When Vincent Russo of Forest Hills, N.Y., retired in 1993 after 31 years as an insurance agent for the New York Life Insurance Co., he expected a secure future, with money coming in every month from two company pensions. But three years after he left work, New York Life reduced the monthly payments on one of his pensions, contending that he no longer deserved the money.
Russo sued the company, trying to get what he calls his full pension restored. A New York Supreme Court judge in Queens dismissed the suit in November, ruling that the company had acted within its rights. Russo is appealing that decision.
The Employee Retirement Income Security Act of 1974, known as ERISA, was supposed to end such disputes by protecting employees’ pensions. But though many people think their pensions are secure thanks to the law, not all pensions fall under its jurisdiction, as Russo discovered.
ERISA covers all pensions from corporations as well as pensions from most nonprofit groups. It regulates whom pensions must cover and how much they can be reduced by Social Security, and it establishes financing standards.
But the law does not govern pensions from state and local governments or religious organizations. Nor does it govern the supplemental pensions that corporations provide to their higher-paid executives and salespeople, like Russo, when their earnings exceed federal caps on traditional pensions.
In Russo’s case, New York Life reduced the payouts only from his supplemental pension; his qualified pension was not touched. (Supplemental executive pensions are called “nonqualified” because they do not qualify for the tax breaks employers receive when they sponsor qualified pension plans.)
The company canceled 80 policies that Russo had sold since 1963, returning premiums to the customers in connection with a lawsuit it settled last year with policyholders who contended that many agents had used deceptive sales techniques.
Russo says he did nothing improper. But the company says that it can take back an agent’s commissions if it cancels a policy for any reason and that in docking Russo’s supplemental pension it was merely following its longstanding practice.
Because his supplemental pension was based on his earnings, the company subtracted from those earnings the commissions he had received from the 80 policies. It recalculated his supplemental pension and so far has reduced his pension payouts by about $55,000, said Russo’s lawyer, Herman Kaufman, of Manhattan and Old Greenwich, Conn.
Kaufman said his client had sold policies as instructed by the company and that the company’s rules allowed it to take back commissions only within about a month of a sale, not as much as 33 years later.
Even the thousands of people with pensions that are covered under ERISA can have problems collecting.
“In the normal course, benefits get paid,” said David Levin, a lawyer with the Washington office of Reish & Luftman, a benefits law firm. “And how well it goes for the vast majority of people is a wonderful thing. But there are also all sorts of shenanigans.”
The most common problems, he and others said, are that companies are sold, merged and split up, and it is hard to track where the pension plans went. ERISA requires companies to keep records for only six years.
John Kovalichik of Holyoke, Mass., worked for 31 years at Adams Pakkawood, a manufacturer there, and for its corporate predecessors. But when the company folded in 1991, he could not find out where to go to start collecting his pension.
He and other workers eventually called on the Pension Assistance Project at the University of Massachussets Boston Gerontology Institute, which runs a clinic to help people collect their pensions.
Jack Pizer, an institute employee who counsels people about their pension problems, said that in the Adams Pakkawood case, “it took nine months, but we finally learned that the pension plan was terminated and the money was used to buy annuities” at the Metropolitan Life Insurance Co.
“Met Life made no attempt to find these people,” Pizer said.
William Rhatigan, a Met Life vice president, said the problems began when Adams Pakkawood closed before all the annuities paperwork was finished. He also said the company sold the file cabinets containing the pension records.
The Adams Pakkawood retirees are now receiving payments.
Another common difficulty occurs when a company refuses to respond to requests to begin payments or miscalculates the benefits when it does pay.
In recent years, the Labor Department’s Pension and Welfare Benefits Administration and the government-owned Pension Benefit Guaranty Corp. have received a small but growing number of complaints about shortchanging, especially in lump-sum settlements.
But pursuing claims for ERISA-protected pensions can be burdensome. The courts have held that lawyers’ fees generally cannot be awarded unless there has been willful misconduct by the pension plan, a high hurdle to surmount.
And although it can be hard to receive pension payments when you think they are due, it’s a lot tougher when you don’t even know you are entitled to anything. According to Norman Stein, a law professor at the University of California at Davis who specializes in retirement law, some employers create pension plans but do not tell their workers, as the law requires.
“I have seen cases that border on outright fraud,” he said, most of them in small plans. “A lot of problems in small plans simply go undetected. Some people don’t know they earned a pension from an employer they left 20 or 25 years ago. It may not be much money, but for someone on a fixed income, even a $25- or $50-a-month pension can be pretty meaningful.”
There are steps you can take to reduce the risk of not getting your full pension.
Susan Martin, a pension specialist at Martin & Bonnett, a benefits law firm in Phoenix, says many problems can be avoided if workers collect key documents.
“Keep a photocopy of all correspondence,” she said. “Send everything by certified mail and keep the receipts.
“If you have a problem, ask for not just the plan summary, but the complete and updated plan with all amendments,” she added.
Before leaving your job, Martin said, get a copy of your statement of accrued benefits. By law you are entitled to such a statement each year.
“You should also keep photocopies of all your W-2 forms,” Martin said, because federal regulations require employers to maintain pension records for only six years. A company that is merged or otherwise reorganized may not keep track of records, and when you file for your pension, it may contend that it has no records of your work or that it paid you less than it did.
When you receive your statement of benefits, a lump sum or your first pension check, study the numbers and the plan documents. If the amount seems low, Martin recommends hiring an actuary to calculate your benefits.
