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Old 07-12-2011, 01:24 PM   #41
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Is it legal to change the DB like this? How can they promise something at the time of hire and eventually change it? Isn't there some kind of law against that?
There are apparently only laws to protect people over 40 from this kind of thing. My employer is a Fortune 25 company that is non-union so is well versed in the legalities of changing benefits. When this change was made, they initially made the change for anyone that wasn't within 5 years of retirement. They came back shortly after and amended it for anyone 40 and over (avoidance of age discrimination laws), or anyone with at least 20 years with the company (5 years from the typical 25 year retirement of the past). This amended plan hurt pretty bad... I was 39 3/4 years old and had 19 3/4 years with the company. So I was 3 months shy of the traditional pension on both counts. No law against them doing this, and my only recourse was to quit.... which I didn't want to do. The employees sued the company and won, and the case was appealed a zillion times and finally they won an appeal and it was over. In addition, nearly everyone I know that got the old plan, was laid off before they ever had a chance to collect it. So in the end, I may have been better off to get the cash plan since I still have a job 10 years later.

I respect a company's right to set whatever benefits they want to set. I make decent money and like my job for the most part, so I've stuck it out and avoided the layoff lottery that happens a couple times a year. I'm confident I could find another job if my number comes up. I don't doubt that one of the reasons the company continues to excel is that they were able to change their course with regard to the drain of retirees that many large corporations are being saddled with. But there is a balance and I think they went a bit harsh on their transition.
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Old 07-12-2011, 01:44 PM   #42
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Originally Posted by HatePayingTaxes View Post
Is it legal to change the DB like this? How can they promise something at the time of hire and eventually change it? Isn't there some kind of law against that?
It probably varies from state to state. I live in a "right to work" state. I can verify this is perfectly legal here. As exec. director of a small nonprofit I oversaw a 50% reduction in benefits for my staff.* (These were vacation benefits/accrual rates, as we didn't offer retirement or any other bennies. If we had, they would've been chopped too.) Subsequently, I had the pleasure of re-staffing the office within 2 months.


*This was a decision by the nonprofit board of directors, not mine. I advocated strongly against it. I proposed grandfathering in current staff, and changing leave accrual rates for new hires. Partially as a result of my distaste for their decision, the board had the pleasure of hiring a new E.D. within four months.
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Old 07-12-2011, 02:32 PM   #43
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Originally Posted by convergent View Post
There are apparently only laws to protect people over 40 from this kind of thing. My employer is a Fortune 25 company that is non-union so is well versed in the legalities of changing benefits. When this change was made, they initially made the change for anyone that wasn't within 5 years of retirement. They came back shortly after and amended it for anyone 40 and over (avoidance of age discrimination laws), or anyone with at least 20 years with the company (5 years from the typical 25 year retirement of the past). This amended plan hurt pretty bad... I was 39 3/4 years old and had 19 3/4 years with the company. So I was 3 months shy of the traditional pension on both counts. No law against them doing this, and my only recourse was to quit.... which I didn't want to do. The employees sued the company and won, and the case was appealed a zillion times and finally they won an appeal and it was over. In addition, nearly everyone I know that got the old plan, was laid off before they ever had a chance to collect it. So in the end, I may have been better off to get the cash plan since I still have a job 10 years later.

I respect a company's right to set whatever benefits they want to set. I make decent money and like my job for the most part, so I've stuck it out and avoided the layoff lottery that happens a couple times a year. I'm confident I could find another job if my number comes up. I don't doubt that one of the reasons the company continues to excel is that they were able to change their course with regard to the drain of retirees that many large corporations are being saddled with. But there is a balance and I think they went a bit harsh on their transition.
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Originally Posted by Keim View Post
It probably varies from state to state. I live in a "right to work" state. I can verify this is perfectly legal here. As exec. director of a small nonprofit I oversaw a 50% reduction in benefits for my staff.* (These were vacation benefits/accrual rates, as we didn't offer retirement or any other bennies. If we had, they would've been chopped too.) Subsequently, I had the pleasure of re-staffing the office within 2 months.


*This was a decision by the nonprofit board of directors, not mine. I advocated strongly against it. I proposed grandfathering in current staff, and changing leave accrual rates for new hires. Partially as a result of my distaste for their decision, the board had the pleasure of hiring a new E.D. within four months.
Actually it is federal law... states do not have any say in this area... and it only protects what you have earned to date... IOW, they can change the plans anytime they want for everybody (no special case for over 40)....

All they have to do is pay the higher of the old plan or the new plan when you retire... I was at a mega that also changed a defined benefit to a cash balance... and there were some people who sued saying that their cash balance was 'low' and wanted more put in (and we are talking high paid people which meant millions of dollars).... the mega won as they said they would pay the people what they earned on the old plan if and when they retired... it did not matter that in reality they were now working without any kind of pension....


PS... thinking about it... I have been through 3 of these... twice when a plan was closed down in order to get excess cash out and then the DB to cash balance... also, this was in another thread and in reality the cash balance of my mega is really a DB for legal purposes.... they just changed the rules of what your benefit will be.... it will be an annuity based on the 'cash' that your account has accrued over the years based on what we have put in.... nothing to do with years worked or salary to determine your benefits, so no trying to get that extra benefit by working more in your last few years....
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Old 07-12-2011, 03:11 PM   #44
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Actually it is federal law... states do not have any say in this area... and it only protects what you have earned to date... IOW, they can change the plans anytime they want for everybody (no special case for over 40)....
Those DB plans are back-end loaded.

Since people accrue most of the benefit towards the end of their career in a DB plan, switching midstream is particularly cruel. Sure they get what they have accrued, but it really doesn't amount to much.
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Old 07-12-2011, 03:20 PM   #45
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Wow, amazing what these companies can get away with. I'm all for staying competitive but don't promise something and backtrack later. People on this board are smart enough to save but imagine the people who planned their lives based on the company's promise... it must be really devastating.
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Old 07-12-2011, 03:31 PM   #46
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Wow, amazing what these companies can get away with. I'm all for staying competitive but don't promise something and backtrack later. People on this board are smart enough to save but imagine the people who planned their lives based on the company's promise... it must be really devastating.

I agree. Big difference between what is legal and what is moral, huh?
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