What do employers owe employees?

[tangomonster]

I swear I'm not an apologist for large corporations or big business. I worked for a small nonprofit agency or government entity my entire career. I didn't feel that I was being paid what I was worth or that I was treated well, but my options were limited. I put up with it as long as I had to and escaped (FIREd!) when I could.

But a recent Newsweek article about Who Should Pay for Health Care Costs? had a quote from a worker who retired from Caterpillar after 35 years of building tractors. He is 65 years old and "is on the hook for $2400 a year in insurance premiums, plus hundreds of dollars more in deductibles and co-pays." This worker said "companies that are using up the lives of their workers are obligated for the health of those workers."

First of all, I don't see $2400 a year as being that bad. Don't know if Medicare is kicking in for him. DH and I would be thrilled to be paying $2400 a year now---we are paying $12,000 a year at 53! And my deductible is $10K; DH's is $2500---so we pay thousands, not just hundreds like this guy, for deductibles and co-pays.

But what really gets me is the mindset that his employer should be paying completely for any health expense. While I do think (and pray) that the health care system is changed, I see nothing wrong with paying something for our own health care costs. $2400 is not chicken feed, but I bet this man comes up with his annual cable premiums or vacations or whatever he would rather spend his money on.

And to say that companies "use up" the lives of their workers somehow doesn't ring true to me. Yes, all workers age while working. They would age and their lives would be "used up" even if they weren't working. And as much as we pay post about what's wrong with j*bs on this board, they are a necessity for most people. And it certainly isn't a one-sided relationship. Yes, workers give their time and their skills, but they are compensated for it. In this person's case, he probably was very well-compensated for work that may not have been all that highly skilled. While I could see why veterans deserve lifelong health care for their service (placing their lives and health on the line, typically at lower salaries than other workers), I just can't agree with an employer owing a worker forever after. It seems as if both worker and employer voluntarily entered into a contract which both felt was of mutual benefit. Had the worker been able to support himself without working or in a different job, he was free to do so.

I do realize that employers did promise retirement health benefits, so that's a different story when they reneg on it (but how could they have predicted that health care costs would rise to this extent?).

Maybe I'm just jealous that the jobs I worked in did not give me a pension or health care benefits after retirement.

What are your thoughts about this?

 

[mickeyd]

But what really gets me is the mindset that his employer should be paying completely for any health expense.

It seems that plenty of my fellow American citizens want others to pay for their health insurance. If the "others" is their ex-employer or the "others" is their Uncle Sam, it is all the same to them. The current political climate seem to be that the US government should pay for more and more. Folks forget that the government is us! Folks forget that if an employer pays for $2400 of insurance for a retired employee, that is $2400 less that the employer has available to pay active employees.

 

[73ss454]

I also often think about the same subject. I worked in the car business all my life and 20+ years at my last gig. My boss told me in the summer of 06 that he was offered a great rent factor from Chrysler Corp for his building. 88K a month (gulp). He said he would be closed by Nov 1st of last year and Dec 1st the latest. I then put my house in NY for sale and made plans to retire to Fla. which I did by Dec.1st. My boss did not close on his deal by that time so I continued to do the Finance for the dealership from Fla. until May of this year when he closed.

Well, after all those years of being a loyal employee I didn't even get a thank you call or a hand shake.

On the other hand a few years ago I told DW after 27 years raising a family that it might be good for her to get some type of civil service job. She took a job at the local school dist and worked for 5 years. This allowed her to be eligible for lifetime family health bennis for the family at a 10% cost to her. She was also eligible for a small pension at 55. She had also worked for the state back in the late 60's and early 70's for 5 years which was added to her pension. So she gets a pension of 10K 1/2 cola for life and family medical bennies for a total of 10years of work.

I on the other hand I am lucky to take advantage of DW's medical bennies and this allowed us to retire in the nick of time since my job was ending. This year our total cost for med. was $1600.

Fair? what's fair it's the luck of the draw.

 

[bbbamI]

Bennies are part of the compensation plan. Stay x amount of years and this is what you get (well as long as we stay in business or until we change our mind).

A few words to the young dreamers....depend on yourself and not the promises of others.

 

[Average Joe]

Hey Joe I got your time card this week but you didn’t turn in your exercise log yet. I see that for the last couple weeks you haven’t been keeping up to the minimum for cardiovascular conditioning, is there something going on I could help with or that I should know about?

