On the inside
MILESTONE
– Your ARA marked the end
of its first year and the beginning of its second at its annual meeting
September 14 in East Hartford.
Leadership changes were made, and reports delivered. It was a busy first year with an important
second year launched. Please see page 2.
THE NATIONAL
SCENE – The National
Retiree Legislative Network (NRLN) has identified the best elements of pension
legislation currently being put forward.
Also, in a second story on NRLN, the group is supporting a new bill to
force reserving for retiree health benefits.
Please see pages 3 and 4.
ARA AUDIT
– Kostin, Ruffkess &
Co. gave generously of its time and not only recognized ARA financials as
fairly presented but helped us with some minor tweaking to improve our
process. Please see page 4.
OVERVIEW
– The Changing World of
Retirement. Walter Busalacchi provides a
perspective on how the government and corporations are changing the retirement
rules, and why it is important for retirees to remain vigilant. Please see page 5.
Are ARA/Aetna Relations
Improving?
One
year ago, the Aetna Retirees Association (ARA) was created in response to a
breach of faith by Aetna management; they unilaterally cancelled our dental
plan subsidy. This action came at a time
when Aetna was experiencing record-setting profits and new stock highs.
Initially, Aetna seemed surprised by
our strong reaction. Company officials acted
irritated and defensive when approached by ARA leadership. They seemed to draw a line in the sand and
refused to listen to their retiree constituents. This adversarial tone left ARA with no
alternative other than to fight fire with fire.
Shortly after this year’s Aetna annual
meeting, Aetna management acknowledged that they had dropped the ball on
retiree communications and discussions began that centered on how to begin to
rebuild the trust that had been seriously breached. The nature of these talks and the need for
confidentiality has made it difficult for ARA to report to association
members. Though we are still unable to
give you a detailed report of negotiations, we can assure you that top Aetna
management and the Aetna board of directors know who we are and are no longer
taking us for granted.
The tone of recent talks has moved
dramatically away from earlier conversations.
Both sides are far more open and less adversarial. Company officials have expressed willingness
to work with retirees and correct their communication errors of the recent
past.
Talks to date have not resulted in any
actions that would entirely compensate for the loss of the dental subsidy. It is doubtful that Aetna will voluntarily
make amends for that “takeaway”. While
your association will continue to try and right that wrong, we do not hold out
a great deal of hope that we will resolve this situation any time soon.
We will continue to keep the
litigation option on the table.
Meanwhile, we are hopeful that, over the long haul, we can work
collaboratively with Aetna management to preserve our remaining benefits, and
help control healthcare costs/premiums.
The dialogue with Aetna will be ongoing.
Your
association will continue to work with state and federal leaders to help
develop legislation that will protect pensions and other benefits of
retirees. This issue has become a
problem of national proportion
and the ultimate solution for us and others may lie in Congressional
action. The ongoing support of all
members of the ARA continues to be crucial to ensuring a positive outcome.
Help
Us to Build Strength in Numbers
ARA membership
has exceeded a thousand in the first year.
In a political world, that gives us “clout”, and helps us in dealing
with both Aetna management and state and national political figures.
However, there
are many more Aetna retirees who can and should join our ranks, giving us more
resources and more clout. Some do not
know of us. Others may not know how to
join or, perhaps, just have not gotten around to it. To this end, we ask you to check with your
friends and former associates to find out if they are members. The enrollment process is simple and can be
achieved by using the ARA web site.
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Second Year
of ARA Launched at Meeting
The
Aetna Retirees Association (ARA) marked key milestones at its annual meeting
September 14 in East Hartford. The
meeting marked the end of a significant first year of operation, and the
beginning of an important second year.
Several
organizational changes were made. John
“Tad” Bell was elected a board member, to serve until September 2008. Bell is well known to many Aetna retirees for
his years of work on Aetna benefits programs.
His experience will be of great value to the organization.
Carl
Galinsky was appointed vice president and membership coordinator. Carl is an American International College
graduate with a degree in accounting. He
joined Aetna in 1968, working initially in group experience rating before
moving to corporate sales, becoming director of the central region. He left Aetna in 1996 and joined United
Health Care.
Dave
Smith was appointed vice president and communications coordinator. He graduated from Boston University with a
degree in journalism and worked for a time as a newspaper reporter and
editor. He joined Aetna in 1965 in life
advertising, and became director of marketing services in PFSD before retiring
in 1992.
Emmett
McTeague stepped down from his leadership team assignment but will continue as
a director.
Dorothy
Cooney has also resigned as a member of the team but will continue to serve as
a volunteer.
