Retirement Heist: how companies plunder and profit from the nest eggs of American workers

Most people can’t afford hourly fees for an attorney, so they seek out lawyers who take cases on a contingency-fee basis. But few attorneys represent employees and retirees in ERISA cases because the most a plaintiff can recover is the benefit, not other damages that can finance the case. Yet another quirk of ERISA: The attorneys, if successful, are awarded fees only at the court’s discretion. Plaintiffs face a financial risk as well: If they lose, they could be required to pay the other side’s costs. Delvin Williams, a former 49ers and Miami Dolphins running back, successfully sued the NFL for seven years’ worth of back benefits, but the NFL appealed, and the Ninth Circuit not only reversed his victory but also ordered him to reimburse the NFL plan $75,000 for legal fees. The league’s plan deducts $625 a month from his disability checks. His debt will be paid off in 2012.

Washington had been fortunate enough to find an attorney willing to take his case on a contingency basis, and initially, it seemed as though he would prevail. In March 2005, a federal judge in Phoenix ruled that the NFL plan had breached a duty to Washington by not disclosing relevant facts. The judge ordered the NFL plan to reconsider Washington’s claim for football-related disability payments.

The league stalled, at one point saying they were suspending processing his claim until Washington sent twenty years’ worth of income tax returns. The league then appealed, and in 2007 the U.S. Ninth Circuit Court of Appeals reversed the lower court’s ruling and handed a victory to the NFL. Victor Washington’s long game in the courts was finally over.

Washington refused to believe it. He continued to mail copies of his records and appeals to lawmakers, the media, and anyone he thought would listen. He died of heart and renal failure in a Pennsylvania hospice on New Year’s Eve 2008. He was sixty-two. Elapsed time: twenty-eight years.

PENSION PARTISAN

Another quirk in ERISA ensures that most employees and retirees who dispute a benefits decision are knocked off the field before the game even starts. Before they can take a case to court, they must follow a lengthy claims-and-appeals procedure that can take months or years, trying to obtain critical documents and attempting to meet tricky deadlines.

And they must deal with the benefits clerks. Anyone who has waited on hold to talk to a benefits plan administrator at a call center in Bangalore knows what a Kafkaesque process this can be.

If anyone was up for the challenge, it was Fred Loewy. He had worked in a lab at Motorola Inc. near Phoenix, Arizona, for more than thirty-five years, analyzing systems failures in guided missiles and nuclear power plants. As a teenager in France, he had joined the partisans and fought the Nazis. So Loewy was not daunted by complex calculations or uneven battles.

But he had never tried to fight a benefits administrator. His battle began the day after he retired in 1998. Loewy (pronounced Low-ey) noticed that his pension had been calculated incorrectly. It wasn’t a big deal—under $100 a month, reducing his pension to $1,100.

Loewy wrote a polite letter to the pension administrator, asking the staff to review their math and recalculate his pension. Instead of an answer, the next month the administrator sent him a check for $111, with no explanation. Loewy wrote again. A month later he received a check for $222, again with no explanation. This was just the beginning of a long, unhappy relationship. But before Loewy could pursue the matter further, his wife died unexpectedly, and he put aside his pension dispute while he dealt with family matters and medical claims.

He resumed his pension pursuit in December 2001, when he mailed a certified letter to the pension administrator asking it to explain how it was calculating his pension and to send copies of the pension documents they used, which are rights under ERISA.

After a month went by with no response, Loewy phoned the administrative offices and was told his letter hadn’t arrived. He sent a certified letter a second time, and again got no answer. In February 2002, he called again, and was again told that his letter hadn’t arrived. In March, not having heard back, he sent his letter a fourth time, and, in April, a fifth time. Finally, an administrator wrote back saying they had received his letter. In May, the administrator sent Loewy a copy of the pension-plan rules from 1998, the year Loewy retired, but didn’t include an explanation of how it calculated his pension.

Loewy already had a copy of the pension rules booklet from 1998. What he really wanted was an explanation of how his benefit was being calculated. So in June he wrote to Motorola’s Appeals Center, complaining that his requests for a review of his pension calculation had been “consistently ignored.” They ignored him.