Report Spotlights Massive Retirement Funds for CEOs

100 CEOs Have as Much Retirement Wealth as 41% of All US Families, 59% of African-American Families, and 75% of Latino Families

By Sarah Anderson, and Domenica Ghanem, Institute for Policy Studies

The Institute for Policy Studies on December 15, 2016, released dramatic figures on the retirement savings gap between those at the top of corporate America and the rest of us.

A Tale of Two Retirements and related graphics are available here.

The report’s key findings are summarized below:

Just 100 CEOs have company retirement funds worth $4.7 billion — a sum equal to the entire retirement savings of the 41% of US families with the smallest nest eggs.

This $4.7 billion total is also equal to the entire retirement savings of the bottom:

  • 59% of African-American families
  • 75% of Latino families
  • 55% of female-headed households
  • 44% of white working-class households

On average, the top 100 CEO nest eggs are large enough to generate for each of these executives a $253,088 monthly retirement check for the rest of their lives.

  • Among ordinary workers, those lucky enough to have 401(k) plans had a median balance at the end of 2013 of $18,433, enough for a monthly retirement check of just $101.
  • Of workers 56-61 years old, 39 percent have no employer-sponsored retirement plan whatsoever and will likely depend entirely on Social Security, which pays an average benefit of $1,239 per month.

With nearly $3 billion in special tax-deferred accounts, Fortune 500 CEOs stand to gain enormously from the President-elect’s proposed tax cuts on top earners.

  • If President-elect Trump succeeds in cutting the top marginal tax rate from 39.6% to 33 percent, Fortune 500 CEOs would save $196 million on the income taxes they would owe if they withdrew their tax-deferred funds.
  • Unlike ordinary 401(k) holders, most top CEOs have no limits on annual contributions to their tax-deferred accounts. In 2015 alone, Fortune 500 CEOs saved $92 million on their taxes by putting $238 million more in these accounts than they could have if they were subject to the same rules as other workers.
  • Michael Neidorff, the CEO of Centene, a provider of health plans to Medicaid recipients and other low-income Americans, has nearly $140 million in his deferred compensation account, up 658 percent since the 2010 launch of Obamacare.

The retirement asset gap between CEOs mirrors the racial and gender divides among ordinary Americans.

  • The 10 white male CEOs with the largest retirement funds hold a combined $1.4 billion, more than eight times more than the 10 CEOs of color with the largest retirement assets and nearly five times as much as the top 10 female CEOs.

Says Sarah Anderson, report co-author and director of the IPS Global Economy Project.

“While slashing jobs and benefits for ordinary workers, CEOs of large companies have been feathering their own nests. It’s no wonder so many American workers are concerned about whether their golden years will be tarnished by financial stress.”

This is the Institute’s second report on the CEO-worker retirement gap.

Institute for Policy Studies turns Ideas into Action for Peace, Justice and the Environment. They strengthen social movements with independent research, visionary thinking, and links to the grassroots, scholars and elected officials. I.F. Stone once called IPS “the think tank for the rest of us.” Since 1963, they have empowered people to build healthy and democratic societies in communities, the US, and the world. To find out more, visit their website.

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One action earlier this month aims to penalize companies that inordinantly favor CEO pay over the average worker. As reported December 7, 2016, by the Institute, the city council in Portland, Oregon, adopted a new local tax rule that sets a precedent for cracking down on excessive CEO pay.

In a 3-1 vote, the council agreed to add a surtax on the city’s existing business license tax for firms that pay their CEOs more than 100 times what their typical worker receives. This will be the nation’s first tax penalty for extreme CEO-worker pay gaps.

The city has identified more than 500 corporations that do enough business in Portland to be affected by the surtax, including many that regularly dominate the highest-paid CEO lists, such as Oracle, Honeywell, Goldman Sachs, Wells Fargo, and General Electric. The measure will generate up to $3.5 million in annual revenue to support public services.

“This path-breaking policy tackles a key driver of our growing inequality,” notes IPS veteran executive compensation analyst Sarah Anderson. “I predict this will spark a wave of similar actions, much like the local living wage campaigns that have spread like wildfire across the country.”

According to the Portland revenue department, most large US cities have tax structures that allow for a similar CEO pay surtax.

The Portland proposal could also build momentum for federal action. Rep. Mark DeSaulnier (D-CA) and Rep. Bonnie Watson Coleman (D-NJ) have introduced the CEO Accountability and Responsibility Act (H.R. 6242), which would increase federal tax rates on companies with CEO-worker pay ratios of more than 100-to-1. Polls show public outrage over CEO pay cuts across the political spectrum.

In assessing the surtax, the Portland government will make use of CEO-worker pay ratio data that will soon be available under a provision of the 2010 Dodd-Frank financial reform law. Publicly held corporations will be required to report the ratio between their CEO and median worker pay to the Securities and Exchange Commission, beginning with 2017 figures.

Says IPS associate fellow Sam Pizzigati, the author of The Rich Don’t Always Win.

“We may be at the dawn of a new ‘pay ratio politics. Corporate pay policies have been driving our income inequality. With annual pay ratio disclosure, we can start insisting that corporations that do the most to make this inequality worse face real consequences for the damage they’re doing.”

 

Ed. Note: While the US is unlikely to institute a Maximum Wage as an economic measure, penalizing corporations for pooling money at the top through initiatives like Portland’s may be a good start — if not reversed politically. Greed-before-people may be an untenable long-term position for a growing society.

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About Kay Whatley 2179 Articles
Kay Whatley serves as Editor and Reporter with The Grey Area News. Kay is a published author with over 20 years of experience in the publishing industry. Kay Whatley is wife to Frank Whatley, founder of The Grey Area™ newspaper and The Grey Area News online news website.