Officers
reelected were: chairman John Dwyer, president Robert Gilligan, secretary
Arthur Bradbury, treasurer Carl Walbam, and vice presidents John Perra, Robert
Quinn and Marilyn Wilson.
Four
standing committees were established.
The audit committee will be headed by Greg Bertles
assisted
by Carl Walbam and Emmett McTeague. The
Aetna liaison committee will be chaired by Bob Quinn assisted by Tad Bell and
Greg Bertles. The legislative committee
will be chaired by Warren Azano assisted by John Perra and Dave Smith. The governance (internal) committee will be
chaired by Bob Gilligan assisted by John Perra and Bob Quinn.
The meeting covered a wide range of
business including an expected proposal from Aetna that will be a part of the
company’s 2006 benefits package. There
will be one very important change to that program this year. Retirees must make an election of benefits on
prescription drug coverage during the enrollment period. There will be no automatic extension of
current coverage. Anyone who fails to
make an election will be without coverage.
Treasurer
Carl Walbam reported on the audit by Kostin, Ruffkess & Co. Please see the audit story in this issue.
Carl
Galinsky reported on the upcoming mailing to all members to renew
membership. This year, PayPal will be
offered as a convenient option for payment.
Warren
Azano gave a report on national initiatives.
The ARA works with the National Retiree Legislative Network (NRLN) to
propose and support legislation to protect pension and other retirement
benefits. ARA is also working on the
state level on initiatives. It was
agreed that ARA will increase its efforts over the next 18 months to work with
state and federal legislative leaders to support legislation aimed at
protecting and/or restoring retiree benefits.
John
Perra will assume overall coordination responsibility for shareholder
proposals. Members who are shareholders
who are thinking of submitting a shareholder proposal should coordinate their
efforts with John. He can be contacted
via the ARA web site, or by mail at ARA, PO Box 280165, East Hartford, CT
06128. Shareholder proposals must be
received by the Aetna Corporate Secretary no later than November 22.
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NRLN Makes Case For Real Pension Reform
National
Retiree Group Cites Legislative Priorities for America’s Pension Crisis
(WASHINGTON, Aug. 22, 2005) – The National Retiree Legislative Network (NRLN) is encouraging meaningful pension reform legislation proposed in the U.S. Senate, while opposing provisions contained in a pair of bills under review by separate committees in the U.S. House of Representatives.
“Workers and retirees have planned for
retirement based on the expectation that the pension and other benefits they
have earned through decades of their labor will be there for them. There must be safeguards in pension reform
legislation that will prevent employers from breaking promises to workers and
retirees,” announced NRLN President Jim Norby.
Norby cited the current effort by corporate
lobbyists on behalf of legislation to legalize cash-balance plans
retroactively, which is vigorously opposed by the NRLN and its member
organizations. “Making cash-balance
legislation retroactive would endanger pending lawsuits for hundreds of
thousands of employees and retirees,” Norby said.
“At this time, we support the National
Employee Savings and Trust Equity Guarantee Act (S. 219) that has been created
in the Senate Finance Committee and we recommend certain provisions of the
Pension Benefit Protection Act of 2005 (S. 1304),” Norby said.
Key
features of Senate bill S. 219 that are supported by NRLN include:
·
The requirement that under-funded
pension plans must reach 100 percent funding within seven years.
·
Stricter pension funding
requirements for companies with poor credit ratings.
·
Protection of older employees when
there is a conversion to cash-balance or hybrid pension plans.
·
Preventing the abusive practice
known as “wear-away” in cash-balance conversions. Wear-away occurs when companies open
cash-balance accounts that are worth less than the benefits older workers
accrue under defined pension plans. Under
this practice, companies can freeze or reduce the benefit accruals for older
workers for a period of time, while younger workers continue to earn benefits.
·
The requirement making cash-balance
plans prospective – not retroactive.
The
Pension Benefit Protection Act of 2005 (S. 1304) also prohibits wear-away in
cash-balance plan conversions. It would
also equalize benefits for older employees when traditional benefit plans are
converted to cash-balance or hybrid plans, and offer them a choice at
retirement between the old and new plans, Norby noted.
NRLN
opposes a pair of bills – the Pension Preservation Act of 2005 (H.R. 2830) and
the Pension Preservation and Portability Act of 2005 (H.R. 2831) – which are
currently assigned to the House of Representative Education and Welfare
Committee and the Ways and Means Committee.
“As
currently written, these bills would legalize age differentials of accrued
benefits when defined benefit plans are converted to cash-balance plans and
wear-away,” Norby said.
