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Old 01-26-2008, 09:58 PM   #21
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You are right that you can get a lot less if you have a big pension (which I think the pilots had... like steel workers IIRC)... but if you are more in the 'norm', you do not get hit as bad...
Lower-paid workers could lose up to 20%. However, high-paid pilots may see their pension cut by 50 to 75% since the maximum coverage from the PBGC for those who retire at 60 is $28,000. Those who were accustomed to a 6-figure pension might had a hard time to adjust.

Court approves termination of United Airlines pension plans
Human Toll of a Pension Default
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Old 01-26-2008, 10:34 PM   #22
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My pension is from a union so the multi-employer contributions are insulated from employer buyouts and bankruptcies, except when an employer tells the union, "We can close now or keep working with no contributions." The union has such a long history of corruption resulting in oversight, that the pension plan is probably okay by now. The rate of payout is in the 2% to under 3% range so I suspect they get advice from the higher cost provider who somehow gives the nicest gifts to the committee. It is amusing to watch them announce a few tenths of a percent bump in benefits after good markets, then reduce it after bad markets. In mid-2007, they announced a bump up for those who were still contributing.
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Old 01-26-2008, 11:04 PM   #23
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My last company was acquired by megacorp 7 years ago, so I have only about 40K in my pension.

On the positive side, megacorp just had a great year. On the downside, they've frozen that pension as of December -- just the last in a series of ways they've found to save money at their workers' expense. Didn't affect me much, but some of the old veterans will be missing out on the gains they were expecting.

I don't trust 'em, and I'm taking my little lump sum with me when I go.
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Old 01-27-2008, 01:17 PM   #24
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Gearhead.... I am surprised that if it was funded at 110% that you would only get 26%... but you know what you are getting.... more than likely it was not 'funded'...
...
..
There were several factors here, some of which might not impact most other folks:
1. The markets started a huge dive after that last report before 9-11; the report was already about a year old.
2. The pilots pension continued for a couple of years but the company got waivers so they didn't need to make contributions.
3. The PBGC computes your pension using the worst contract/policies within the last 5 years; then looks back 3 years prior to your actual retirement or the date the plan was terminated, whichever is EARLIER. Our plan had big penalties for early retirement, and the PBGC applied them. Even though I retired at mandatory age 60, the 3 year lookback gave me the penalty as if I had retired about age 56. And used my much lower pay at age 56 as the basis for calculations.
4. There were rather low IRS limits on how large an individual pension the company was allowed to fund, so about 1/3 of my pension was not and could not be pre-funded; it had to be paid out of ongoing company funds. Until ch 11...
There are more details but as mentioned in my original post, the math is all designed to make sure you get only a modest pension regardless of how large it was originally supposed to be.

On the bright side, I do the FIRECALC for a 40 year retirement, that would put me at 100 and DW at 98. Probably very conservative, but modern medicine...
Because I ended up with a big pile of cash (DC plan plus negotiated pension termination payout from company), the big losses in my non-COLA DB pension become much less significant over a long period. In my particular case, I lost 74% of my DB pension but only about 20% of my total annual income, based on that 40 year retirement. YMMV.
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Old 01-27-2008, 02:37 PM   #25
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As someone pointed out... I like the cash balance account because that is YOURS... but then again, I do not know if there has been a company that has gone under and not had all the cash needed....
I'd be interested in knowing this also.

However one advantage you have is that if the future looks bleak for your company you can leave and roll over your cash balance to an IRA.
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Old 01-27-2008, 05:55 PM   #26
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Gearhead.....

(not looking this up... but to me an interesting question)...

So... it was funded at 110% prior to 9-11... and after they just stopped putting in money... and then they were so bad that they had to give it to the PBGC... and you got hosed by that huge percent?

I would have thought that they would use all the money in the fund... so even if it had a bad couple of years and no payments that it would be hard to drop below.... let's say the 75% funded level...

And it this is true, you still get hosed down to IIRC 26%?

If this is true, then this is our great gvmt at work again...


BTW, I worked at a bank that was closed... and low and behold when they sold off all the pieces (and at fire sale prices)... and paid huge payments to some of the vendors.. they STILL had $1 billion profit.... OPPPPSSS... so sorry... here is your money back...
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Old 01-27-2008, 07:16 PM   #27
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Texas-

The S&P 500 dropped by something like 50% during those times, no money was put into the plan, and pilots who had already retired were continuing to draw their full pension until the plan was taken over by the PBGC in 2005. Plus the "fuzzy math" that the PBGC uses to recalculate your benefits.

Some guys got hit harder than I but they haven't retired yet to really feel the pain. Recently I talked to a flight attendant (different pension plan but similar problems) who is in her 40's with 20 years at United, her pension at age 65 will be somewhere around $400/month. Or was that $200/month? No increases for inflation, of course.

