Vol. 1, Edition 3
Letters,
Letters, Letters
This edition of
ARA News is devoted to the letters, both published and unpublished, that were
written when our members read Elease Wright’s response to Bob Quinn’s OP-Ed
piece that appeared in the Hartford Courant.
We begin with Bob
Quinn and Elease Wright’s original columns so that anyone who missed them may
have context for the letters:
Slashing Retiree
Benefits Is Unprincipled Business
March 25, 2005, The Hartford Courant
Robert Quinn
|
Corporate business ethics have
eroded dramatically over the past 20 years.
Nowhere is this more evident than in the treatment of retirees. Companies are slashing retiree benefits
to increase shareholder value. A 1991
accounting rule requires companies to estimate the cost of future retiree
benefits, which then becomes a liability on the balance sheet. By eliminating benefits, companies can
turn those liabilities into profits.
This bolsters their stock price, which heavily influences executive
compensation. In response to this growing trend,
the National Retiree Legislative Network was created. It represents more than 2 million retirees
from corporations including GE, Boeing, SNET, IBM and Aetna. It seeks federal legislation prohibiting
changes to benefit plans after retirement and requiring restoration of
benefits already reduced or eliminated.
There are more than 25 million retirees affected by post-retirement
cuts in pension and health benefits. The federal government has been of
little help so far. The Wall Street
Journal quoted a spokeswoman from the U.S. Labor Department as saying in
November that "retired workers aren't our constituents anymore."
The courts have generally been unsympathetic, allowing companies to reduce
benefits, ignore labor contracts and abandon pension plans. Fortunately, a bipartisan group of
Connecticut legislators recently proposed legislation that would revoke any
state-funded grants, loans, guarantees or abatements to any Connecticut
company that unfairly reduced retiree benefits. Retirees have few good options for
coping with the loss. Some try to live
more frugally or are forced to spend down their retirement savings more
rapidly to make up for lost benefits, increased premiums, higher deductibles
and other out-of-pocket costs. Those
who can do so search for jobs, hopefully with health benefits, to supplement
their retirement incomes. Still others
avoid getting treatment for health problems and don't have prescriptions
filled to save money. Aetna, despite its reputation as
an enlightened employer and good corporate citizen, is one of the companies
breaking its promises to retirees to enrich its bottom line. Aetna set a spending limit of $4,235 on how
much it would contribute yearly for employees retiring after March 1994; any
amount above that is the responsibility of the retiree. It also increased out-of-pocket expenses
for those already retired, and it eliminated the dental subsidy for current
retirees and medical and dental subsidies for future retirees. Eliminating the dental subsidy produced $32
million in savings for the company in the first quarter of 2004, contributing
to a 41 percent increase in that year's total earnings. Aetna's decision is especially
harmful to retirees living on small pensions.
The extra costs they must absorb can approach 15 percent or more of
their pensions. Retirees' faith in Aetna has been shaken. They fear other benefits may also be lost
to the relentless desire for profits at any price. Meanwhile, Aetna's executives are
making millions. Aetna Chairman and
CEO John W. Rowe recently pocketed $18.2 million from the exercise of stock
options. This money is in addition to
Rowe's total compensation of $4 million for 2004 and $3 million in 2003. Federal Reserve Chairman Alan
Greenspan, testifying before Congress in February 2004, asserted that
"we have an obligation to those in and near retirement to honor what has
been promised to them. If changes need
to be made, they should be made soon enough so that future retirees have time
to adjust their plans for retirement spending." Robert
Quinn is a retired Aetna employee and vice chairman of the Aetna Retirees
Association, a nonprofit group that lobbies for the protection of retirement
health and pension benefits. |
Aetna Strengthens Retiree Benefits
April 2, 2005, The Hartford Courant
Elease Wright
The March 25 Other Opinion article on
Aetna's retiree benefits by Robert Quinn ["Slashing Retiree Benefits Is
Unprincipled Business"] is misleading in several respects. The article is selectively focused,
exaggerates the changes in retiree benefits and overlooks very substantial
positive aspects of Aetna's benefits package.