“Each
week we read news reports of under-funded retirement plans from troubled
companies and the threat they pose to the federal Pension Benefit Guaranty
Corp. (PBGC). That agency reports that
single-employer plans have liabilities that exceed assets by $450 billion,”
Norby noted.
“What
we’ve ended up with is a system that’s broken and in need of a legislative fix
that assures the integrity of the PBGC and protects retirees from losing the
pensions they deserve after loyal years of service to their employers,” Norby
said.
“If our corporate leaders will not live up to
their commitments for deferred compensation, then the federal government must
take steps to protect the interests of retirees,” Norby said.
“It is time our congressional leaders and
President Bush bring about meaningful pension reform that prevents age
discrimination, ensures strong pension funding and disclosure requirements, and
protects trust fund assets. In addition,
legislation such as The Emergency Retiree Health Benefits Act (H.R. 1322) is
desperately needed to help retirees receive their promised health care
benefits,” Norby added.
Based in Washington, D.C., NRLN is
dedicated to securing federal legislation that will guarantee the fair and
equitable treatment of retirees in private and public sector health and pension
programs. NRLN represents a
non-partisan, grassroots coalition of retiree associations with a combined
membership of nearly 2 million men and women who are seeking to protect their
pension and health care benefits. For
more information, visit the NRLN Web site at www.nrln.org.
ARA is a member of the National Retirees
Legislative Network and works with them on national issues that can help
retirees. While Aetna has committed to fully funding its pension obligation, it
would be helpful to have this commitment backed by law. Also future retirees
will be affected by cash balance rulings. NRLN helps us remain vigilant in
these areas.
National
Group Urges New Law
The
National Retiree Legislative Network (NRLN) has voiced support for new
legislation to protect retiree health insurance benefits. In a recent news release, Jim Norby,
president of NRLN pointed out that retiree health benefits are not welfare but
deferred compensation earned through decades of employment. However, unlike Pension benefits which
companies are required to reserve for, health benefits require no advance
funding and can be changed by the companies.
Two senior fellows at Harvard’s Kennedy School of Government recently
described the situation as a “national crisis in the making.”
Norby
said that retirees deserve the same protections for health benefits as are
available for their pension plans. Those
protections would be provided under a proposed new law, H. R. 1322, the
Emergency Retiree Health Benefits Protection Act that NRLN helped to
write. Another approach being considered
is for Congress to establish minimum health care funding and vesting
requirements similar to pension requirements in ERISA. This approach would be accompanied by tax
incentives to help companies with the transition.
ARA
members are urged to write to their representatives in Congress to express
their concerns and demand action on HR 1322 or some other similar protection.
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ARA Audit Completed
At our December 2004 meeting, the Board appointed the firm
of Kostin Ruffkess & Company, LLC as our independent auditors. We are very appreciative
of the time that they devoted to their review and the thoroughness of the
audit. Among the components of the audit were direct confirmation that member’s
dues and donations were properly accounted for, along with a comprehensive
review of expenses, supporting documentation and payment authorizations.
Internal controls were also reviewed. At the auditor’s recommendation, the
Board approved a change in our fiscal year end from December 31st to April 30th.
In addition to the appointment of auditors, the Board has
also appointed an audit committee to oversee the implementation of the
auditor’s recommendations and to provide ongoing oversight. Board members Greg
Bertles and Emmett McTeague were named to work with Treasurer Carl Walbam. The
auditors have recommended further separation of duties of the accounting
function and that the Audit Committee review detail documentation supporting
receipts and expenses periodically on a test basis. These recommendations are
currently being implemented.
Our financial statements are prepared using the cash basis
of accounting, and to quote the report the auditors have stated: “In our
opinion, the financial statements referred to above present fairly, in all
material respects, the assets, liability and net assets of Aetna Retirees
Association, Inc. as of April 30, 2005, and its revenues and expenses for the
initial period then ended, on the basis of accounting in Note 1.” Note 1
differentiates the cash basis of accounting from the accrual basis of
accounting.
As stated
in our first newsletter, ARA does not plan to publish its financial reports for
reasons stated there. Individual members may request to review these statements
in our offices. We are all thankful to our Treasurer, Carl Walbam, for setting
up our procedures and working with the auditors to make sure they meet the
traditional high standards Aetna retirees expect.
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The Changing World of
Retirement
By
Walt Busalacchi
In less than a generation, the retirement landscape
in the United States has changed dramatically. The responsibility and risk for
providing a financially secure retirement is rapidly shifting from institutions
(government and employers) to individuals. We can no longer sit passively by
hoping the institutions that historically provided us with secure retirement
benefits will, on their own, continue to do so. More than ever, we must be
informed about the issues affecting our retirements, get actively involved in
securing the benefits we were promised and do more to ensure our own retirement
security.
