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Old 04-02-2010, 05:54 PM   #41
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My MegaCorp has a pretty good DB pension. They also offer healthcare benefits to retirees. But the Premium cost for health benefits is fairly expensive and the benefits offered are getting more restrictive. Still, it is better than going it alone. DW's MegaCorp has better healthcare benefits at a much lower cost.
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Old 04-02-2010, 08:09 PM   #42
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My Megacorp had a DB, but it was pretty minimal. It did have a rather generous profit sharing which went into a 401K-like pension plan, employees were eligible for the higher of the DB plan or profit sharing plan. Most years I was there the contribution was 12.5% but there were years it was 0%. Health care for retiree was offered but not subsidized and not a great deal. I maxed out my 401K the whole time I was there. Although in truth what let me retire early was the lucrative stock options.
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Old 04-02-2010, 08:47 PM   #43
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My current Megacorp:

Current 60+ retirees with 30+ years of service: Pretty generous (non-cola) defined benefit pension plan and retiree health care until 65

New hires: No defined benefit pension plan, no retiree health care

DWs old Megacorp: same as above

I don't think that any of the new generation of Megacorps (e.g. Microsofts, etc.) have a defined benefit retirement plan.

I don't think that it is an exaggeration to say the the corporate defined benefit retirement plan is going the the way of the buggy whip.
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Old 04-02-2010, 09:18 PM   #44
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I don't think that it is an exaggeration to say the the corporate defined benefit retirement plan is going the the way of the buggy whip.
Which makes sense if you think about it, because private corporations have to worry about competition. And if the competition can cut costs and pass that on to their customers, they will get a huge advantage over you. So you have no choice but to also eliminate pensions and retiree health insurance otherwise your products and services will be priced out of the market.

Government work doesn't usually have that dynamic. There is usually no "competition" that you have to worry about undercutting your cost structure. You just continue to use the power to tax and hope the people don't eventually go into "tax revolt" mode.
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Old 04-02-2010, 09:29 PM   #45
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I don't think that it is an exaggeration to say the the corporate defined benefit retirement plan is going the the way of the buggy whip.
As globalization and competition continues, a lot of retires in the coming decades will probably be happy they've got DC rather than DB plans. If I've got a pile of 401K money, I can choose a solid insurance company and convert it into an annuity. Or I can trust in my own ability to invest the money for my benefit. If instead I only have a promise from a shaky company to pay monthly benefits for decades to come, I'm in a worse position and have little control over my fate.
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Old 04-03-2010, 12:41 AM   #46
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OK..... let me try again.

1. I prefer to listen to people's stories rather than look for dry facts on the internet(which I am really good at doing).

2. I've spent my career listening to people describe their lives and I prefer stories to dry facts.



Z
Ok you and I are opposite ends of the spectrum. I'm a data guy and often remind people that plural of anecdote is not data. I gave my Megacorp story above.

But to me the interesting story about retirement is what happens to the average Joe. So let me tell my pretty well researched but greatly abbreviated history of retirement in the US.

The first thing I should say is that this story never applied to rich people, and starting in early years in the 20th century didn't apply to government workers, thanks to in large part to pension plans put in place by Bismarck in Germany for civil servants and widely copied.

1776-1935: You work until you died or got too sick to work. If you were sick your kids, spouse, or rarely your neighbors took care of you.
1935-1955. Social security entered the picture. It was cleverly designed to kick at 65 a couple years past the life expectancy of the average male. Meaning many people never collected anything. SSN provide a safety net but that was it, family took care of most retires for the few remaining years.
1955-1985: The golden age of pensions. Most large corporations (but by no means all) started defined benefits.

The truth was the golden age of pension that people remember wasn't all that golden. Initially most pension plans were designed as golden handcuffs to retain employees.Meaning you had to work for 20-25 years to qualify for them leaving early meant you got nothing. In general for the up until the 70s pension pretty much were limited to 65 or some cases 62. Then as now some prominent companies went broke leaving their retire employees with nothing. The PBGC came along in 1975 to provide some pension coverage for retirees of bankrupt companies.