Far from "slashing" benefits, Aetna has taken active
steps to strengthen retiree benefits and, in some instances, increased
benefits. We take our responsibilities
to employees and retirees seriously.
That is why we have voluntarily contributed more than $1 billion to our
pension plan in the past three years, and increased spending on other retiree
benefits to more than $44 million in 2004.
For 2005, Aetna's projected spending for retiree benefits is expected to
reach $50 million.
As opposed to what the reader of Mr. Quinn's article might be
led to believe, we continue to provide a retiree dental benefit, though at a
somewhat higher cost, while increasing the array of benefit choices available
to retirees including offering a dental discount card available at just $6 per
month. Through this program, retirees
may receive discounts on dental services averaging 28 percent and ranging as
high as 50 percent.
In an industry where many of our competitors do not offer pension
plans and subsidized retiree benefits, Aetna continues to provide a strong and
comprehensive package including a pension, life insurance, subsidized medical
coverage and dental coverage at discounted group rates. And we provided these benefits even in the
midst of our difficult financial turnaround.
In addition, a significant portion of retiree 401(k) savings originated
from company matching contributions.
Elease Wright, Senior Vice President
Human Resources,
Our letters
from retirees start with one from Greg Bertles, a member of the ARA Board. Greg went through the Aetna’s own financial
data and his analysis produced the following:
To the Editor of the Hartford Courant:
On April 2nd, 2005, Elease Wright, Senior VP, Human
Resources at Aetna, replied to another opinion article regarding cutting Aetna
benefits to Retirees. Her response, it
seems to me was both misleading and disingenuous.
I would have thought that Ms. Wright would have received more accurate
information from her accounting department.
While she states that Aetna “contributed more than $1 billion” to its
pension plan in the past three years, most of those dollars were due to a
re-allocation of assets. The actual
cost to the Aetna, pre-tax in those three years was $304.5 million. I would suggest that Ms. Wright read her
company’s 10K report for the year 2004 as filed with the SEC on March 1st.
Further,
her statement that Aetna increased spending to more than $44 million in 2004 for
other retiree benefits is also wrong, or at best misleading. On page 71 of the above-mentioned 10K
report, Aetna clearly notes that in 2004 there was actually $9.9 of income, not
cost, due to the other post-retirement plans.
This resulted largely from a $31.8 million “curtailment benefit”. The footnote to that entry notes that this
is due to “a plan amendment related to the elimination of the dental subsidy
for all retirees…”
In the years 2003 and 2002 Aetna also benefited by “curtailment
benefits” of $34.0 million and $11.8 million due to a “phase-out” or
elimination of benefits to current employees.
Incidentally, these “curtailment benefits” reflect monies that
Aetna had previously put aside to pay for the retirement plans. When they decided to “phase-out” and
“eliminate” benefits, they took these dollars that were set aside and let them
go to the bottom line to increase earnings.
Ms.
Wright says that in some instances Aetna has increased benefits. I would like her to be more specific. If it is the offering of a Dental card, then
that is truly disingenuous. And the
“somewhat higher cost” for dental care for this retiree was an increase from
$14 per month to $67 per month, a “somewhat” 379% increase.
The remainder of Ms. Wright’s response is typical company
self-praise.
What I would like to know is why they did it. The company had pre-tax income from
continuing operation of $1,898.9 million (that’s $1.9 billion, and does not
include $1 billion from a favorable tax decision). Was the “curtailment benefit” of $32 million
from eliminating the dental subsidy really that important?
Ms. Wright uses the stock phrases of “highly competitive
environment” and “our competitors do not offer…retiree benefits.”
That might be hard to argue against except for two reasons. First, when companies eliminate benefits
they usually do it for new people coming in; they don’t make the promise of
benefits from the start. Then everyone
knows what the rules are. Good
companies don’t hire people, promise them a benefit package and then reduce or
eliminate it after they retire.
Second, the actual ongoing cost of all retiree medical benefits,
not just dental, historically has been between $25 and $30 million
annually. General and administrative expenses
for the company have been in excess of $3 billion, and revenues have been $18
to $20 billion. Surely the cost of
keeping your promises is not that great.