GOVERNMENT:
Social Security
benefits were income tax-free until 1983 when Congress voted to tax 50% of
benefits above a certain limit. In 1993, President Clinton raised the amount
taxed to 85%. Eligibility for receiving full Social Security benefits was
increased as part of the 1983 reform package from age 65 to 67. Demographics
are straining the Social Security Trust Fund. Medicare premiums continue to
rise and the projected Medicare shortfall is already huge and growing. As
private companies increasingly try to transfer their responsibility for
retirees onto government programs, the costs of such programs can only get
worse.
After paying into
the system for many years, the baby boomers and others are being told by
Federal Reserve Secretary Alan Greenspan for example that, “we have promised
more than we can deliver.” (Too bad he didn’t realize that before we
paid all that money into the system.)
Suggestions for
dealing with this shortfall include: further extending the age required to
receive benefits, increasing the amount of income subject to social security
tax, reducing benefit levels, changing the cost-of-living formula and means
testing (thereby turning Social Security into more of a welfare program).
President Bush’s
proposal to create individual savings accounts would allow workers to invest a
portion of their Social Security taxes in the market. This would transfer the
risk for accumulating a retirement nest egg from the government to the
individual.
EMPLOYERS:
It’s no secret
that employers have been moving away from “defined benefit” pension plans where
a guaranteed dollar amount (based on salary level and years of service) is paid
to retirees for life. These are being replaced by less expensive “defined
contribution” plans like 401-k’s and/or “cash balance” plans where the employer
contributes a certain limited dollar amount to an employee’s account. It is
then up to the individual employee to invest those contributions so that, upon
retirement, there will be enough to meet anticipated financial needs. The risk
and responsibility for growing those contributions has been transferred from
the employer to the individual.
Media headlines
increasingly speak of the number of companies and industries (airlines most
recently) that have severely under-funded pensions and/or who have walked away
from their pension obligations altogether. As a result, the Pension Benefit
Guarantee Corporation, the federal agency established in 1974 to “encourage the
continuation and maintenance of defined
pension plans” is
running a huge deficit ($11.2 billion in ’03 and $23.3 billion in ‘04).
Many people don’t
understand that the “guarantee” provided by PBGC is limited. It does not
necessarily replace 100% of promised pension benefits. For 2005, the maximum
annual benefit (Straight Life Annuity) for a person age 65 is $45,613. If you
retired earlier than age 65 and/or if you had accrued an annual pension greater
than that amount, you would receive less from the PBGC. (The maximum guaranteed
benefit for a person retiring in 2005 at age 60 is $29,648; $20,526 at age 55
and $15,964 at age 50.) One currently retired United pilot (pilots are required
by law to retire at age 60) who was receiving a pension in excess of $100k
will, because of United’s default, see that benefit cut to $36k. Another United
employee who was expecting a $140k annual pension will receive only $28k.
And as we all
know, fewer and fewer employers are providing retiree health benefits. For many
years, major employers took pride in providing “free” medical benefits to
retirees, in part as a reward for their years of loyal service. Companies are
increasingly taking a variety of steps to reduce these obligations. They
include: having retirees pay a portion of the premium (frequently a variable
amount based on length of service), setting spending limits, i.e., “capping”
their exposure to future cost increases, restricting the eligibility for
dependent coverage, making plan benefits more restrictive, reducing or
eliminating subsidies, eliminating eligibility for new hires and of course
increasing premiums, co-pays, deductibles and co-insurance percentages. All
these measures transfer more of the cost from companies to individual retirees.
While often unfair
and in some cases unethical (especially when applied retroactively to those
already retired), the stated rationale for many of these actions is to reduce
cost and enhance shareholder value. (A by-product of which is enhanced
executive pay.)
SECURING OUR RETIREMENTS:
While these are
complex issues and some of the changes are understandable, the point is, our
retirement security is at risk. The days of, “letting someone else worry about
it” and hoping you will be taken care of are gone. (“Mother Aetna” no longer
exists.)
As retirees, we
need to be more actively involved in protecting our benefits and managing our
retirements. Specifically, we must keep informed about the issues, monitor
proposed changes to company benefits and government legislation and make our
opinions known. Partnering with other retirees and retiree groups makes us more
effective and gives greater voice to our concerns. Where possible, we should
engage officials in a dialogue to thoughtfully and constructively influence
future decisions/policies. Together, we need to remain vigilant and vocal.
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