The Shocking Bill Your Daughter's Girl-Scout Cookie Money Is Paying


Selling Girl Scout cookies is an annual spring ritual, one that my 8-year-old daughter participated in for the first time this year with her Brownie troop. I was proud of all the hard work and effort that I saw from dozens of local troop members and parents as they worked to raise funds for the activities that define what being a Girl Scout is.

Yet recent revelations about the pension crisis at the national Girl Scouts of the USA organization have me questioning whether the efforts that my daughter and her troop-mates make are truly aimed at furthering their Girl Scout experience. With recent lawsuits between local Girl Scout councils and the national organization, mistakes in the way the GSUSA handled pension benefits have cast a shadow over what should have been untempered enthusiasm in light of the Girl Scouts' 100th anniversary last year.

Image source: Wikimedia Commons, courtesy Drmies.

What's behind the pension problem?
The most shocking thing about the pension shortfall at the GSUSA is its size. A $347 million deficit at the national organization has led to major financial demands on the more than 100 local councils that help fund GSUSA. One council in middle Tennessee has sued the national organization, seeking to withdraw from the pension plan by alleging that the national organization breached its fiduciary duty in mismanaging the plan's finances. Without pulling out of the plan, it and other local councils will have to pay makeup contributions to the plan to cover pension liabilities. That in turn has put financial stress on local councils, leading to controversial moves like selling off summer-camp properties and laying off the locally based employees who help volunteers.

For its part, the national organization blames the economic crisis for its pension troubles. As recently as 2007, the pension plan ran a surplus of about $150 million. In comments to the House Ways and Means Committee (link opens PDF file), GSUSA CEO Anna Maria Chavez argued that the organization's "unfortunate situation is not anyone's fault," citing its decision to freeze its pension plan as having reversed the initially positive effects of recent amendments to pension-funding provisions that were designed to help it and other charities. Chavez now anticipates that the organization will have to contribute $145 million between 2014 and 2016 to help fund the defined-benefit plan for 13,000 participants, further noting that those contribution requirements are more stringent than for-profit corporations face.

The national organization hopes to get at least some relief from the shortfall. If GSUSA can successfully lobby Congress, it could reduce the amount it has to contribute to the plan, giving it more time to remedy the shortfall. Still, any short-term reduction in required contributions would come at the expense of higher costs from 2017 to 2022, according to GSUSA projections.

Get ready for more
There's nothing all that unusual in the pension problems facing Girl Scouts of the USA. Plenty of private companies and public-sector employers are dealing with the same issues and have had to take similar steps to shore up their pension finances. Like the GSUSA, IBM and Verizon froze their pension plans several years ago, as both companies decided that reducing the unpredictability of pension benefits made the most sense for them in managing their risk. More recently, Verizon and General Motors took even more dramatic steps to limit pension risk, outsourcing substantial portions of their respective pension liabilities to insurance giant Prudential . By doing so, the two employers passed off their obligations to an industry that's designed to handle the longevity risk that pension payments create.

The main problem that employers throughout the nation are facing is that promises they made to their employees were more expensive than they initially planned for, and many of them were ill-equipped to handle the responsibility of funding their obligations in uncertain market environments. In the long run, the solution will require rethinking about long-term promises made to workers in their employee benefits, with particular attention to the worst-case scenarios that can create unexpected financial burdens.

For the Girl Scouts, the pension controversy comes at a time in which the entire organization has gone through major changes in an effort to reinvent and modernize itself in order to reverse falling numbers of participants. For many parents, there's less incentive to work hard on fundraising efforts when they know that an alarmingly large portion of the proceeds from their labors will go not toward current programs for girls but rather toward getting a distant national organization out of its financial bind. To avoid the challenges the GSUSA now faces, other popular nonprofit organizations need to look closely at their employee benefits to keep would-be donors from balking at the prospect of funding pensions rather than supporting the current programs that do so much good.

The article The Shocking Bill Your Daughter's Girl-Scout Cookie Money Is Paying originally appeared on

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