Letters to the Editor

I was offended by the article "The courts: PwC sued over cash balance, 401(k)" (Feb. 21, page 3).

I am a PwC professional (not a partner) who participates in both of the plans mentioned. The article is misleading at best, erroneous in fact at worst. I am disappointed that an article would be published where the author did not take the time to verify the information included. I understand that certain internal information is not readily available, but in those situations it should be omitted.

Additionally, the article implies that the poor employees were duped by the complexity of the plans and the creativity of the partners, including not understanding that the investments include those of the management company. We audit these types of plans on a regular basis. The firm provides us with all financial information required by law, and if employees chose to read it, they would find all appropriate disclosures. Our employees are certainly of the caliber that we could look at the financial statements and see if they were not in line with the plan documents provided.

The discussion regarding how the established retirement age is beneficial to the partners completely disregards the fact that all "rank-and-file" employees also have the ability to take advantage of the same opportunities. Additionally, the 200% match discussed is, once again, available to those same employees. I personally took advantage of it my first year by saving up all year and contributing my entire salary for the month of September to get the match.

Finally, it is not required that the firm offer the generous benefits that it does to begin with. We are provided a fair retirement package that is designed to encourage professionals to remain at the firm, and rewards us for our tenure. When publishing an article critical of a company's retirement package, those employees affected by it should be interviewed as well in order to gain a balanced viewpoint.

Rosemary Geelan

senior associate

PricewaterhouseCoopers LLP

Denver

Concerning "PwC sued over cash balance, 401(k)," a clarification: No court has ever considered whether an employer can adopt a fictitious normal retirement age for the sole purpose of evading ERISA's defined benefit plan standards. That issue is squarely presented in the pending Laurent suit because in a 1999 letter to the Internal Revenue Service, PricewaterhouseCoopers admitted its five-year retirement age was not "normal" and was specifically adopted to sidestep the so-called "whipsaw" rule. The mere fact that normal retirement age can be younger than age 65 does not mean that it can be "any" age, which is PwC's position (how about age 12?).

Yes, ERISA allows a plan to use a retirement age younger than 65 when the circumstances dictate — think airline pilots or NFL players. But neither ERISA nor the tax code defers to sham contract terms — which of course is what PwC's "retirement age" amounts to, nothing more. This is consistent with the IRS' long-standing ruling position, dating back almost 50 years (see Rev. Rul. 57-163) and as recently confirmed in proposed phased retirement regulations. Would the IRS really propose a regulation that it believed "contradicts a provision in the tax law"? We don't think so, and we're confident the courts will agree.

Eli Gottesdiener

Gottesdiener Law Firm PLLC

New York

Editor's note: Mr. Gottesdiener represents Timothy D. Laurent, a former PwC employee who brought the lawsuit, and the proposed class. A motion is pending to certify the lawsuit as a class action.

San Diego County Employees' Retirement Association's actuary was directed by the board to provide initial discussion on the potential impact of Assembly Constitutional Amendment 5, which is the same as Gov. Arnold Schwarzenegger's proposed initiative. According to the actuary's analysis, if the proposed changes to a defined contribution plan were to take effect, we would still have the existing defined benefit plan for all retired, deferred and current active members. However, what could change is that in June 2007, the DB plan would stop taking in new members. These new members' pensions would be funded under a DC plan, which does not provide the same kind of benefits offered by the current DB plan.

Under the split DB/DC scenario, the county would have to continue contributing to all active members on the DB side and start contributing to all new hires on the DC side. Retired, deferred and current members have every reason to worry. For one, active employees on the DB side could face a huge increase in their contribution rate. Secondly, the plan sponsor, which ultimately is liable to DB plan participants, could see a huge increase in contributions into the retirement plan. Faced with this increase, the plan sponsor may push to reduce ancillary benefits, such as the COLA and retiree health coverage.

Another alarming issue is that ACA 5 and the governor's proposed constitutional amendment, which is misleadingly named the Fair and Fiscally Responsible Public Employee Retirement Act, do not address disability components and death benefits included in our existing DB plan. Under a DC plan there are none.

If Gov. Schwarzenegger gets his way on public pensions, the family of a deputy killed in the line of duty would not get survivor benefits from the DC plan. Under ACA 5 and Gov. Schwarzenegger's scheme, all the family would receive is a funeral. The deputy's family would receive no death benefit from the deputy's DC plan and would have to rely upon other sources of savings, such as a 401(k) plan. Disabled deputies would fare no better. ACA 5 and Gov. Schwarzenegger's plan would eliminate disability retirements altogether. Instead, like the slain deputy's family, a deputy disabled on the job would have to rely on savings elsewhere, such as his/her 401(k) plan. Public employees who are disabled and forced to leave the work force could even end up on public assistance if they don't have a lot of savings or use up what they have. Ironically, plan sponsors seeking to offset the losses in survivor benefits by offering disability and life insurance for their deputies might end up with insurance premiums as large, if not more than, the cost of funding their pension plans. How "fair and fiscally responsible" do you think this is?

What I've just described is not a worse case scenario — this is the reality under ACA 5 and the governor's DC initiative. I will continue to support DB plans as the only viable retirement plan economically feasible for the retention, recruitment and economic stability of the members and plan sponsor. You must also take an active role in this debate by telling your elected officials, both locally and at the state level, that you support the preservation of your retirement plan and strongly oppose any measures to change it.

Dave Myers

vice-chair

San Diego County Employees'

Retirement Association

San Diego