A Tale of Two Retirements: Why CEOs Get Bigger Retirement Subsidies Than the Rest of Us

Sarah Anderson | Scott Klinger

A joint report by the Institute for Policy Studies and Jobs With Justice


In the eight years we’ve been analyzing the retirement divide, we’ve seen ordinary workers struggle with rising insecurity while corporate executives enjoy ever larger gilded nest eggs.

One largely overlooked factor in this disparity? Our tax code for government retirement subsidies gives preferential treatment to the wealthy corporate executives who need it least.

Ordinary employees with access to 401(k) plans face strict limits on the amounts they can set aside, tax-free, for their golden years. Most senior executives of large corporations, on the other hand, have unlimited tax-deferred compensation accounts. Often called “top hat” plans, these special perks for executives are growing rapidly.

From a policy point of view, no rational argument exists for allowing certain members of society to shelter unlimited amounts of compensation from taxes simply because of the kind of work they perform. It’s especially obscene because many corporations pay their workers so little that employees can’t afford to contribute to their retirement plans in the first place.

This report explains that double standard, highlights the large low-wage corporations where the retirement divide is starkest, and lays out how to make the system fairer for the workers who make these companies so valuable in the first place.

Key Findings

“Top hat” plans offer the rich one more way to avoid paying their fair share of taxes.

  • The top five executives at S&P 500 firms held a combined $8.9 billion in special tax-deferred accounts at the end of 2021. Such perks became even more common over the past year.

Low-wage employers have among the largest deferred compensation accounts while many of their workers can’t afford to contribute to 401(k) plans.

  • At more than 20 low-wage employers, executives have sufficient deferred compensation funds to generate monthly retirement checks larger than their workers’ median annual pay.
  • Walmart CEO Doug McMillon held more than $169 million in his deferred compensation account at the end of 2022 — enough to generate a monthly retirement check worth more than $1 million.
    • 46 percent of Walmart workers have zero balances in their company 401(k)s.
    • Median pay at Walmart is just $27,136, meaning half of their 2.1 million employees make even less.
  • Hyatt Hotels Board Chair and billionaire Thomas Pritzker is sheltering $91 million from taxes in his deferred pot.
    • 36 percent of the hotel chain’s employees have not been able to set aside any funds in their 401(k) accounts.
    • Half of Hyatt employees make less than $40,395.
  • 53 percent of eligible participants in Home Depot’s 401(k) plan have zero balances.
    • Meanwhile, former CEO and current Board Chair Craig Menear is sitting on $14.8 million in deferred compensation — enough to generate a monthly retirement check three times larger than the company’s median worker pay of just $30,100.

As ordinary families struggle with rising housing costs, real estate executives are sitting on massive tax-sheltered funds.

  • Paul Saville, Executive Chairman of NVR, the owner of Ryan Homes, has the fattest “top hat” account in the S&P 500.
    • The $488 million in his account at the end of 2022 is enough to generate a $3 million retirement check every month for the rest of his life.
    • That’s 1,514 times as much as a typical American retiree could expect to receive every month, based on the average U.S. Social Security benefit and median 401(k) accounts.
  • Two leading rental apartment corporations, Camden Property Trust and AvalonBay Communities, are also near the top of the “top hat” list.
    • At Camden, two executives have more than $80 million each in their deferred accounts while the Executive Chair of AvalonBay has $23 million.

Health care executives have amassed huge deferred compensation accounts, buoyed by taxpayer investments

  • The CEO of Centene, the nation’s largest Medicaid provider, had the second-largest “top hat” plan in the S&P 500 in 2022, valued at $328 million.
  • Fueled by COVID-19 vaccine profits, Pfizer CEO Albert Bourla enjoyed a 37 percent increase in the value of his deferred compensation account over the past year, from $29.5 million to $44.4 million at the end of 2022.

The deferred compensation double standard is widening the retirement divide

  • Among S&P 500 CEOs with tax-deferred accounts, the average balance at the end of 2021 was $14.6 million.
    • By contrast, the median 401(k) balance at Vanguard, a major provider of such plans, was just $33,472.
    • The current annual contribution limit for 401(k) plans: $22,500, or $30,000 for employees over age 50.
  • Nationwide, just 35 percent of working-age adults have tax-deferred 401(k)-type defined contribution plans through their employer and another 13 percent have defined benefit or cash balance plans.
    • Some 42 percent of Americans age 56-64 have zero retirement account savings, according to the U.S. Census Bureau.
    • Americans who are unable to save for retirement need to rely on Social Security, which pays an average monthly benefit of $1,784, as of March 2023.
  • Among S&P 500 CEOs with company-provided retirement assets (either or both a “top hat” plan and a pension) the average balance at the end of 2021 was $19.4 million.

