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Old 12-11-2012, 08:52 AM   #21
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Does this mean that folks who front load their 401k contributions will end up getting their expected match on the amount they put in, so they no longer have to carefully spread the contributions over the entire year to allow for paycheck by paycheck matching? For people with uneven compensation, the adjustment game needed to make sure there was still space available in the 401k cap for the last few paychecks of the year was annoying.
Yes, although not all companies work that way.

With my company you got the match every month even after you had maxed out.

DD joined IBM immediately after graduating and worked there ~8 years. The large company she then moved to also has no DB pension pays the 401k match annually in December.

As mentioned above, IBM are not the first, or even the first in the computer industry, to go this route, which more companies will probably head down.
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Old 12-11-2012, 08:56 AM   #22
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I appreciate IBM's desire to reduce costs, but this seems like a poor way to do it. It's likely to encourage a lump of departures at one time each year (tougher to maintain continuity on projects). The randomness and uncertainty of who gets pinched will increase angst, it's probably better just to reduce the match amount rather than start the lotto. Finally, if a person is really ready to go, does IBM want them hanging around another few months to get the match?
I talked to a friend who is an IBM operations manager and responsible for budgets in her department. First she was mad due to the personal impact (doubled because her DH also is at IBM). Then she realized that it has a major impact on how they need to budget, as they factor in a certain amount of attrition during the year into their plan. Normally, Q3 and Q4 is when the majority of voluntary attrition happens but she expects this will drive it into Q1 and Q2. And the concerns sam raised above were also raised.

I fear this will spur a megacorp trend as others have mentioned. How sad, especially at a time when there is so much attention to people not saving enough for retirement and also potential future changes to SS and Medicare.
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Old 12-11-2012, 09:20 AM   #23
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I fear this will spur a megacorp trend as others have mentioned. How sad, especially at a time when there is so much attention to people not saving enough for retirement and also potential future changes to SS and Medicare.
That horse left the over 30 years ago...this is just a continuation of that trend. And "people" not saving enough for retirement has been receiving attention for almost as long, though "people" haven't been listening, and many still aren't...
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Old 12-11-2012, 09:24 AM   #24
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My friend works at IBM. One other factor we discussed: no doubt if an IBM employee is on the bubble, they'll be sure to let him/her go in the 3rd quarter.
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Old 12-11-2012, 01:23 PM   #25
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All may be true, but not sure it's fair to paint IBM alone with this brush. According to this source, private DB pensions like many of our parents had are down to less than 5% of companies in the private sector. Companies simply cannot afford to continue pensions once competitors start dropping them (and global competitors who never had them). Sad but...

FWIW, % of companies with a combination on DB + DC plans seems to held steady. Having spent a career faced with competitive pressure, cost control, future liabilities, etc. - it's not as easy as some people would like to think. And the decisions are rarely taken lightly or without understanding the impact.
From your graph about 17% of private sector companies have DB plans.
4-5% of companies have ONLY DB plans...
but another 12-13% have BOTH DB and DC plans.

Unless I'm misinterpreting the black line as being companies that have both types of plans.
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Old 12-11-2012, 01:34 PM   #26
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From your graph about 17% of private sector companies have DB plans.
4-5% of companies have ONLY DB plans...
but another 12-13% have BOTH DB and DC plans.

Unless I'm misinterpreting the black line as being companies that have both types of plans.
The company I retired from 3 years ago had a traditional DB pension plan and a 401k with a 50% match for the first 5% of employee contributions. It also still has a retiree HI plan. (so far so good)
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Old 12-11-2012, 01:56 PM   #27
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From your graph about 17% of private sector companies have DB plans. I assume you meant DC here.
4-5% of companies have ONLY DB plans...
but another 12-13% have BOTH DB and DC plans.

Unless I'm misinterpreting the black line as being companies that have both types of plans.
I haven't figured out your numbers. In 2008:
  • Turquoise: About 31% had defined contribution plans - 401K et al
  • Black: About 12% had a combination of DC & DB - though DB/pensions are typically some fraction of DB only companies
  • Green: About 3% still have DB only plans - pensions or annuities
Here's that chart again.
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Old 12-11-2012, 02:06 PM   #28
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Then again, there is no requirement for IBM (or any other company) to do ANY match at all.

Isn't this another form of entitlement expectation? Somehow they're the bad guys for trying to get some wiggle room in a benefit they don't even have to provide.
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Old 12-11-2012, 06:02 PM   #29
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Then again, there is no requirement for IBM (or any other company) to do ANY match at all.

Isn't this another form of entitlement expectation? Somehow they're the bad guys for trying to get some wiggle room in a benefit they don't even have to provide.
They don't have to provide it, but if they want to attract talent then they'd want to make sure their benefits package match those of their competitors, at least on the surface.
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Old 12-11-2012, 06:32 PM   #30
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Then again, there is no requirement for IBM (or any other company) to do ANY match at all.

Isn't this another form of entitlement expectation? Somehow they're the bad guys for trying to get some wiggle room in a benefit they don't even have to provide.
They don't HAVE to provide any benefits (at least not yet). I expect the match to come down over the next several years as they look for more ways to cut expenses (or to offset new upcoming benefit expenses).
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Old 12-11-2012, 06:38 PM   #31
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Old 12-11-2012, 06:47 PM   #32
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They don't have to provide it, but if they want to attract talent then they'd want to make sure their benefits package match those of their competitors, at least on the surface.
I agree. Except I can imagine a lot of people would be happy just to get a job at this point.