Naturally I am disappointed by the benefit cut. I am more disappointed in the explanation
that Ms. Wright tries to give. At least
she could have done her homework and understood the actual financial impacts
before she wrote her letter. But I am
most disappointed in the change in Aetna, the great company for whom I worked
for 25 years, and the way it is treating its employees and retirees.
G. Greg Bertles,
Here is a sampling of letters from
other retirees who had hoped to be heard - only one was published by the
Courant:
|
Aetna Strengthens Retiree
Benefits?? As an Aetna retiree,
I am confused by Ms. Wright’s claim that Aetna has “strengthened” retiree
benefits. It wasn’t all that long ago
that Aetna provided medical/dental benefits to its retirees - for free. Since the late 80’s,
there has been an accelerating erosion of benefits. From free to paying a small percentage
based on years of service, to “capping” the amount Aetna will contribute for
future cost increases and since about 2002, limiting the number of people eligible
for any company subsidy to where no future retirees will have any at
all. But worst of all, was the
decision effective this year to take away the dental subsidy of those who are
already retired. It is painful and in an odd way
embarrassing to see a senior Aetna official make such a foolish and obviously
inaccurate statement. But then I
guess it is just another sad example of questionable corporate logic that
occupies news headlines across the country. Marilyn J. Wilson, ARA Editor’s note: this letter was
the only one published by the Courant |
Those Were the Days I am an Aetna Retiree who truly loved working
for Aetna. It was a highly ethical
organization. I was thrilled when I
was able to find another organization of the same caliber when I joined
Johnson & Johnson. J&J’s Credo
seemed to me to capture the same standards that I had experienced at
Aetna. That is why it saddens me to
see not only the abuses stated in Bob Quinn’s excellent op-ed piece but the
half-truths in Elease Wright’s response.
What kind of thinking causes Aetna officials now to say they are
providing the dental benefit “at a somewhat higher cost” when the entire cost
is now the responsibility of those retirees who can afford to keep it? Or to
proclaim that their $6 dental discount card is as generous when our retirees
can’t find dentists on the plan in their areas? Then they present pension
funding as if it were an increase to benefits. The plan was fully funded when most of us
retired. Apparently management failed
to keep it funded and has to catch up.
But the benefit is the same. I wish I could see evidence of the
values Aetna had when it was a company that made and kept its promises. The company I brag about to my current
co-workers. Dorothy J. Cooney, Higganum, CT |
|
The Blind Leading
the Blind The recent
Letter-To-The-Editor from Aetna's E. Wright raises an interesting question
about what corporations decide to do and how they support those
decisions. Specifically, the article
describes Aetna as being, "In an industry where its competitors do not
offer pension plans and subsidized retiree benefits". Many of us as children were told,
"I suppose if all the corporations jumped off a cliff, you would do that
too?" For all the talk about "leadership" and the high
salaries that are paid for it, too many corporations play
"follow-the-leader" and use industry "averages" to
justify their poor decisions. If Aetna were the only employer in the world to offer
subsidized retiree benefits, it wouldn't make any difference. All we need to know is they offered
them. Nobody forced them to do
it. Employees didn't negotiate for
them. Aetna freely gave them. And now that people are retired and relying
on those benefits Aetna says they want to take them back. But just because many others are
acting inappropriately doesn't mean Aetna should too. They need to step up and do the right
thing. Leadership should not be based on short-term issues that
please Wall Street, but on having the guts to "keep the promises
made" to both policyholders and employees. That's what leadership is all about. Brian M. Farrell, Sr., Bristol, CT |
Wright is Wrong on Benefits In response to Bob
Quinn’s March 25 Op Ed, “Slashing Benefits is Unprincipled Business,” Elease Wright
put forward a rather weak and rambling response apparently in the hope
something might stick. But nothing she
said changes the essential facts. Aetna promised its
retirees subsidized benefits. Some
employees accepted severance agreements and took early retirement because
they thought they would have these benefits for life. Aetna has taken away the retiree dental
subsidy and who knows what might be next. This decision defies
