Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 07-12-2012, 10:37 AM   #21
Recycles dryer sheets
 
Join Date: Jul 2012
Posts: 229
Quote:
Originally Posted by ERD50 View Post
What is your reference for 'pretty low'?

My pension @ 65 after 28 years at MegaCorp, with a decent salary history is about $40,000 @ 0% survivor benefit. Knock that down to $20,000 if I were to take it at 55, that's just $1,667 month before adjusting for a 50% survivor. And no COLA.

I'd say $1884 is pretty high, and it isn't a ceiling, it's just the point at which benefits are reduced (I think, I'd need to check that). edit/add: Maximum Monthly Guarantee Tables OK, I guess they are maximum payouts.

-ERD50
Pretty low is just relative to expectations. PBGC does not cover supplemental plans like Supplemental Executive retirement and deferred comp, which are mechanisms used when pay is above ERISA limits. Those supplemental plans are not protected in bankruptcy. So $1884 would be low relative to pay. (whether you made 100K or 300K a year, the $1,884 limit at age 55 would apply to both, even though the pre-bankruptcy pension would be higher for the higher income.) Again this is not a sad story, just an example of what can happen when promises exceed the ability to pay for them. In our case, retirement is just delayed a few years or early, albeit at a lower income level.
__________________

__________________
Shanky is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 07-12-2012, 11:52 AM   #22
Thinks s/he gets paid by the post
 
Join Date: Nov 2006
Posts: 2,268
This thread was not supposed to be about poorly run pensions or bankrupt companies. It was supposed to be about what happens to a pension fund and the pensioners when the pension is closed. Do they continue to get their same pension check? What about people about to retire? Does the fund liquidate or continue to operate just with no new contributions? It would seem to me that if the fund is 80+% funded and the funding level goes up due to it being closed, then everyone retired or at least vested should be able to be paid all (or most) of the benefits that were promised to them, even though nobody will accrue any future benefits.

Does anyone not have a problem with a law being enacted that makes DB plans illegal?
__________________

__________________
utrecht is offline   Reply With Quote
Old 07-12-2012, 12:41 PM   #23
Recycles dryer sheets
 
Join Date: Jul 2012
Posts: 229
Quote:
Originally Posted by utrecht
This thread was not supposed to be about poorly run pensions or bankrupt companies. It was supposed to be about what happens to a pension fund and the pensioners when the pension is closed. Do they continue to get their same pension check? What about people about to retire? Does the fund liquidate or continue to operate just with no new contributions? It would seem to me that if the fund is 80+% funded and the funding level goes up due to it being closed, then everyone retired or at least vested should be able to be paid all (or most) of the benefits that were promised to them, even though nobody will accrue any future benefits.

Does anyone not have a problem with a law being enacted that makes DB plans illegal?
My post was not about a poorly run pension, it was about a well run pension where the combination of lower investment earnings, increased HC costs & financial distress made it impossible to contribute enough to meet obligations. There was no spiking and the investment portfolio performed on a par with others. But when contributions needed to increase to make up for lower returns/ higher HC cost, it became untenable for a company that was struggling financially. Going from 80% funded to defunct only took a couple years.
__________________
Shanky is offline   Reply With Quote
Old 07-12-2012, 04:10 PM   #24
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,396
Quote:
Originally Posted by utrecht View Post
This thread was not supposed to be about poorly run pensions or bankrupt companies. It was supposed to be about what happens to a pension fund and the pensioners when the pension is closed. Do they continue to get their same pension check? What about people about to retire? Does the fund liquidate or continue to operate just with no new contributions? It would seem to me that if the fund is 80+% funded and the funding level goes up due to it being closed, then everyone retired or at least vested should be able to be paid all (or most) of the benefits that were promised to them, even though nobody will accrue any future benefits.

Does anyone not have a problem with a law being enacted that makes DB plans illegal?
My understanding is that if a pension plan is frozen that the plan participants would get the benefits that they would be entitled to under the plan as if they had all resigned on the close date. If the pension plan assets were insufficient to provide for those benefits then the sponsoring company would need to make additional contribution to make up the difference. If the plan assets were insufficient and the sponsoring company was unable to make the contributions then the plan woud fall under the PBGC.

And I would have a problem with a law that made DB plans illegal. I don't see how it could be constitutional to restrict any company from providing a benefit to their employees if they chose to. The problem isn't the DB plan, it is the benefits being promised and the funding (or lack thereof).
__________________
pb4uski is offline   Reply With Quote
Old 09-25-2012, 05:47 PM   #25
Recycles dryer sheets
 
Join Date: Jul 2012
Posts: 229
Ask yourself why isn't the pension fully funded. How long did it take to drop to 80%? Does the pension assume abnormally high average returns? Again the move from 100% funded, to 80% to insolvent can happen in a matter of a few years if assumptions are unrealistic, benefits cost increase, returns are sub par etc. The key is something has to change to return to 100% funding. Ideally, increased contributions make up the shortfall or benefits are trimmed.

This would make me nervous...

http://www.dallasobserver.com/2012-0...estate-gamble/

http://blogs.dallasobserver.com/unfa...09/post_36.php
__________________
Shanky is offline   Reply With Quote
Old 09-25-2012, 09:19 PM   #26
Thinks s/he gets paid by the post
Finance Dave's Avatar
 
Join Date: Mar 2007
Posts: 1,046
Quote:
Originally Posted by brewer12345 View Post
Its not that simple. 80% funding means that the assets in the fund are equal to 80% of the actuarially estimated present value of all the future payouts the fund is on the hook for. There are a huge number of assumptions that go into getting that actuarial estimate and the assumptions and other inputs change every year, so this is more of "cut with an axe" type measure than a "cut with a rzaor blade" precise number.
+1

I work in a Treasury department for a MegaCorp. Although I don't manage pensions, I work daily with our pension executive. The accounting and rules for pensions are highly complex.

I'm no expert, but I do know that if a company's plan is less than fully funded, they are obligated to make contributions in such a way that they will "catch up" the funding. How much is the complex part, because it's a moving target. In years that the market is good, you may not have to make any contributions, but when the market is down, some companies struggle to keep up. Very few plans are fully funded, and I'm sure many were at or below the 80% mark a couple years ago when the markets were down considerably.
__________________

__________________
"Live every day as if it were your last, and one day you'll be right" - unknown
Finance Dave is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 07:20 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.