Listen, Manuel, you’re a reliable man and I’m lucky to have you on the team. But your latest med-check showed cholesterol a little higher than we like here at CareAboutYou Corp. Records show you’ve been getting cheeseburgers at the company cafeteria. I’m sorry to have do this but since you haven’t been filing your shopping and dietary reports I’ve asked the Care Team to subpoena your credit card records and receipt records from the grocery stores where you and your wife shop. We’re determined to help you get control of your diet so we can fulfill our obligation to take care of your health.

Mary, good to see you. Thanks for the report on the Billingsgate Project. Mr. Bigheart was really wowed by your analysis. But there’s something else I’ve been meaning to talk to you about. The Care Team reports that you’ve been dating a man we don’t have in your records. When were you intending to make your health report about the matter? Are you having sex with him? Are you using protection of any sort? What do you know about his health history and personal habits?

Frank, we’ve known each other for a while and I’m not going to sugarcoat this. What the heck are you thinking? Smoking!? Don’t play games with me man, it showed up in you’re latest med-check, it’s way to high to be second hand smoke, and besides that you know the company’s policy on being around second hand smoke anyway – and you haven’t filed any second hand smoke exposure reports. What gives man? You know I’d hate to see you go, but I can’t cover this.

 

[haha]

Bennies are part of the compensation plan. Stay x amount of years and this is what you get (well as long as we stay in business or until we change our mind).

A few words to the young dreamers....depend on yourself and not the promises of others.

Unless of course these promises come from your Uncle and mine; Uncle Sam!

Ha

 

[bssc]

I know people who have stayed on at their MegaCorps since their bosses promised them pensions and healthcare. Wouldn't you if that was offered to you? Of course, it is hard to tell what was said or even what the boss believed at the time.

 

[Grizz]

Might sound cold hearted, but IMHO, at the end of a career, your employer shouldn't owe you anything more than your final paycheck. I don't see a reason for thank you's, gold watches, parties, pensions or benefits of any kind. It should be as simple as... you choose your career path, and both sides hold up their end of the bargain. You work, they pay.

If you have a skill and feel you are underpaid or underappreciated in the organization then you should leave for greener pastures. This is how fair valuation for marketable skills is arrived at.

If you were smart enough to save for your retirement then good for you, if not, well, you should have. Best of luck with the rest of your life.

 

[chinaco]

First of all, I don't see $2400 a year as being that bad. Don't know if Medicare is kicking in for him. DH and I would be thrilled to be paying $2400 a year now---we are paying $12,000 a year at 53! And my deductible is $10K; DH's is $2500---so we pay thousands, not just hundreds like this guy, for deductibles and co-pays.

I agree $2400/yr seems pretty good to me at my age. But, he and his spouse are likely paying for Medicare also. $2400 seems kinda high for what the company kicks in (which sound like little). I am pretty sure one could purchase a medigap insurance policy for that for 2 people at 65.

Assume this person does not pay a premium for part A and they are in the lowest part b bracket.

$2400 + $1156 = $3556 Plus the copays and deductibles rose. Also if ones has a number of medical problems the copays and prescription drugs, it adds up. Since he has a company plan, I did not add in the medicare drug plan. The medicare drug plan premium for 2 people could be up to 1/2 of the company premium. Looking at it like that, the company isn't really providing too much.



Medicare Part B Monthly Premium Goes Up 3.1% to $96.40, in 2008
Updated Medicare Part B Premium Projections for 2008, 2009


Part of the problem is that we are the generation where the rules changed mid-stream and many are unprepared.

 

[dex]

The circumstances about your employment set the stage:
- If you have a contract or union member - the employer's obligations are set out in it.
- State/Fed Employee - expectations that you get a little lower salary for better benefits
- Private enterprise - you can have health benefits and then lose them before or after retirement.

These things also influence how we think about health ins.

The democrats are positioning Health Ins. as something that differentaes them from the Republicans - caring vs not caring. The discussion is setting up expectations that health ins. is too high and should be paid by the government.

Middle class entitlements are the hardest to take away. Look at the mortgage deduction. They only grow.

 

[Ed_The_Gypsy]

I am an independent contractor. I get paid for every hour worked, as worked (no un-paid overtime, no net 30-days).

I do not work for free. I do not buy promises (a promotion Real Soon Now, a raise, a pension, health care benefits in retirement, etc., etc.). I don't even believe Social Security completely and have my contingency plans.

I do not work in unsafe conditions. I do not participate in unethical activities. I do not work for people I do not like. (Boy, employers really do not like truly independent employees. They can't apply any pressure. I really enjoyed fragging one truly offensive Big Oil supervisor on the way out.) All I need is one job and I am picky.