The most important thing to understand about the American worker force, is most people don't work for the government, or a large corporation. Most American work for small and medium companies or themselves. Very few medium and virtually no small corporations offered pension plans. I estimate that at the peak no more than 1/3 of private employees were every covered by a pension plan, probably no more than 1/4 were vested in them.

1985 to present: The rise of the 401k. Although many people complain about 401K and defined contribution plans especially compared to a DB plan, the reality is prior to the 401K and IRAs most American had no retirement plan at all. Starting in the mid 80s many companies froze their pension (much like the stories that have been posted) and phased out the plan for new employees. In some cases, employers forced employees to convert to a defined contribution plans (which generally were unfavorable to the employee)

As we have seen in countless stories about 1/2 of American don't have any retirement savings. Now there lots of reasons behind this, but one which gets over looked a lot is this; plenty of workplaces have no retirement plan period. People do have the options for various types of IRAs, but it takes a level of financially sophistication/planning which sadly a lot of people don't posses to proactively open one of these accounts.

It seems to me Zarthas the more important stories are the ones you are NOT hearing, cause the thought of early retirement isn't even a dream for many of folks. I wager for every well do retiree from a megacorps like myself, who complains about the overly generous pension of state, local employee, there are at least 10 folks who have no clue how they will retire. They are understandably upset when public employees fight every attempt to reign in the pension costs cause they know it will be their taxes funding somebody else pension and they are getting no help.
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Old 04-03-2010, 08:38 AM   #47
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From this morning's FT

Quote:
More than 3,000 Cadbury employees face a three-year pay freeze unless they opt out of the confectioner's final salary pension scheme.
New owners Kraft Foods, the US food group, has told 3,600 staff that they must accept a pay cap after it discovered an obscure clause in Cadbury's pension trust deed that makes it almost impossible to close the scheme.
Kraft did not know about the clause, which is at least 30 years old, until after it acquired Cadbury for £11.6bn ($17.6bn) .
A person with knowledge of the Cadbury pension fund said he did not know why such an unusual clause existed, but it could be linked to Cadbury's Quaker heritage and its doctrine of giving a fair deal to staff and suppliers.
Kraft is forcing Cadbury employees to accept a pay freeze because it believes that this is the only way it will be able to get its future retirement costs under control.
"The scheme is unaffordable going forward," said one person involved.
The trust deed clause prevents Kraft from changing benefits to members in any way that is "unfair or materially detrimental" in the opinion of the scheme actuary.
I don't believe the part that Kraft didn't know - they are far too experienced in buyouts to not see unfunded pension cost, especially in the UK.
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Old 04-03-2010, 08:40 AM   #48
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I don't believe the part that Kraft didn't know - they are far too experienced in buyouts to not see unfunded pension cost, especially in the UK.
If they didn't know this, then their executives that led the acquisition and the legal team that worked on it should all be fired.
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Old 04-03-2010, 08:49 AM   #49
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"A person with knowledge of the Cadbury pension fund said he did not know why such an unusual clause existed, but it could be linked to Cadbury's Quaker heritage and its doctrine of giving a fair deal to staff and suppliers."

Cadbury had a history of giving a fair deal to staff and suppliers? BLASPHEMY!!!!!
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Old 04-03-2010, 08:50 AM   #50
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From this morning's FT

I don't believe the part that Kraft didn't know - they are far too experienced in buyouts to not see unfunded pension cost, especially in the UK.
I don't believe it either, but also don't forget that Volkswagon purchased Rolls Royce only to discover that the brand name was not part of the deal. Those crafty Brits then sold the Rolls brand name to BMW.
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Old 04-03-2010, 09:00 AM   #51
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As part of the Cadbury acquisition they already promised to keep open a plant in Bristol only to renege after the agreement. Then, a couple of days ago,