My spies tell me that everyone who has the intelligence and energy to get a different job, is doing so. United (and some other airlines) have a huge brain-drain problem that will haunt them for decades, if they survive at all. Me, I'm happily retired. A little less money but a LOT less hassle.
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Old 01-28-2008, 03:43 AM   #28
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I'm a retired United pilot. The last annual report before 9-11 showed our pension to be funded 110%. Now that the PBGC is running the things, I actually get 26% of my pension. Do you notice a slight difference?
I saw that about a year ago in (I think) Fortune magazine. People were promised six-figure retirement incomes and now all it pays is the groceries. Yeah, you got the shaft.

About five years before I retired one of the guys I worked with on the road stopped by with a new recruit who had been an F-16 pilot. (I'm retired law enforcement.) When he told me that he saw what I was thinking, ("What the hell are you doing here?") and said "I've got a wife and two kids, and I've had six jobs in five years. I need a steady paycheck".

Made me very glad I didn't choose a career in aviation, which I almost did. Where I worked the county govt. is one of the few that has no unfunded pension liability.
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Old 01-28-2008, 08:46 AM   #29
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So... it was funded at 110% prior to 9-11... and after they just stopped putting in money... and then they were so bad that they had to give it to the PBGC... and you got hosed by that huge percent?...

If this is true, then this is our great gvmt at work again...
So how do you think the gvmt is to blame? For deregulating the industry? For not providing a better guarantee on the pension? For not better regulating how the funds are funded? If so, you must be a closet liberal.
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Old 01-28-2008, 09:07 AM   #30
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So how do you think the gvmt is to blame? For deregulating the industry? For not providing a better guarantee on the pension? For not better regulating how the funds are funded? If so, you must be a closet liberal.
The govt will make sure that once you have something, that somone else cannot take it away, wit hthe exception of taxes. However, the govt is certainly NOT responsible for a broken promise. Essentially, that is all a pension really is. It is a promise that your employer will give you a certain amount of money when you retire. Then again from a legal point of view you might be able to sue a corporation for a broken contract.
That is why I feel much more comfortable with a 401k. Once those assets are in MY account, no company or the govt can ever touch them again. Unless this country goes so completely liberal that the goverment votes to be able to take those assets for the "less fortunate" as well. I fully understand at this point that any agreement made between me and a company can be terminated at any time, and for almost any reason....
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Old 01-28-2008, 01:46 PM   #31
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I'd be interested in knowing this also.

However one advantage you have is that if the future looks bleak for your company you can leave and roll over your cash balance to an IRA.
Unfortunately, the cash balance pension plans have the same type of company default problems that the old DB plans do. The cash balance is just hypothetical amount credited to you. It isn't an actual amount sitting around invested in stocks/bonds. If the cash balance plan is handed off to the PBGC, you're still in the same boat as the peeps with the other DB plans.

Per the DOL's website:

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How do cash balance plans differ from traditional pension plans?
While both traditional defined benefit plans and cash balance plans are required to offer payment of an employee’s benefit in the form of a series of payments for life, traditional defined benefit plans define an employee's benefit as a series of monthly payments for life to begin at retirement, but cash balance plans define the benefit in terms of a stated account balance. These accounts are often referred to as hypothetical accounts because they do not reflect actual contributions to an account or actual gains and losses allocable to the account.
If you want to check up on the health of your pension plan, check out its most recent annual report, and also get a copy of the plans Form 5500 and most recent actuarial report. A lot of companies got into trouble because they were/are invested heavily in equities, and when interest rates fell as stock prices fell, the pension plans' assets and liabilities went in opposite directions. Another good trick that companies do is that they assume high rates of return for their pension plan asset [like 8-10%], and they can use this rate of return to discount future pension obligations like this is some sort of risk-free arbitrage. "Hey, if we invest the pension plan heavily in risky investments and raise expected returns, we can reduce the present value of the future pension obligations, which can reduce the amount of $$ we have to put into the plan."

btw - a pension is just a fixed immediate annuity backed by the company and pension assets. One could just roll the lump sum over to an IRA and get a fixed immediate annuity from an insurance company, like AIG, etc, or a number of insurance companies to hedge default risk. Maybe brewer can back me up on this one, but insurance companies that issue fixed immediate annuities aren't stupid enough to invest the assets backing those annuities in anything but long term bonds. Unless taking the pension has some other benefits, like heathcare, I don't see the advantage to taking the possible risk vs. spreading the default risk around. Also note that companies can cancel retiree healthcare at the drop of a hat. Those benefits aren't insured by anything.

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Old 01-28-2008, 02:00 PM   #32
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I am the spouse of a big pharma employee and I feel very glad I have stayed at my job and gotten my own pension with the Government. With the changes they made last week at his company for pension benefits and medical benefits, I would not count on anything to be stable.

In fact, it looks like my medical benefits will be better than his and he will be covered under mine. Never in his entire career did we think this would really happen.
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Old 01-28-2008, 04:11 PM   #33
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So how do you think the gvmt is to blame? For deregulating the industry? For not providing a better guarantee on the pension? For not better regulating how the funds are funded? If so, you must be a closet liberal.
Not even close...
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Old 01-28-2008, 04:15 PM   #34
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Texas-

The S&P 500 dropped by something like 50% during those times, no money was put into the plan, and pilots who had already retired were continuing to draw their full pension until the plan was taken over by the PBGC in 2005. Plus the "fuzzy math" that the PBGC uses to recalculate your benefits.

