Ethics

My paper will demonstrate the impact cutting off benefits has on retired employees and on those who have a vested interest in the company. Employees often work for decades at one company. They should be afforded the same amount of dignity and respect now as ambassadors of said company. However, the changing economic climate coupled with business cutting back to save money and keep afloat, retirees are often seen as the first place to reduce services.

My hope is seeing how this response affects the company, the retirees, and the people who are hoping their investment proves being beneficial in the long run.

Many people believe that when employees work for a company, that they are there for as long as the business stays solvent and he or she remains loyal to them. Generations of employees have stayed at one employer for decades. It was common for people to work at one company from high school or college graduation until their retirement 50 or 60 years later.

Since employees dedicated their lives towards promoting a company and watched its progress from highs and lows, many people feel the company needs to give back. That was not a problem for a long time since many places could weather many economic storms over time. Long-range planning and the shareholders confidence in the company made the team effort persevere over difficult economic times.

However, the current economic client seems to be the equivalent to a raging storm. With businesses going bankrupt, and money not coming in as before, executives must face making tough choices that will not sit well. One group is the retireesthe very group that made the company operates smoothly.

The facts in this endeavor are damning. According to the Wharton School, many retirees have lost a significant chunk of their retirement benefits (401K) due to the declining economy. (2009) This means people who are retired may have no other recourse but to reenter the workforce to make up the difference. Worse, it would take years to replenish funds lost during the latest downturn. (2009).

Trillions of dollars have been lost because of the poor economy. That alone is not the reason for the on-going malaise. Companies have either cut back on employer matches or cut them out altogether (2009). This income that retirees worked for needs to be made up somehow, and the employers are not going to be the answer.

Another example of this growing trend appeared in the auto industry before the economy went into a tailspin.

General Motors decided to eliminate retiree benefits to its workers at the beginning of last year (January 2009). (Saubert 2008) The company even encouraged its current workforce to continue working part-time until retirement age (65) or face possible reduction or elimination of benefits (2008).

It gets less encouraging when the government stepped in to assist. About two decades a ago, a government agency known as the Financial Accounting Standards Bureau (FASB) imposed regulations forcing companies to show where their benefits are going in relation to their employees on the job and retired. (2008). What happened next was that companies that could not afford to spend funds on their retirees benefits either limited the amounts paid out or simply stopped. In some cases, the recipients were not notified of these changes and not finding out until they attempted to use their benefits, usually at the doctors office. (2008)

Both Wharton and Saubert agree that controlling costs could help all parties involved. Living heart-healthy lifestyles such as eating healthy, exercising and not smoking were several ways employees could encourage their employees to remain well. This helped out companies in decreasing sick days, paying out medical expenses and more. While this has some positive attributes, it does not solve the persistent problem of giving those who have served what they are entitled totheir benefits. (2008)

Their benefits are shrinking be it on the private sector or in state government. There is plenty of money that must be accounted for those retirees have not been receiving. Many state
legislators have not been keeping up with the contributions that need to be made. (Byrnes, 2010)

The result is a staggering shortage in the trillions and retirees scurrying for answers (2010) One question that needs answering is, Who will be paying the difference between what is paid by the state and the total bill If taxpayers are unwilling to makeup the difference, then the burden falls on the retirees. (2010)

If the latter answer becomes a reality, then those retires will have to enter the workforce. (2010). As previously mentioned this option is becoming a cold reality because what retirees thought they had stored away is either greatly reduced or gone. With restrictions on the number of hours they can work a week, the amount they can make, etc., retirees must wonder what went wrong.

As state legislatures are battling this issue, one city demonstrates what may be happening nationwide. In San Diego, California, the issue was giving city employees deferred compensation instead of raises. (Burke, 2010). That sounds good on paper because the money would be dispensed at a later time, when the local or state government had the resources to allocate the funds.

There was one small but significant detail there was no money for the city to defer to its employees. (2010). The question was asked how can a company (or a municipality in this case) ask its employees to hold off on step increases when the city had no money to contribute to their employees

With the lack of available funds, city leaders must make a tough choice either raise taxes on its citizens or make deep cuts on services. Raising taxes will most likely cause an uproar within the community who already feel the crush of high property taxes, gas prices, mortgages and other necessities. Eliminating services could range from cutting school-based programs such as intramural sports, the band, etc., opening City Hall only four days a week, limiting the public library to certain days and times (closed on weekends, for example). It may mean stopping senior shuttle services because of lack of funding.

One can easily see that choosing either one of those options is not the best. Even splitting the difference and raising taxes somewhat and cutting some services are only a stopgap measure at best. Some group will be affected more than others, but saying that nobody would be hurt by the decisions made by city officials would be just malicious.

When the government attempted to join the fray on the federal level, the results were just as messy as in the state level. When the Equal Employment Opportunity Commission approved a measure enabling companies to offer different plans for its retirees who are not yet eligible for Medicare, it set up a firestorm regarding who had the best interests of retirees in mind.

Groups such as the AARP (Association for the Advancement of Retired Persons) were fighting to overturn the statute claiming the new rule would put retirees in a bind when paying for medical expenses, such as prescriptions and other physician benefits. (2010) They could force employers to scale back on their benefits or shut them down. That would mean seniors would have to choose which medications to take and when. That would not be something AARP executives believe should happen. (2010)

The National Education Association disagrees with AARPs stance, saying the EEOC is simply communicating that employers who pay out employee benefits can still do so without interruption of service. They think the AARP is going too far with their campaign to prevent the change from happening.

Right now, the EEOC ruling stands but will be taken up again after other federal agencies review the proposed changes. The statute becomes final when it gets published in the Federal Registry. Until then, both sides of this issue will continue to convince legislators and the EEOC that their side is correct.

What we have learned is that people are working longer and holding off retirement because their houses are worth a fraction of what they were several years ago. Companies that were in the black a few years ago are now struggling to make tough financial choices. Those decisions are forcing those who have departed from the workforce to consider taking a part-time job to make ends meet.

People are not happy with having their benefits cut significantly or eliminated altogether. The federal government wants to make it easier for companies to deliver benefits and states are trying to find alternative methods of stopping its workers from finding other jobs. There is not a lot of good news regarding this issue because the economy and poor judgment by top company executives (such as Kenneth Lay at Enron) or greed (Bernie Madoff) have left retirees with nothing to live on for their golden years.

CBS MoneyWatch thinks there is a silver lining in all of this turmoil. If people can reinvent themselves, then they can make up some of what was lost during the downturn. That might not make much sense to those who have exited the workplace, but having the knowledge could prove pivotal for a prospective employer.

Retirement benefits are going to come back at some point when the economy improves and there is more disposable income. Recessions have come and gone as this current one will. What this  tale demonstrates is that people who are still working must make plans to save more money for their retirement. In doing so, they must also diversify their portfolio because should their funds be tied to one companyand that company foldsthen they are not saddled with regret and an empty account.

Retirees face problems regardless of where they live. However, the companies they worked for should step up when the going is good to make amends. These people spend their lives making the company or business better. It would be foolhardy to let those people down by cutting off their benefits. It does nothing in the realm of creating good public relations and will only work to damage the reputation of that company.

Companies should also look for other ways to make funds available. This country was born out of a can-do attitude and people who were ready to take chances. It would be to these companies  benefit (and bottom line) if they can devise a better plan to make this groups-and the ones after themhappy they devoted their time and energy to that company.