Most of the press has completely missed the most significant part of the Enron
stock fiasco relative to their employees' retirement.  Ellen Schultz from the
Wall Street Journal did an interesting article about on December 19 about the
Enron " floor plan " which subtracted from their pension plan holdings in Enron
stock via ESOP such that if that stock did not go up - they lost out. This had
the very significant effect of subtracting a fixed amount from their pension -
and the ONLY way they could make it up was to hold the stock... not that some
percentage of the employees did have some choice - and not that some made an
extra 100 or 200k which they 'lost' - what is missing from all the accounts is
how much of the 'loss' was really what they had invested of their own money, in
order to replace promised pension values that were taken away from them! Some
extracts are below...

Congress would love to just implement a 'quick fix' setting limits on company
stock ownership in 401Ks, and allowing companies to offer more investment advice
to their employees...  But IMHO that doesn't even come close to the real pension
protection that needs to be put in place -- as long as corporations are given
tax advantages for voluntarily setting up pension plans and telling their
employees they are a valuable part of their total compensation, then employees
need the assurance that those promises will be kept and can be relied upon!!!

If any of you are interested in just how easily and legally corporations today
can cut retirement benefits, feel free to contact me off-line!

Janet Krueger
507 529 8777 ext 110
December 19, 2001
Enron Workers Face Losses On Pensions, Not Just 401(k)s


Many Enron Corp. employees will suffer even greater losses to their retirement
income than was immediately apparent in the wake of the energy-trading company's
sudden downfall.

It is well known that many Enron employees will take big hits in their 401(k)
retirement-savings plans because much of their investments were in company
stock. What has been largely overlooked is that the pensions of many employees
also will be reduced as a result of complex, interrelated changes involving
pension and retirement-savings plans.
That is because Enron had a "floor-offset" arrangement, which has been used by
many companies, including Hewlett-Packard Co. and Airborne Inc. These
arrangements are intended to provide participants with the "better of" the two
plans, the savings plan (either an ESOP or a profit-sharing plan) and the
But it didn't work this way at Enron, even though the ESOP accounts have become
virtually worthless because of the decline in Enron's stock. In an unusual
arrangement, Enron calculated the ESOP "offsets" based on the price of the stock
from 1996 to 2000, when it was trading between $37.75 and $43.44. It then used
the locked-in value of the ESOP accounts to permanently offset the value of
pensions that employees had earned between January 1987 and January 1995.

In other words, Enron has reduced the amount of the pension by subtracting the
former -- and far higher -- value of the ESOP, even though the ESOP today has
virtually no value and thus can't make up for the difference.

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