Human Capital & Careers

Hoping to Retain Execs, AIG Ends Deferred Comp

The action will return pay earned by employees and agents, and is aimed at discouraging departures.
David KatzNovember 14, 2008

In an attempt to keep executives on board during a period of big uncertainty at the company, American International Group said Friday that it’s closing down 14 voluntary deferred compensation programs involving 5,600 employees, independent agents, and representatives. About $500 million in earned but deferred pay will be distributed in the first quarter of 2009.

The deferred compensation in the terminated plans is pay that a person earned but volunteered to defer receiving until a later date, according to the mostly government-owned insurance giant, which noted that employees could leave AIG for any reason and be entitled to the deferred pay. “AIG has decided to terminate and pay out the deferred pay plans to remove the incentive for employees to leave in order to obtain their deferred pay,” said Andrew Kaslow, the company’s senior vice president for human resources.

Under most of AIG’s deferred pay plans, participants can only receive deferred pay when they retire or leave the company, according to a release issued by the insurer. “AIG is concerned that employees will leave AIG so they can obtain their deferred pay. This is a concern at a time when AIG is working to maintain the value of its businesses, whether those businesses are to be sold to repay AIG’s Federal Reserve loan or to be continued as part of a restructured AIG,” the company stated.

As of November 12, AIG had borrowed $83.6 billion from the Fed, including about $63 billion out of $85 billion from a revolving credit facility and the balance from the government’s securities lending program, Joe Norton, the company’s public relations director, told The U.S. government owns about 80 percent of the company.

“Many AIG employees have seen their life savings wiped out in the financial crisis,” said Kaslow. “Employees are now concerned about obtaining the pay they have earned but deferred so they can pay for retirement, college tuition, or other expenses.”