This website is dedicated to protecting the financial independence of retirees. It will highlight key issues impacting retiree pensions and benefits. This will include the positive steps some employers are taking to protect and enhance retiree pensions and benefits.

This website has a special interest in the right of employees to share in their pension surplus. This is particularly important since employees at many companies contribute to their surplus from their pay.

Companies benefit from compensating employees with pensions and benefits. This enables companies to attract and retain skilled, dedicated and high performing employees. Companies save cash now by paying a lower wage with the promise of benefits in the future. This web-site is concerned with ensuring that the promised financial benefits are maintained once the employee completes his part of the employment contract.

The following case illustrates the need to ensure this right of employees to share in the pension surplus from their paycheck deductions.

Hughes Aircraft vs. Hughes Retirees before U.S. Supreme Court - From Hughes Aircraft vs. Hughes Retirees before the U.S. Supreme Court, No. 97-1287

Earlier, the Court of Appeals concluded that Hughes Aircraft retirees alleged six causes of action:

1. Hughes retirees claimed that Hughes violated the Employment Retirement Security Act of 1974 (ERISA) prohibition against using employees' vested benefits to meet Hughes' obligations by depleting their pension surplus to fund a noncontributory plan, Section 203, 29 U.S. Code Sec. 1053(a).
2. Hughes retirees further argued that Hughes violated ERISA's anti-inurement prohibition, Sec. 403(c)(1), 29 U.S. Code Sec. 1103(c)(1), by benefiting itself at the expense of the retirees' Plan surplus.
3. Hughes retirees also alleged that Hughes breached its ERISA fiduciary duties in three ways:

 Amending the Plan in 1989 to fund a program outside of the Plan's purposes and thus violated Sec. 404(a)(1)(D), 29 U.S. Code Sec. 1104(a)(1)(D).

 Amending the Plan in 1991 to create the noncontributory plan and thus violated Sec. 406(a)(1)(D), 29 U.S. Code Sec. 1106(a)(1)(D).

 Using the surplus to fund noncontributory benefits for those who had never contributed to the Plan and thus violated Sec. 404, 29 U.S. Code Sec. 1104.

4. Finally, Hughes retirees claimed that the alleged termination of the Plan violated Sec. 4044(d)(3)(A), 29 U.S. Code Sec. 1344(d)(3)(A), which requires that remaining assets in a terminated plan be distributed to retirees.

In spite of these persuasive arguments the Supreme Court ruled that Hughes retirees had no right to any part of the $2 Billion Hughes pension surplus-much of which came from the money Hughes took out of their paychecks. Now, after this ruling, the lawyers of the corporate giants Hughes and Raytheon are fighting over the $2 billion surplus. "AARP believes the court needs to look much more closely at plans funded with worker contributions," said AARP staff attorney Mary Ellen Signorille.

This case, where Hughes sued its retirees before the U.S. Supreme Court, could affect 33 million workers and retirees in similar defined-benefit pension plans, said The Washington Post, April 28, 1998. The Supreme Court decision highlights the increasing need for organizations of employees and retired employees to work together to keep their pension and benefit rights.

America has the largest retired population in history. The financial independence of this immense retired population is in the national interest - critical to a healthy economy.

The $96 billion California State Teachers' Retirement System, Sacramento, is considering a gain-sharing program to take advantage of its 104% funding status. According to Cathie Eitelberg, national government practice leader in the Washington office of consultant The Segal Co., gain-sharing is a popular way to deal with surpluses: If investment gains are above a certain percentage, active employees, retirees and employers all share in the gain.

For some retirees it may mean a 13th check in a year or a one-time lump-sum check. For employers it may mean a reduction in the contribution for a single year, with no guarantee that it will continue in the future. If there is a downturn, all parties are responsible for making up for the difference (Source: Pensions & Investments, 9/20/99).

Earlier it was reported that the California Public Employees Retirement System (CalPERS) plans to boost retiree pay (Los Angeles Times, June 17, 1999).

Headline from USA Today, Oct. 1, 1999. IBM employees opposed to a change in their pension plan waged their battle on Web sites and in chat rooms, a sign the Internet is becoming a powerful tool for organizing workers. The ability of dispersed people to be organized has completely changed, said Erik Gordon, marketing professor at the University of Florida.

These are organizations with Web sites dedicated to protecting the financial independence of employees after retirement:

IBM Employee Benefits Action Coalition (IEBAC) - www.cashpensions.com/

Coalition for Retirement Security (CRS) - www.pensions-r-us.org/

Association of BellTel Retirees Inc. - www.belltelretirees.org/

"Delphi tries to calm worker pension fears," is the headline of an Automotive News Aug. 23, 1999 article. Delphi is a GM Spin-off.

Many Delphi workers are retiring early to collect a GM pension available only until October 1, 1999. Workers fear a Delphi pension will be worth less than a GM pension.

Nearly $2 Billion Needed

"Delphi needs $1.7 billion to fully fund its pension."
Automotive News, Aug. 23, 1999, pg. 6

Sprague vs. GM may give insight to practices that companies use toward long-term employees. The Sprague case advocated the health care rights of 84,000 GM retirees. This lawsuit achieved a number of legal victories but ultimately did not succeed.

