Twelve Steps to Negotiating a Bridge to Retirement

ACTUAL CASE HISTORY: Alex had been employed in the Information Technology ("I.T.") department of a large insurance company for 20 years. At 54 years of age, he was looking forward to retirement in just a few years. His wife, Barbara, had recently retired as a school teacher in a private school, and the two looked forward to traveling and spending more time with their grandchildren. Alex was just 11 months away from being able to retire with full pension and, more important to Alex and Barbara, his employer's Retiree Medical Plan, which provided for lifetime medical coverage at minimal expense. Barbara had no such plan at her school, and Alex had serious kidney problems that suggested he would face large medical bills in the future.

Unfortunately, Alex was chosen to be among about two hundred employees being let go as part of the company's outsourcing of its I.T. functions to a company in Pakistan. Alex knew that his being selected for downsizing was nothing personal against him, as the entire department was being disbanded as part of a company-wide move to lower payroll costs. It just seemed to come at the worst possible time. Alex immediately asked his Human Resources representative if there was any way that he might get the retiree medical benefits. Her answer was as swift as it seemed certain: "No, I'm sorry, there's absolutely nothing at all that can be done." He and Barbara consulted our firm from their home state of Iowa to see if we might be able to help.

What Alex needed and surely deserved is most often called a "bridge to retirement," that is, some mechanism - any mechanism - to get him from "non-qualified" to "qualified" status for full retiree treatment. We see this problem with considerable frequency.

After reviewing with Alex and Barbara all of the relevant facts, events and circumstances, we sent them on a search for more information. What they learned held the key to negotiating to get Alex the full retiree benefits he and Barbara sought. First, they learned that two senior executives (one an executive vice president, one a senior vice president) had received their own "bridges to retirement" during the last year. Second, they learned that a few of Alex's colleagues were being kept on board by the company, but re-assigned to different departments. Most importantly, Alex learned it was growing more likely that the company in Pakistan that was to take over his employer's I.T. functions might not be ready to do so for another six months.

We assisted Alex in preparing an email letter to his employer's Chief Operating Officer, outlining Alex's arguments that he should receive the benefits of full retirement status. His letter focused on three topics: (a) the company needed at least some I.T. professionals to stay on longer than originally estimated; (b) the company needed at least some I.T. professionals to continue working, but assigned to different departments, and (c) the company obviously recognized the concept and the fairness of providing a "bridge to retirement" to those who had given long-term and faithful service, as demonstrated in how they treated the "higher up's."

Though it took a few weeks to get the response, Alex did receive notification that his departure date would be later than originally thought, in fact 12 months later, giving him precisely what he needed. He and Barbara were surprised how relatively easy it seemed to achieve their "bridge to retirement" goals, after what had just weeks earlier seemed like a hopeless, lost cause. We weren't surprised, because we have many times helped clients negotiate their own "bridges to retirement." Our experiences in negotiating "bridges to retirement" have led us to conclude that the most difficult aspect of doing so is simply counteracting Human Resources' insistence that it's not possible, and convincing our client that it is. While achieving bridging to retirement is not always easy, with so much at stake, it's shameful not to try.

LESSON TO LEARN: If, just before you are scheduled to achieve full vesting in a company pension, or earning retiree medical benefits, or some other significant employee benefit - you are fired, downsized or laid off, don't presume you're out of luck and without recourse. To the contrary, there is every good chance that you can negotiate to receive what, otherwise, you were scheduled to soon receive. By requesting the accommodation of a "bridge to retirement," and supporting that request in one of the following twelve (12) ways, you can often achieve what you've been told is not possible. And, bear in mind too, that in making a request for a "bridge to retirement" you have nothing to lose and everything to gain.