Quote:
Irene Rosenfeld, Kraft Foods chief executive, was given a 41 per cent pay rise last year to $26.3m for services that included “exceptional” leadership in the takeover of Cadbury, the UK chocolate maker, Kraft said in a filing on Tuesday.
.
All this in the FT - I've not seen much in US financial press. I'd comment further but I can't think of anything that's not excessively cynical.
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Old 04-03-2010, 09:07 AM   #52
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Cadbury had a history of giving a fair deal to staff and suppliers? BLASPHEMY!!!!!
If they hung a help wanted sign out which offered a 25% pay cut and no retirement benefits and still got way more qualified applicants than available positions, I'd say the reduced compensation was still a "fair deal" based on the labor market. Supply and demand determine what the "fair deal" is -- what employers are willing to pay and what prospective employees are willing to accept. And there wouldn't be huge attrition problems down the road as long as they monitored the labor market to make sure their overall compensation package was competitive; there wouldn't be too many "greener pastures" to jump to.

Like it or not, global competition in the private sector is here to stay, and the winners will be the ones (with relatively stable governments) that can produce acceptable quality at the lowest price. That will inevitably produce downward pressure on wage growth. And the more we see our wages squeezed and not keeping up with inflation, the more we'll have to seek out the low-cost providers. Lather, rinse, repeat. I don't like it either, but I can't change it. Global economics are here to stay.

And it's not a good deal for labor in the "developed world," I agree -- but economic reality nevertheless. After all, if the "fair deal" quoted in the article meant pricing your product too high for the market to accept, all those workers would get a "fair deal" -- and a ticket to the unemployment line when lower-cost competition killed them in the marketplace.
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Old 04-03-2010, 09:44 AM   #53
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1. I prefer to listen to people's stories rather than look for dry facts...
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Ok you and I are opposite ends of the spectrum. I'm a data guy and often remind people that plural of anecdote is not data. ...
Great post clifp. I'll see Zarathu's point just a bit though, and I'll agree that stories are great... but only to illustrate the 'dry data' that was presented.

IOW, if we determine through 'dry data', that 10% of people fall into category A, 20% into category B, and 70% into C, it can really help to get a couple stories from each group to illustrate what it is like to be an A, B or C person. But if you get six stories, it tells you nothing about the distribution of those groups. Especially self-selected stories.

So, Z's request is really only about getting stories about various people's pension experience, and no conclusion or even inference can be drawn from that whatsoever. So, 'dry date' first and foremost, then stories to add some 'color' and connections.

Drifting a bit here, but I feel this is a big problem with our political system and the media - they trot out a poignant 'story', and then want to create legislation (and/or influence public opinion, much the same thing) based on stories rather than 'dry facts'. That has a high probability to end badly - in fact, people are being killed by these bad decisions. But often, a single 'story' of anguish connects with people much more than the statistics that show that the proposed action will result in more deaths than inaction, because you can't put a weeping 'statistic' (dry facts) on the evening news, or have them present to Congress. But the resultant deaths are just as real. Read one of the Freakonomics books for examples.

Now I hate stories


edit/add re: Cadbury - it's not like 3 year pay freezes (or even cuts) ar uncommon today. Not sure that is really such a big story, all things considered. What if they did it for other than pension reasons. Same result, no big deal?
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Old 04-03-2010, 09:46 AM   #54
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My point was that the statement made it sound like giving people a fair deal was a bad thing. They said it was an unusual clause that may be related to a history of giving a fair deal. "Fair deal" is relative. A fair deal today may be different than a fair deal tomorrow, but a "fair deal" is always a good thing and should not be unusual.
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Old 04-03-2010, 10:12 AM   #55
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... but a "fair deal" is always a good thing and should not be unusual.
Depends who it is fair to. I bet the UAW workers felt they were getting a 'fair deal' with their benefits package - after all, assembly line work is hard and tedious and boring. But do the taxpayers bailing them out, or paying higher prices for cars feel they are getting a 'fair deal'?

