The ultimate layaway plan

Buy yourself a dignified future and get one for the whole family!

If you see a deduction on your employment pay stub for a defined benefits pension plan, regardless of your age or years on the job, you have bought your future already — on layaway. 

In the purchasing agreement called "layaway", the buyer makes installments to the seller over time in advance of taking possession of the purchased item. In the meantime, the seller has "laid away" the item while the installments roll in — at the same time ensuring that the product is as unmolested as it was when purchased. 

It's a contract with consumer protections.

A widget that was fine when you purchased it but is busted when you finally get it means your money back, no? The seller breached the layaway agreement.

Over at the Human Resources office, a defined benefits pension may be pitched as a perk of the job —  it’s a really good one — but it’s not a gift. It's a widget. Your employer may help in paying for the widget, but your employer isn’t doing you a favor. It's more of a mutual back-scratching relationship, or an employee retention strategy. You haven't earned a pension. You are paying for it — unless you opt out — so you should get the future you paid for.

Yes, yes. Pension fiduciaries like PRIM in Massachusetts are not retailers. But, are we certain about that?

Paying into a pension plan is really no different than the widget you bought but don’t take possession of until you’re paid up. In this case, you’ve agreed to pay 1,000 installments into a dignified, carefree retirement — in all its meanings. 

For example, you bought financial security in your retirement years. 

But wait, there’s more! You also bought:

• The unshakeable confidence that comes with having fiduciary professionals bound to the law and managing the delivery of your purchase to your satisfaction.

• The comfort of knowing what your own future retirement should be like as a life experience because current retirees have it pretty good — and that's what you were sold. 

• A lifetime guarantee that, no matter what happens to your pension plan, you get your checks for as long as you are eligible because of a government obligation. (See SCOTUS Thole, 2020.)

• The right to dream expansively about all the wonderful things you’ll do with that promise: Golf by the sea, glamp in the California wilderness, tour Italian pinot noir vineyards, breathe without particulates.

• The right to choose how you live in your golden years — choices that should be available to you then as they are now. 

• A future of suitable social and environmental quality, curated by your fiduciaries to ensure that it’s a world worth retiring into. 

As a gift with purchase,

you also bought a dignified future for the rest of us — including your friends and family who haven’t had the option to buy the future-defining guarantees you did. Thanks from the rest of us for focussing the trillions backing your pension on climate security. 

Wait, is it buying climate security?

Twenty million US civil servants, in all levels of government, have bought their futures — their pension promise — when they took their government jobs. That future is backed by an aggregated $5-trillion+ nest egg that backs up the pension promise across the US and is at work right now in the current economy.

That’s $5 trillion in pension purchasing power guided by fiduciary duties that must work to deliver that pension promise equally to all pension promisees. It represents 21% of the global defined pension value that, in aggregate, works at the scale of climate.

As you know, we are supporting fiduciary standards bill S.1644 in Massachusetts and, in doing so, have begun conversations with the legislative aides to the 17-member Joint Committee on Public Service, which is doing the first review. 

(Emails if you want to write a letter of support for S.1644: Kate.Donaghue@mahouse.gov Judith.Garcia@mahouse.gov Aaron.Saunders@mahouse.gov James.Eldridge@masenate.gov Ryan.Fattman@masenate.gov Natalie.Higgins@mahouse.gov Pavel.Payano@masenate.gov Erika.Uyterhoeven@mahouse.gov Michael.Kushmerek@mahouse.gov Michael.Brady@masenate.gov Patricia.Jehlen@masenate.gov Ken.Gordon@mahouse.gov Nick.Collins@masenate.gov David.Linsky@mahouse.gov Bruce.Ayers@mahouse.gov David.DeCoste@mahouse.gov Todd.Smola@mahouse.gov

These legislative aides, so far, are all twenty-somethings, fresh out of college, new to the job and getting their paychecks with a pension deduction because they are enrolled in the Commonwealth's public pension system. That means they are paying for a product they haven’t thought much about: Their future affected by how their deductions are invested today.

“It’s so far away” said one aide, apologizing for not thinking about it. 

That’s an understandable perspective: In competition with student loans, career launching and other early adult priorities, planning how you’ll spend your retirement years is apparently an afterthought — even if:

• A 9% payroll deduction might sting now and it's unclear where that money goes 

• It gives her more leverage to change the system toward climate security than most of us.

At most, the “onboarding” recruiter might have mentioned the PRIM pension as a compensation benefit and maybe even as a cash flow tutorial: “You pay in now, so current retirees get their checks."

Unlikely to be mentioned is the reverse: Ensuring current retirees get their checks now should not come at the expense of your retirement quality in the future. "Here's a brochure on 'The Duty of Impartiality.'"

In bill S.1644, we talk about the pension promise. For argument, let’s amp it up to a pension purchase because there are layaway protections in law.

If you, a pension purchaser, get the gift of hindsight, what did your 1,000 regular, faithful installments ultimately buy? Is it the same as the offer that you bought originally, or has the vendor swapped it out for something of less quality or damaged?

If you, the pension purchaser, have the gift of foresight, what do you think you’ve bought through your pension deduction? What's that product when you are still ticking in 2098? Do you have confidence in your vendor to make good on that promise -- because you're actually paying for that assurance.

If you  are in any way dissatisfied, the US Federal Trade Commission has a helpful online resource. There are two federal laws guiding layaway agreements:

The Federal Trade Commission Act prohibits unfair or decep­tive acts or practices in or affecting commerce. Failure to disclose important terms of your layaway plan under certain circumstances may violate the Act.

Your layaway plan may be covered by the Truth in Lending Act if you require your customers to agree in writing [like an employment agreement] to make all payments until an item is paid in full. 

As a companion strategy to pension divestment or ESG, you might consider if your layaway defined benefits pension was sold to you in good faith as per the consumer protection laws.

The FTC guide doesn’t specify what happens in the case the product suffers damage while in layaway. However, in Massachusetts, where we are sponsoring MA Senate Bill S.1644, the Commonwealth has that covered in a consumer guide to “shopping rights.” 

In reference to layaways, “Merchants cannot change the price of merchandise by increasing payments or by substituting lower-priced merchandise.” 

The shopping rights guide also warns consumers against “Bait & Switch” tactics.

Meanwhile, “defective merchandise must be accepted for return, regardless of any policy, and you must be given the option of a repair, replacement item, or refund of the price.”

The buyer, however, is not off the hook in keeping the seller on its toes...

The red flag phrase "buyer beware" suggests that buyers should not assume that the quality of a purchase is guaranteed. That seems like a convenient out for pensions working against the future of their own layaway customers, but let’s say the pension purchasers should be encouraged do their homework and ask their fiduciaries all the tough questions to make a thorough and thoughtful purchasing choice.

That alone impacts how pension money is put to work. You can’t kick the tires and check under the hood when fiduciaries like PRIM are lacking in transparency about the quality of their vehicles.

A layaway cam might do the trick so purchasers can keep a remote eye on how the seller is safeguarding the future.

Because our young pension promisees are not yet flexing their shopping rights muscles, the non fiduciary status quo's "growth at all costs" trajectory continues to spend their money procuring a future that may not be to their liking. It's a blindspot that S.1644 hopes to illuminate: Because of the billions and trillions at play, how we pay for the promisee's dignified future, in all its meanings, is how to pay for a dignified future for all of us. 

That's pocketbook activism that carries a climate-scale punch.