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$500m is what AIG is spending on the bailout funds every few hours.
The $500m is deferred compensation that these people already earned. This money was already sitting in an account somewhere.
This is just screwing the employees. They’ve probably invested it long term. (Most people use their deferred comp like an addon to their 401(k).) They’re going to take a hit on the investment when the plan is liquidated. (Because everything’s down.) Then they have to pay taxes as ordinary income on the entire amount.
I’m not sure Ralph is totally correct. Yes, it’s money the participants earned, but unless it’s a qualified plan, it is not sitting somewhere in escrow or a trust fund or anything like that. Nonqualified plans are usually on a “pay as you go” basis, and the fact is that if a company goes bankrupt then any nonqualified plan accounts are in jeopardy. Maybe this one is different, so if anyone knows, might help the discussion.
Who really cares? This is not hurting the employees and is not at all newsworthy.
I guess the IJ has to meet their negative article quota…