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Old 12-12-2012, 04:08 AM   #33
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My current and previous employers both had no matching on the 401k, which is painful. Higher salary than I had at the employer before that, but when you add in the benefits the lower salary position ended up being somewhat better remuneration than my previous job. I'm not actually expecting to see 401k matches anywhere in the future, at this point I'm glad just to get the tax benefit...
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Old 12-12-2012, 05:15 AM   #34
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I haven't figured out your numbers. In 2008:
  • Turquoise: About 31% had defined contribution plans - 401K et al
  • Black: About 12% had a combination of DC & DB - though DB/pensions are typically some fraction of DB only companies
  • Green: About 3% still have DB only plans - pensions or annuities
Here's that chart again.
So, it seems to always (since early 80s) have been the case that a minority of employers offered any type of retirement plan. Add union pension plans on top of that (~20% Of work force in early 1980s and ~12% now), and there are still lots of folks without anything except their own savings. This is certainly a major factor in the meager average retirement savings in this country.
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Old 12-12-2012, 05:24 AM   #35
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My perspective certainly isn't that of a normal employee. But this gradual decline in benefits has been going on for at least the last 25 years. First the DB plan went, max vacation weeks dropped, increases in health insurance passed on to employees, 401k matches decreased etc. All the more reason to LBYM and save, invest and save some more. Even with the thousands of mistakes I've made over the years I like most here reached FI. Nothing fancy just play the hand your delt and make adjustments as required. Certainly this is not easy but it is possible.
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Old 12-12-2012, 08:29 AM   #36
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My perspective certainly isn't that of a normal employee. But this gradual decline in benefits has been going on for at least the last 25 years. First the DB plan went, max vacation weeks dropped, increases in health insurance passed on to employees, 401k matches decreased etc. All the more reason to LBYM and save, invest and save some more. Even with the thousands of mistakes I've made over the years I like most here reached FI. Nothing fancy just play the hand your delt and make adjustments as required. Certainly this is not easy but it is possible.
I feel sorry for my kids generation (around 30). If they can find a job, the benefits aren't that great (depending on the industry). I look for a gradual decline in benefits over the next 2-3 decades with 401K matches to be a thing of the past. When you add in much less employer help and probably much lower SS - it won't be pretty when the next generation retires.
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Old 12-12-2012, 08:38 AM   #37
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So, it seems to always (since early 80s) have been the case that a minority of employers offered any type of retirement plan. . . . This is certainly a major factor in the meager average retirement savings in this country.
Yeah, how does that work? "My employer hasn't set up a pension plan for me and doesn't contribute to a 401K match. No sense in me maxing out my IRA, letting it accumulate, and putting away after tax retirement savings. If my company doesn't think it's a good idea for me to have retirement savings, why should I do it myself?"
Another reason for the low level of savings even within retirement savings vehicles is the fact that employees frequently spend the money on other stuff.
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Old 12-12-2012, 08:44 AM   #38
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Yeah, how does that work? "My employer hasn't set up a pension plan for me and doesn't contribute to a 401K match. No sense in me maxing out my IRA, letting it accumulate, and putting away after tax retirement savings. If my company doesn't think it's a good idea for me to have retirement savings, why should I do it myself?"
Another reason for the low level of savings even within retirement savings vehicles is the fact that employees frequently spend the money on other stuff.
Good point. Think how well it would work to move Social Security to a 401(k) style of retirement scheme.
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Old 12-12-2012, 08:53 AM   #39
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I feel sorry for my kids generation (around 30). If they can find a job, the benefits aren't that great (depending on the industry). I look for a gradual decline in benefits over the next 2-3 decades with 401K matches to be a thing of the past. When you add in much less employer help and probably much lower SS - it won't be pretty when the next generation retires.
IOW, most of us here should consider ourselves fortunate for the times we worked/lived in, to some extent. I know my 90 yo parents have come to realize their timing was nearly ideal...they retired with full COLAd pensions and retiree health care for life.
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Old 12-12-2012, 09:29 AM   #40
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This trend will continue as long as US companies are managed quarter to quarter by Wall Street reporting. I worked 30 years for IBM and retired on December 31, 1996 because they were eliminating the free retirement medical on January 1, 1997. So yes I still get a free medical plan, but oh how it has changed. Now it is still free, but with a VERY high deductible. Still good to have though. Also still have the life time pension. Went to work for another company in the same field and earned a lot more salary, but much less in benefits.

This change may not be so bad if you think about how you contribute. Used to be I adjusted my contribution % so as to max the matching over the entire year. Now you can max out your contribution early on and gain the increase time your part is invested. Based on most company match amounts this may actually work in your favor. I know I used to get the "catch up amount in as fast as possible for that reason. Lets say I maxed out each year and put 20K in my 401K spread over 12 months to maximize the match. That would be on average 10K invested over the 12 months. If I was able to put the 20K in during the first 3 months, my average invested amount now becomes 17.5K for 12 months. So does a 8% return on 7.5K for 12 months or about $600 offset the spread out earnings on the 3% to 5% company match? For a 3% match it does, for 5% you lose a small amount. Just need to max out contributions and catch up amounts as fast as possible during the first few months of the year to help offset the delayed company match.
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