure benefit package. After retirement he was reassigned against his wishes to Lucent Tech. Inc. who reduced his health benefits and eliminated his spousal death policy that was promised. He is survived by his loving wife of 24 years, Susie Cronin Parano.

The notice provided the time of the funeral mass and said that in lieu of flowers, donations could be made in Joe’s name to: PETA, 501 Front St., Norfolk VA 23510. Joe was sixty-nine.

OLD WIVES’ TALES

Most retirees and their spouses, however, didn’t have a chance. Connie Sharpe, a widow in Las Cruces, New Mexico, had been a classic corporate spouse, moving many times as her husband, George, set up missile programs in Cape Canaveral, Florida, Vandenberg Air Force Base in California, and White Sands, New Mexico.

When George retired in 1975 after working for Bell Laboratories for thirty-four years, he had a pension, retiree health coverage, and a death benefit. The couple hadn’t taken out life insurance, because they were relying on the death benefit of $34,080, which was what George had been earning when he retired.

But when George died in 2003, his wife’s health coverage ended six months later, and his pension ended, too. Lucent maintained that Connie Sharpe had waived her right to a survivor’s pension; she didn’t remember doing so and asked to see the paperwork. Lucent told her she would have to subpoena the records. With just $950 a month in Social Security, hiring a lawyer was out of the question. “If I don’t live too long,” she said, “I won’t have to go on welfare. I sure do feel sorry for the big executives who make millions when they retire.”

Margaret Jelly, Bill Jelly’s wife, also found herself in a fix she never expected to be in. She had been a classic stay-at-home spouse in the golden age of benefits. If anyone was likely to have a secure retirement, it was this postwar cohort, whose paths followed a common trajectory.