I think the best arbitrator of what is 'fair' is - whatever the market will bear.

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Old 04-03-2010, 10:23 AM   #56
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Using the word "fair" means that all parties got a good deal. We all know that the UAW is overpaid for what they do. That's not fair, even though I'm sure the UAW is happy.

You're correct, "fair" is whatever the market will bear which is why I said a fair deal today be be different than a fair deal tomorrow. The article didn't say that Cadbury had a history of overpaying its workers. It said they had a history of giving them a fair deal. Im not sure why we are debating this. The world would be a great place if everyone got a fair deal and it should not be unusual to be fair to everyone.
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Old 04-03-2010, 11:32 AM   #57
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I'm not sure why we are debating this.
Because (emphasis mine)....

Quote:
We all know that the UAW is overpaid for what they do.
I think some (many, most?) UAW members would disagree with that. I don't see them lining up to give back anything, just to be 'fair'. So it gets debated.

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Old 04-06-2010, 06:29 PM   #58
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Which makes sense if you think about it, because private corporations have to worry about competition. And if the competition can cut costs and pass that on to their customers, they will get a huge advantage over you. So you have no choice but to also eliminate pensions and retiree health insurance otherwise your products and services will be priced out of the market.

Government work doesn't usually have that dynamic. There is usually no "competition" that you have to worry about undercutting your cost structure. You just continue to use the power to tax and hope the people don't eventually go into "tax revolt" mode.
With all due respect, your first comment is incorrect and your second is misleading.
1) Corporations would cut costs and eliminate pensions even if all the money flowed directly into the owner's pockets. Corporations maximize profits. Some have a short term some have a long term focus. However, they do need people. Corporations don't make product, people do.

2) Government work varies all over the lot. In my own area, academia , Professors run their operations as a business. Some have as many as 10 or 15 employees, and pay ratable shares of even more. Tax dollars pay only a fraction of the costs. No customers or no research grants, no jobs. Our pricing model is directly related to the competition.

There are always inefficiencies, in both areas. And in both areas there are practices which are indefensible
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Old 04-06-2010, 06:41 PM   #59
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Using the word "fair" means that all parties got a good deal. We all know that the UAW is overpaid for what they do. That's not fair, even though I'm sure the UAW is happy.

You're correct, "fair" is whatever the market will bear which is why I said a fair deal today be be different than a fair deal tomorrow. The article didn't say that Cadbury had a history of overpaying its workers. It said they had a history of giving them a fair deal. Im not sure why we are debating this. The world would be a great place if everyone got a fair deal and it should not be unusual to be fair to everyone.
I beg to differ, at least on terminology. Market mechanisms are designed to provide "efficiency". Fairness is something else. Fairness is a sociopolitical judgment about what kind of society we want to live in. . "Fairness" is everyone in the USA paying the same postage, whatever it actually costs to handle the mail. Fairness is handicapped parking spaces, prohibition of discrimination, and veterans preferences. Fairness is saying that the sickest, not the richest get organs for transplant.
Some scholars use the word "equity" to describe the process of adjusting rights to make them more fair. The trade off of efficiency and equity is always complex and often messy. But they are not the same
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Old 04-06-2010, 07:49 PM   #60
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I beg to differ, at least on terminology. Market mechanisms are designed to provide "efficiency". Fairness is something else. Fairness is a sociopolitical judgment about what kind of society we want to live in. . "Fairness" is everyone in the USA paying the same postage, whatever it actually costs to handle the mail. Fairness is handicapped parking spaces, prohibition of discrimination, and veterans preferences. Fairness is saying that the sickest, not the richest get organs for transplant.
Some scholars use the word "equity" to describe the process of adjusting rights to make them more fair. The trade off of efficiency and equity is always complex and often messy. But they are not the same
Great comment! Sums up the Conservative Liberal argument quite well. Never simple black and white.
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