On the other hand, I respond to loyalty with loyalty.

All an employer 'owes' me is to pay me on time. I take care of the rest. In order to achieve this, I must network like crazy and be ready to work in far places under challenging circumstances. Freedom has its price.

 

[Martha]

It is impossible for some businesses to provide retiree health benefits. I am a retired shareholder of a law firm that has about 75 employees. There is no way it could afford retiree health insurance. As it is, health insurance for current employees is a huge cost for the firm. I had clients who have 300 to 500 employees. They also cannot afford retiree heath insurance.
And it is not because the owners are putting millions of dollars into their own pocket.

My FIL retired from Bethlehem Steel, a mega employer. It turned out that it could not afford retiree health benefits and pensions either and it ended up in bankruptcy. Same with Reserve Mining and LTV Steel, all bankruptcies I worked on for creditors when I was a lawyer.

I also never think of my old firm as using up the lives of its workers. Instead I often was proud of how many people, including worker families, we supported with our work.

 

[bssc]

Might sound cold hearted, but IMHO, at the end of a career, your employer shouldn't owe you anything more than your final paycheck. I don't see a reason for thank you's, gold watches, parties, pensions or benefits of any kind. It should be as simple as... you choose your career path, and both sides hold up their end of the bargain. You work, they pay.

A pension is considered part of your "comprehensive" compensation package. So are benefits. They are deferred compensation. Which would you choose, a package that pays $55K with 20K pension at 60 years of age or a 60K job with no pension.

 

[eridanus]

My FIL retired from Bethlehem Steel, a mega employer. It turned out that it could not afford retiree health benefits and pensions either and it ended up in bankruptcy. Same with Reserve Mining and LTV Steel, all bankruptcies I worked on for creditors when I was a lawyer.

Warren Buffet discussed this in his newsletter some years back. When bond rates were sky high in the 80s, MegaCorp convinced Congress to allow them to reduce the employer contributions. Of course, the pensions got in trouble when bond rates lost altitude. The PBGC -- the taxpayer -- ends up footing the bill.

 

[Martha]

Warren Buffet discussed this in his newsletter some years back. When bond rates were sky high in the 80s, MegaCorp convinced Congress to allow them to reduce the employer contributions. Of course, the pensions got in trouble when bond rates lost altitude. The PBGC -- the taxpayer -- ends up footing the bill.

True enough, and the PBGC only foots part of the bill and only for the pension, not retiree health care.

 

[Goonie]

I took a job with the municipal gov't when I was 19, although the pay was low the benefits were quite good. One of the main reasons that I took that j*b was because of they had a great pension plan. After 30+ years there, the benefits and the pay were both quite good! (my net pension...after fed tax and ins. premiums....is 87.7% of my net pre-ER pay)

I and my employer both paid into the pension plan, so that is something that was/is 'owed' to me! We had a contract.

My employer offered decent medical/dental insurance while I was w*rking, and THEY made the proposal to extend that same coverage to retirees. Of course our union accepted their offer! And THEY are also the ones who proposed to add the clause to the union contracts, as well as to the municipal ordinances, that determined that retirees would be responsible for a set percentage of the monthly premiums. THEY also determined that the rate that was in effect at the time one retired would be binding until that retirees death. (the contract that I retired under set the percentage at 25%...currently $142/mo)

Had my employer stated up front that upon retirement insurance coverage would cease, that would have been accepted and I would have made arrangements to obtain individual coverage elsewhere. Since that was not the case, and we had a legal and binding contract stating otherwise, I'd say they 'owe' me the insurance coverage that THEY offered.

A pension is considered part of your "comprehensive" compensation package. So are benefits. They are deferred compensation. Which would you choose, a package that pays $55K with 20K pension at 60 years of age or a 60K job with no pension.

Bingo!!!

IMHO, if someone w*rked for a living, and they were promised certain benefits upon retirement, then those benefits ARE 'owed'. Other than that, I don't feel that anyone....including myself.....is 'owed' anything by anybody. That includes SS...IF I get it that's great, but if not...it doesn't really matter because I left that out of my FIRE calculations. Although if things do change, and I don't get SS, I think I would be 'owed' a refund of what I had [-]paid[/-] loaned them over the years.....plus interest for that loan! But that's just my opinion.

 

[Martha]

Sure you can be owed benefits because a contract says you are entitled to them. But you are SOL if the contract is breached and the employer files Chapter 11 or liquidates.

 

[Ed_The_Gypsy]

Right on, Martha.

Don't rely on promises--even contractual obligations--or deferred compensation. Even annuities can crater.