The lawsuit began in August of 1989 with 114 salaried retirees who challenged the legality of the GM health care changes that took effect in 1988. The main thrust of the retirees' complaint was that GM had bound itself to provide salaried retirees and their spouses basic health coverage for life, entirely at GM's expense. The right to such coverage vested upon retirement, according to the plaintiffs, so the coverage could never be changed or revoked.

Seven separate causes of action were pleaded:

1. Failure to maintain the written plan documentation required by ERISA
2. Violation of the health care plan
3. Breach of fiduciary duty
4. Breach of contract
5. Equitable or promissory estoppel
6. Failure to supply requested information
7. Failure to comply with the requirements for summary plan descriptions

For more information see: http://lw.bna.com/lw/19980120/941896.htm

For instance GM/Hughes retirees:

Raytheon's 44% drop in stock price in one day is a good example of the pitfalls of investing too much of one's retirement in the company stock.

Class action shareholder lawsuits were filed against Raytheon regarding its 44% drop in stock price in one day, October 12, 1999:

1. A suit by Berman, DeValerio & Pease LLP http://www.bermanesq.com , alleges that Raytheon "concealed from investors that its 1999 third quarter charge would be materially higher than originally disclosed and that Raytheon was experiencing problems in its defense business'' said Jeffrey C. Block, a partner at Berman, DeValerio & Pease LLP.
2. A second suit, by Milberg, Weiss, Bershad Hynes & Lerach LLP http://www.milberg.com , "charges Raytheon and certain of its officers and directors with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 as well as Rule 10b-5 thereunder. The complaint alleges that defendants issued a series of materially false and misleading statements regarding trends in the Company's business and failed to disclose the problems it was experiencing concerning the integration of its acquisitions. As a result of these materially false and misleading statements and omissions, plaintiff alleges that the price of Raytheon common stock was artificially inflated during the Class Period," according to the firm's release.
3. Another lawsuit by Wolf Popper, LLP http://www.wolfpopper.com , alleges, "On September 16, 1999, defendants represented to the investing public that Raytheon expected to take a pretax $350 to $450 million restructuring charge in the third quarter 'related to further cost reduction opportunities,' but led the market to believe that its fundamental business was operating well and that Raytheon was not experiencing contract performance problems.

This was not the case. Indeed, as a result of a meeting the Company had with the Pentagon on September 11, 1999, defendants knew that they were experiencing problems with its programs. On October 12, 1999, Raytheon announced, among other things, that it would be taking a $668 million third quarter charge -- with $320 million of the charge relating to write-offs due to problems the Company purportedly had not been experiencing with its programs.

The effects of the Company's statement regarding the third quarter were staggering, as the Company's news triggered its biggest stock drop in at least two decades. Raytheon's Class A shares fell $19-1/2, or approximately 46 percent, from $42 to $22-1/2. Additionally, Raytheon's Class B shares plunged from $43 on October 11, 1999, to close at $24-1/4 on October 12, 1999, a drop of $18-3/4, or 44 percent, erasing almost $4.5 billion in market value."

4. Abbey, Gardy & Squitieri, LLP , http://www.a-g-s.com , initiated a lawsuit. According to the firm, "The Complaint charges Raytheon and certain of its officers with violating the federal securities laws. The plaintiff claims that defendants misrepresented and concealed material facts concerning the Company's operations and misled investors about the size of its restructuring charge, cost overruns and delays in certain defense contracts as well as its statements about expected 1999 financial results.
5. On October 15, 1999, Cohen, Milstein, Hausfeld & Toll, P.L.L.C. http://www.cmht.com/ filed a Class Action Suit Against Raytheon Company.
6. On October 18, 1999, Levy & Levy, P.C http://www.levylawfirm.com announced the filing of a class action lawsuit against Raytheon alleging violations of federal and/or state securities laws.

There are Internet Yahoo Message Boards for circulating news about major publicly owned companies. Messages are often posted by employees, retirees and shareholders on issues impacting business prospects, stock price and employee benefits. This is an excellent means to alert other retirees of new problems with pensions and benefits.

News and messages can be read and posted on these Hughes, Raytheon, GM and Delphi Yahoo Board addresses:

If you work at another company copy any one of the above addresses to "location" above. Then insert the company New York Stock Exchange (NYSE) ticker symbol after the last equal-sign and then hit the return key.

The Yahoo message boards state: This board is not connected with the company. These messages are only the opinion of the poster, are no substitute for your own research, and should not be relied upon for trading or any other purpose.

RETIREE NEWS is independent of any employer including Hughes Aircraft, Hughes Electronics, General Motors, Raytheon and Delphi.

Please e-mail retiree/benefits information or changes that may impact many Hughes Aircraft, Hughes Electronics, General Motors, Raytheon and Delphi employees/retirees to:

This web-site is dedicated to the right of retirees to be independently informed of changes in pensions and benefits to protect their financial independence.

To support independent volunteer research on changes in pensions and benefits, please send contributions to:
Coalition for Retirement Security
P.O. Box 19812
Washington, D.C. 20036
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