WHAT YOU CAN DO: Over the years we've found the following twelve (12) steps and measures to be particularly helpful in gaining "bridge to retirement" for our clients:

1. Are All Calculations Correct? When faced with "bridge to retirement" issues, the first thing we consider is "What are the correct numbers?" You might find it hard to believe, but we've seen mistakes made in figuring out how many years the employee worked for the employer, mistakes made in how old the employee actually is, and mistakes made in adding the two together. While such arithmetic is at par with the lessons learned in third grade, that doesn't preclude errors. More complicated calculations regarding years of service, final or average compensation, and the like are common, too. You can't even assume that calculations made by a computer are correct, because the numbers input into the computer may, themselves, be in error.

2. What Does the Plan Say About Calculations? Our second step in analysis is to review the wording of the retirement or pension Plan itself. We carefully review Plan provisions to determine precisely how many days, weeks, months or years are needed to "cross the bridge." More than once we've found that Human Resources and our clients have both miscalculated.

For example, a Retirement Plan may provide that an employee receives "credit" for a year's employment only if he or she worked from January 1 through December 31 of that calendar year. Alternatively, a Retirement Plan may provide that a full year's "credit" is fully earned so long as the employee was employed for 180 days in the calendar year. And it is possible, too, that a Retirement Plan may provide that an employee has to work only 1000 hours to earn a year's credit toward retirement. Be careful in your reading, and just as careful in your arithmetic.

3. Does the "Plan," Itself, Provide for Bridging? Some pension and retirement plans have express provisions regarding who, in what circumstances, and when employees are eligible for bridging. The most common Plan provisions we see provide that, if an employee is within two (2) years of attaining full retirement status, bridging of some kind will be provided. Other plans provide that, for example, if your age and your years of service together add up to a certain number, such as 65 or 75, then bridging will be permitted. Reading pension and retirement plans may be boring, but reading them can provide a lifetime of financial security, too. Review your Plan carefully, and then read it carefully, again. Incidentally, most Plans don't use the word bridging, so don't look for it; instead, the concept is spelled out in words such as "permitted accommodations," "flexibility in calculation," or "thinning out" of final employment.

4. Does the Company have a Policy or Practice of Bridging? It's a good idea to inquire among your colleagues - especially those who have retired already - to determine what your company may have done for others in your circumstances, that is, possibly in need of bridging. Arguments for your being granted bridging are especially persuasive if you've discovered that bridging has been granted to members of senior management. We've found that one of the strongest arguments for "bridging" is that the Company has done it for others, and so should do it for you.

5. Have You Been Assured that You Would Be "Kept On Board" to Retirement (or Vesting)? It's not uncommon for people to start worrying about full vesting in retirement or pension years before they are at the "doorstep of transition." If you've previously been told "Not to worry," or "Don't fret... you're safe," or things of that nature, you may have a convincing argument that you've remained with the company in reliance upon those assurances, and so have earned the right to either remain employed over the full period necessary to vest, or to bridging so as to be treated that way. In fact, we always counsel those in the 47 to 52 age range to consider making inquiries on this very subject - preferably in email - to gain exactly this kind of leverage for use in later years, should the need arise.

6. Is the Timing of Your Departure Immovable; If so, Why? One thing you will never see "written in stone" in a retirement or pension Plan is the exact date by which you must officially no longer be an employee. The determination of your last date of employment is always a matter of your employer's discretion. By simply postponing your final date of departure, you can often achieve your goal - full vesting in retirement or pension. So if you receive notice of your position being eliminated as of December 31, and your vesting does not take place until May 15, don't be shy about asking to remain the necessary four-and-one half months. If told that this is not possible, always ask "Why not?" More than once our clients have asked that very same question, and then been told, "Now that you ask, I guess we could consider that."

7. Might a Different Job be Available? Even if your job is being shipped overseas, or your entire department is being closed down, each on a certain, immovable date, might your skills be transferable and utilized by a different department of your company, even if it's just for a few weeks or months? In this way, you may find that extra time to get you bridged, not by a bridging accommodation, but by simply working for your salary and benefits, and the added time and credits to achieve that "big benefit" that may otherwise be scheduled to soon vest.

