Retirement Benefits Are Rigged to Favor the Rich

Retirement Benefits Are Rigged to Favor the Rich

Retirement Benefits Are Rigged to Favor the Rich

Wealthy CEOs are sheltering too much of their pay. A cap could fund long-term care for all seniors.


Our nation faces a retirement divide even wider than its income divide. Here’s just one dramatic indicator from a recent Center for Effective Government and Institute for Policy Studies report: 100 major corporate CEOs have individual retirement accounts equal in value to the entire retirement savings of 41 percent of American families. These CEOs can obviously afford any senior care they could ever possibly need, but average American seniors cannot. Nearly 70 percent of Americans over 65 will need at least three years of long-term care. Many can’t afford it.

One reason for this staggering divide: The rules governing retirement benefits have been rigged in favor of top executives. For average employees, the guaranteed monthly retirement check has become a thing of the past. Yet at the 383 Fortune 500 firms that provide data on executive compensation, over half of the CEOs receive customized company-­sponsored pension plans that guarantee them hefty checks for the rest of their lives. The firms can deduct the cost of these exorbitant plans from their taxes, even if they’ve cut pensions for ordinary workers or never offered them at all.

Nearly three-quarters of these Fortune 500 firms have also set up special tax-deferred compensation accounts for their execs. These bear some similarity to 401(k) plans, but with extremely generous perks. Ordinary workers face strict limits on how much pretax income they can invest each year in retirement plans. Top executives do not. The super-rich can shelter an unlimited amount of compensation in their retirement pots—and watch their more-than-ample savings grow tax-free.

To correct this egregious imbalance, the Caring Across Generations campaign is building a broad coalition of Americans who support a dignified retirement for all, with quality care provided by fairly compensated workers. Hawaii Senator Mazie Hirono has introduced the Living Independently for Extended Time Act, which would establish a federal grant program for innovative state-level long-term care and pilot programs.

Caring Across Generations has explored a number of ways to fund efforts like these, including new taxes on the pharmaceutical industry. Another useful and particularly appropriate approach would be to eliminate subsidies for corporate executives’ golden nest eggs.

In 2013, President Obama proposed capping IRAs and other tax-deferred retirement accounts at $3 million. That move would raise an estimated $9 billion over 10 years. Additional revenue could come from ending unlimited tax-deferred compensation for CEOs and prohibiting corporate tax deductions for excessive executive retirement benefits.

Caring Across Generations has united labor, immigrant-rights, and women’s groups with advocates for the elderly and disabled in a creative campaign that addresses one of the greatest challenges of our time. With an American turning 65 every eight seconds, and with so few seniors having savings adequate to their needs, the constituency for decent long-term care has a colossal potential to grow in size and power. How can we unlock that potential? Drawing attention to the stark contrast between the subsidized golden nest eggs of the rich and the long-term insecurity of everybody else would be a perfect place to start.

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Katrina vanden Heuvel
Editorial Director and Publisher, The Nation

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