Obscene Retirement Divides at America’s Low Wage Employers

Top executives of low-wage employers are sitting on some of the largest deferred compensation accounts. The table below lists executives whose “top hat” account balances are large enough to generate a monthly retirement check that exceeds their workers’ 2022 median annual pay.

Recommendations: How to Narrow the Divide

Ensuring a dignified retirement for all will require action on many fronts.

1. End the double standard in government retirement benefits.

Corporate executives should be subject to the same rules that govern the retirement assets of the people they employ. The 2020 CEO and Worker Pension Fairness Act (S.3341), for example, would revise Section 409A of the tax code, which currently allows executives to shelter unlimited amounts in accounts where their money can grow tax-free for years and years until they withdraw the funds. Under this bill, executives would owe taxes on their compensation when it vests.

Revenue from the bill, estimated at $15 billion over 10 years, would be transferred to the Pension Benefit Guaranty Corporation to shore up multiemployer pensions, plans negotiated by two or more employers with one or more labor unions.

2. Expand Social Security and require CEOs to pay their fair share.

To narrow the retirement divide, we also need stronger labor rights, a federal minimum wage increase, expanded defined benefit pensions, and other pro-worker policies so that ordinary Americans can afford to save more to ensure financial security in their golden years.

Perhaps most importantly, we need to expand Social Security. Funding for expansion could come from lifting the wage cap on payroll taxes so that CEOs and other high earners pay roughly the same share of their total income into the Social Security fund as ordinary workers. Under the current wage cap of $160,200, people who make more than $1 million a year stop paying payroll taxes in February, while most working people pay all year.

Across-the-board Social Security benefit increases, combined with targeted increases for low-income workers and other vulnerable groups, would make an enormous difference in American seniors’ quality of life.

3. Cap retirement benefits for major federal contractors and subsidy recipients at the level received by the U.S. president.

Taxpayer money should not be used to widen the retirement divide.

The executive branch should wield the power of the public purse to demand that companies receiving large federal contracts and subsidies not provide executives retirement benefits that are worth more than what the president of the United States receives. Former presidents receive a pension equal to the salary of a Cabinet secretary, currently set at $235,600.

When Marillyn Hewson retired as CEO of mega-contractor Lockheed Martin in 2020, she had $63.2 million in her deferred compensation plan and $54.5 million in her pension.

4. Increase retirement benefit transparency.

In researching this report, we were frustrated by the lack of publicly available data needed to get a clearer picture of employer-provided retirement benefits and how much they are actually helping workers prepare for their golden years. We recommend requirements to disclose:

Median 401(k) plan balances: Using companies’ Form 5500 reports, we could calculate the average balance in their 401(k) plans. But given how top-heavy these accounts are, it would be much more revealing if corporations were required to report median account balances.

Unclaimed matching funds: Many companies boast of their matching benefits, but these are virtually meaningless if workers are paid so little they can’t afford to save enough to take advantage of this perk.

CEO-worker retirement benefit ratio: Publicly held corporations are required to report the ratio between their CEO and median worker pay. These pay gaps are staggering. But the CEO-worker retirement divide is no doubt even wider. It would be most revealing if they were required to report the estimated monthly retirement check the CEO and other named executives can expect compared to the estimated retirement check for the firm’s median worker.

5. Tax excessive CEO pay.

One way to reduce executive deferred compensation is to reduce executive compensation. The Tax Excessive CEO Pay Act would encourage corporations to lower executive pay levels and lift up worker wages.

Under this bill, the wider a company’s gap between CEO and median worker pay, the higher their federal corporate tax rate. Tax penalties would begin at 0.5 percentage points for companies that pay their CEO between 50 and 100 times more than their median worker. The highest penalty would apply to companies that pay top executives over 500 times worker pay.

Companies with pay gaps of less than 50 to 1 would not owe an extra dime. Similar taxes are already raising revenue in two cities, San Francisco, California and Portland, Oregon.

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Media Contacts:

Olivia Alperstein