all logic and common sense. Taking
away a benefit after someone has already retired is not appropriate. Retirees can’t go back to their employer
after they retire and say, “You know this retirement thing is financially
difficult. Everything costs so
much. How about increasing my pension
a couple hundred bucks a month?” So why should Aetna be able to
decide after-the-fact that they are going to go back and unilaterally change
the retirement agreement??? Aetna has a moral obligation to honor the
commitment. Elizabeth J. Rose,
Higganum, CT |
|
The Rich Get Richer In an April 2nd
Letter-to-the-Editor, Elease Wright attempts to lightly dismiss the
elimination of a $32 million dental retiree benefit simply as, “a change to
control costs.” This cold corporate rationalization misses the point that
real people are being hurt by this decision. And while retirees are suffering,
Aetna’s already well-paid executives are taking ever more. According to a recent Morningstar report,
“Aetna’s executives are egregiously overpaid.” The report also raised a
concern over, “the alarming confiscation of shareholder wealth for the
enrichment of Aetna’s management.” I worked for Aetna for
35 years during a time when its leaders were more ethically inclined and
better balanced the needs of employees (current and former) with other corporate
interests. There is no acceptable
rationale for taking from retirees to benefit those who already have so much. Maurice A. Belanger,
East Hartford, CT |
|
And for our final letter we share a letter we
received from someone who is not yet a member but is as upset as our members
are by what is happening and the disappointing response from Ms. Wright.
From:
William Albrecht
Sent: Saturday, May 07, 2005 9:30 PM
To: editor@aetnaretirees.com
Subject: OPEN LETTER
I regret
the unfortunate delay in adding my thoughts to what has been said or still
needs saying in the continuing saga of "balancing" the commentary on
Aetna's actions. Being in Florida
precludes one from seeing everything in print or anything on the local airways
regarding the benefits issues. To the
ARA I offer these thoughts and approve your sharing them as appropriate.
The
"corporate" response to Mr. Quinn's letter is an incredibly
deliberate and almost insulting parse of words.
A truly effective and proactive management team makes points announcing
the freeze in 2005 premiums at the same time rather than well after the
decision to eliminate the dental subsidy and seemingly in response to
the issues raised by the ARA.
For the company
to espouse the wonderfulness of the "sensitive" feelings they had
over increasing health care costs only after the uproar seems disingenuous at
best. It seems much more likely the
"we chose to absorb the full increase" was a reaction, not a first move. The so called "bean counters" would
probably conclude that the company saved so much money in immediate real
dollars as well as the "accounting dollars" of future years that
holding the line for a year was a relatively cheap way to try to offset the
public relations disaster of dropping the subsidy.
It is also
insulting to read how more than 500 retirees "took advantage" of the
new Dental PPO and nearly 500 selected Vital Savings. I would strongly suggest that few if any of
these 1000 or so retirees would have selected either choice if not forced into
it by the subsidy elimination.
Of final
note is the lame attempt to limit the scope of Mr. Donaldson's remarks in April
2000. If I read his remarks correctly
he said that he "understood the importance of retiree benefits and that
Aetna would stand behind its' obligations." So now Aetna says he really
only meant that statement would apply and Aetna would do the right thing if the
possible split into two companies went forward.
The double talk two months later not withstanding, nor the hiding behind
the "Aetna retains the right...." lessens the impact of these
actions.
Aetna had those rights
for more than 125 years, and rose to become the premier multi-line insurer in
the world. Only after a series of
missteps by the most senior of the management team put the company and hence
the many dedicated and loyal employees behind the eight ball were any of these
benefits at risk. And all the while
those senior managers, and probably today's as well enjoyed or will in the
future packages where they'll get credit for the maximum years of service for
the pension benefit, even if they spend only a few years actually on the
corporate payroll. Check the details out
for the "big" guys who have left in the last 15-20 years. Bet they ain't losing a dime of their
packages, and some are probably collecting 6 figure payouts on the
pensions. Shame on them.
William
Albrecht
Naples,
FL