Do it yourself.

 

[bssc]

Sure you can be owed benefits because a contract says you are entitled to them. But you are SOL if the contract is breached and the employer files Chapter 11 or liquidates.

I agree, everything, including Social Security, is not guaranteed. But, like everything in life, you have to make your best guess about it. The worse case scenario usually doesn't happen.

 

[kcowan]

I worked for a large company based in NY that offered extensive benefits in retirement: COLAd pension, health care, travel medical insurance, dental and drugs like Blue Cross, education assistance, matching grants for charitable contributions. Probably one of the best packages in their industry by far.

However, it as an "at will" employment company with no Unions or other contractual guarantees. The employment relationship was one of mutual trust.

Guess what happened? The worst case. They are only fulfilling their minimum legal requirements. So the above advice is really sound. Do not count on anything that is not guaranteed.

OTOH the employment relationship has to remain mutually beneficial in the current context. No one owes anyone anything. I think this is a good thing.

Fortunately, I took early retirement and then worked for ten more years. I feel sorry for the people that worked their whole life with the company, depending on their hollow promises. In a sense, the most "loyal" employees got hurt the most.

 

[tightasadrum]

When I started working for megacorp, the benefits hardly made it on my radar screen. I was young, healthy, just married and was only interested in what was I going to get paid on pay day. I got a little more tuned into the program when DW had DD. Hey, this benefits things is ok.

Fast forward 25+ years... Always thought, and was lead to believe, that retirement healthcare and a pension were just part of the long-term program. Of course I never bothered to check on whether it was "guaranteed" in writing. One day a little noticed memo came out written in legalize that mentioned something about retirement healthcare coverage. It emphasized the still great things the retirees would get in medical coverage, but buried in the wording was something that most people missed: after three more years, megacorp would no longer contribute MORE than they were contributing at that time in the future. I learned what it all meant from a co-worker in the grocery store one day. He was retiring and learn the facts. No big deal, I was still many years from hanging it up with megacorp. Wrong.

I certainly understand the need for holding their future costs down, and frankly I'd rather have something rather than nothing. But I do question their spin on the whole thing. Why not just tell it clearly and to the point. "People, I know we've been carrying the cost of all this, but to avoid going out of business, we need to make some changes that will affect you when you retire. Listen up, and start saving a little more to cover what we will no longer be providing you." Instead it was passed along in one little cryptic memo without any mano-to-mano exchange. Sad.

 

[kcowan]

Yup the corporate spinmasters don't want the heads of their loyal employees to be focusing on anything but work.

 

[Grizz]

A pension is considered part of your "comprehensive" compensation package. So are benefits. They are deferred compensation. Which would you choose, a package that pays $55K with 20K pension at 60 years of age or a 60K job with no pension.

I prefer to not need to count on an employer sponsored pension at all. I'm more of a self sufficient type. I'd rather go find the job where my skills are going to fetch the highest pay rate possible (presumably higher than the pension job), and preferably not union since creativity and ability are usually trumped by seniority, and invest the difference between the jobs by myself.

 

[youbet]

buried in the wording was something that most people missed: after three more years, megacorp would no longer contribute MORE than they were contributing at that time in the future.

The Megacorp I retired from did the same thing. The subsidy level to retiree medical coverage was fixed a number of years ago and all increases in premiums have been born by the retirees ever since. In my case, I didn't retire until 58 yo so I have only 7 yrs until Medicare kicked in and the subsidy still represents a significant discount to what the premium would be otherwise. But, for younger folks, the fixed subsidy is becoming a smaller and smaller percentage as premiums continue to rise until eventually it will become like no subsidy at all.

When Megacorp announced the change, it happened quietly. People near retirement were grandfathered to the old plan, so no complaints from them. Younger folks seemed disinterested. When I brought it up in lunchtime discussions, few seemed to care or understand what the change meant.

Since then, Megacorp has announced that new hires are not eligible for retiree medical coverage at all. HR/Staffing reports that recruiting was not negatively impacted by this.

My own feelings are that:

1. Pensions (including government jobs) should be completely portable and move with the employee from job to job (such as 401K plans with immediately vesting employer contributions and SS).

2. Health insurance (including government jobs) should not be tied to employment.

It's sad to hear about so many folks absolutely miserable in their jobs but locked in golden handcuffs because of pensions and health care. How much more productive could our economy be if folks could work where they were interested in working without worrying that they're leaving benefits behind?

It's sad to hear about so many folks being screwed (or thinking they're being screwed) by employers over long term commitments involving pensions and health insurance coverage.