Some guys got hit harder than I but they haven't retired yet to really feel the pain. Recently I talked to a flight attendant (different pension plan but similar problems) who is in her 40's with 20 years at United, her pension at age 65 will be somewhere around $400/month. Or was that $200/month? No increases for inflation, of course.

My spies tell me that everyone who has the intelligence and energy to get a different job, is doing so. United (and some other airlines) have a huge brain-drain problem that will haunt them for decades, if they survive at all. Me, I'm happily retired. A little less money but a LOT less hassle.
Most plans do not just invest in the S&P... yes, it was down 50%, but RE was up etc... so I doubt (OPINION HERE) it dropped by 50%....

And it if did.. then it still would be funded in say... 55% or so not counting the new contributions... so getting half of the half is what I am talking about being a problem that just seems wrong in some way... someone got the 'extra' money... maybe the lower waged people got 80% or so...
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Old 01-28-2008, 04:40 PM   #35
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However, the govt is certainly NOT responsible for a broken promise. Essentially, that is all a pension really is. It is a promise that your employer will give you a certain amount of money when you retire.
I get confused by this. There seem to be different classes of "promises" that a company can make to me.

For example, an old employer of mine tried to renege on our bonus program in the month our payments were due. They also laid off some of my teammates, who went to the labor board to complain about the bonuses they didn't get. They won their cases, and we all got paid what we were "promised" at the beginning of the year.

So sometimes the gummint DOES enforce agreements (for wages, bonuses, etc.) that the company has made with employees. I don't know what the reasoning was but I assumed it was something to the effect that we did the work in anticipation of the bonus, and so we were owed it.

So... what is the reasoning behind NOT paying folks their pensions? How is that different from not paying them bonuses? Does anybody know the legal principles here?

In other words, what promises does the company have to keep (assuming they're still in business), what do they NOT have to keep, (pension, vacation time? etc.) and how can I know the difference before I put in 20-30 years' of my life working for them?
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Old 01-28-2008, 04:40 PM   #36
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Actually the Enrons and Uniteds have forced some serious changes in pension plans and how much they are funded - I was speaking with some union guys out here and was told that they now have to have 100% of their pension obligations funded in any year, so this year, they cut the payout and all of the money that management is giving them will not count towards their future retirement benefits, it will be used to meet the 100% obligation (i.e. they lose a year's eligibility towards retirement) - there are some very unhappy people right now as their retirements (for some of them) have been extended. I did ask a few of them if they've invested on their own - I suspect not for some of them based on their responses to the retirement situation with the union.
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Old 01-28-2008, 06:23 PM   #37
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I get confused by this. There seem to be different classes of "promises" that a company can make to me...

sometimes the gummint DOES enforce agreements (for wages, bonuses, etc.) that the company has made with employees. I don't know what the reasoning was but I assumed it was something to the effect that we did the work in anticipation of the bonus, and so we were owed it.
That is the courts responding to centuries of contract law. Quite a bit different than the govt making people whole or guaranteeing pensions. The courts would also rule that the company must pay the pensions of retired employees - but that doesn't help much if you find yourself standing in line behind a bunch of others with "superior" claims.
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Old 01-28-2008, 07:32 PM   #38
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...but that doesn't help much if you find yourself standing in line behind a bunch of others with "superior" claims.
Ok.

So if I'm standing in line for my salary and another guy is standing in line for his pension, where are we relative to one another and to other creditors?

In other words, does the company have to pay salaries to its worker before it pays its vendors? Does it have to pay its vendors before it pays its pensions?

If I'm not in the same place as the guy looking for his pension, why not?

Sorry to be obtuse here, but I don't think my questions are out of line (no pun intended) with what the OP was asking -- how safe IS a pension, really?
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Old 01-29-2008, 02:13 PM   #39
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Texas Proud - what happened to the airline pilots works something like this:

Say they were expecting a pension of $100K (which many of them were).

The PBGC pays a maximum of about $51K (in 2008, probably $47K in 2007), for people who retire at 65. But it goes down each year that you retire before age 65.

Pilots, who are required to retire at 60, get a lower amount than the maximum because of their required retirement age, which is probably something like $28K or so.

So, Jim's 26% calculation sounds about right to me, as I am just rounding off here.

For most people, who are probably getting more "normal" sized pensions and can work until 65, their pensions would be fully covered.

I don't have the stat handy, but the number of people who get their full pensions when the PBGC takes over is quite high - pilots excluded.
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Old 01-29-2008, 02:34 PM   #40
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Depends. Mine (pensions) are US government (when I retire) and although it's possible, it's unlikely they will go away.
I'd check on that, seems like I heard they are being bought out by the Chinese............Shredder
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