8. Remember that Retiree "Treatment" does Not Require Retiree "Status." Don't get confused between the words "treatment" and "status." Said differently, you may be given the "treatment" given to those who qualify for full retirement benefits even though you have not attained the "status" of full retiree. By "treatment," we mean that you are getting the benefits of a fully vested person. By "status," we mean you are, in actuality, a fully vested person. It is not necessary to be a fully vested person in order to be treated like one. (As an analogy, even if I am not, in reality, a king, I can still ask to be treated like one, at least for a day.) Human Resources representatives are fond of confusing these two concepts and, in the process, convincing employees that "you cannot be treated like a fully vested person if you are not a fully vested person." That's exactly the reason behind asking for a "bridge": to have you receive full vesting or retirement "treatment" even though, technically, you don't qualify for the "status." Keep the two different notions in mind, and clearly apart.

9. Might Your Job Loss - Just Months Short of Vesting - Be the Result of Intentional "Targeting?" One issue to carefully consider is whether you may have been chosen to be fired, downsized or laid off for the very purpose of denying you your pension or retirement rights. It is sometimes troubling to consider how many people are treated in just this very way. While such conduct by employers violates both Federal and State laws, the enormous savings achieved by reducing the number of people who will achieve full retirement and pension is so great as to tempt many employers. If you think that this might be the case, don't be afraid to raise the issue, and if necessary, seek a consultation with an experienced employment law attorney.

10. Consider an Appeal to Basic Fairness, Especially "At The Top." Even if you are faced with a Plan that does not permit "bridging," and even if bridging has never been granted to other employees before, and even if you've never been assured that you would remain on the job until retirement, you can always fall back on the concept of simple, basic, fundamental fairness to request that a "bridge to retirement" be provided to you. Every single retirement or pension Plan I've ever reviewed contains a provision (usually to be found at the very back of the Plan) that provides the Plan Administrator, or the Compensation Committee with flexibility in exercising their duties. These are usually worded to grant the Plan Administrator or the Compensation Committee "the right to make such modifications in application of the terms and provisions of the Plan as, in their sole discretion, they find necessary or appropriate under the circumstances." This is the closest thing you'll ever find to an open invitation to make a heartfelt request, based upon your own unique life circumstances, to be treated as a special case. For example, if you gave twenty-nine years of service to your employer, but missed vesting in full retirement because of a mere paperwork glitch, your bringing this to the attention of the Plan Administrator might very well get you the small "bridge" you may need.

11. Consider, Too, Using What We Call the "Doctrine of Cash Equivalents." In negotiating for certain workplace benefits such as pension "bridges," we are at times faced with an abject refusal to deviate from the terms and provisions of a benefit "Plan." It is sometimes presented to us that "The Plan does not allow that, and we just don't deviate from the Plan." In these instances, we come right back with the most effective response: "Well, surely there is no reason that you can't make up the loss to our client in some other way... especially by paying her, in "cash" an amount equivalent to her losses." Given that "will," this is the easiest "way" to get to the same place a "bridge" would take us.

12. Finally, Remember that in Workplace Negotiating "Email is Your Faithful Friend." One thing to always bear in mind about workplace negotiating is that using email to communicate is to your advantage. First, it is "forever." That is, it is nearly impossible to delete or lose an email; no matter what someone does, an email trail always exists. Second, people often feel "unguarded" when writing emails, or responding to them, and so are more open, honest and frank in email correspondence. Third, they are so very easily transmitted, printed and stored. Remember that, in contrast, what you say using your lips can be easily heard wrong, denied, forgotten, mischaracterized, or misplaced. Whatever you do in connection with negotiating a "bridge to retirement," do it in email.

A note about our Actual Case Histories: In order to preserve client confidences, and protect client identities, we alter certain facts, including the name, age, gender, position, date, geographical location, and industry of our clients. The essential facts, the point illustrated and the lesson to be learned, remain actual.