IBM switches 401k match to annual lump sum

[rodi]

Quote:

Originally Posted by Midpack 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.

My numbers are simple addition of Black and Green.
Black is a logical AND, not a logical OR. So black is for companies that have BOTH types of plans...
Green is for companies that just have DB plans.
Turquoise is for companies that don't have DB plans.

In a venn diagram - black is the overlap area, Green is the area outside the overlap, but containing DB plans.

At least that's the way I'm interpreting it based on the language on the diagram. I'll give you that your eyeball of the percents might be more accurate - we're within a percent of each other.

[samclem]

Quote:

Originally Posted by travelover Think how well it would work to move Social Security to a 401(k) style of retirement scheme.

On an individual level, some folks would come out a lot better, others would come out worse. But, from a social perspective it wouldn't accomplish what SS now does (wealth transfer from young to old, wealth transfer from highly paid workers to less well paid workers, and a degree of social welfare/disability safety net for everyone).

[Sesq]

A substantial portion of my pay is bonus which vests on the last day of the year. Every January we wait and see who is quitting. Then, in March the stock vests (and the bonus that vested in December is paid) we look around again.

I think the shifts in voluntary attrition due to vest dates like this has the biggest impact on how the biz is actually run. In my department, the January departures were the worst because we were in the financial close. The stock plan has helped lessen this for which I am thankful.

[FUEGO]

What's the big deal? IBM wants to retain and reward long term employees because it is expensive and disruptive to have turnover. This plan change seems to favor long-term employees over those who are short timers. Maybe their candidate pool of job seekers will self select out (ever so slightly) the short timers.

DW's company recently did the exact opposite of the move to lump sum 1x a year. They used to have a 401k match and 401k retirement contribution on March 31 of each year, along with payment of the annual bonus and retroactive payment for the current year's raise from Jan 1 to March 31. So it was a huge payday for all on March 31. Now they spread out the employer's 401k contributions to be deposited in equal amounts each payday. I suppose it is nice to get those contributions an average of 9 months earlier, since we get to enjoy the fruits of the float for 9 months instead of the employer. Except I think the change in payment structure was all a pretext to conceal the lower the benefit amount they just instituted a couple months ago. No one is as up in arms when they see a couple hundred bucks disappear from their 401k deposits every 2 weeks, but losing thousands and thousands in contributions all at one time on March 31 would be very noticeable.

[travelover]

Quote:

Originally Posted by samclem On an individual level, some folks would come out a lot better, others would come out worse. But, from a social perspective it wouldn't accomplish what SS now does (wealth transfer from young to old, wealth transfer from highly paid workers to less well paid workers, and a degree of social welfare/disability safety net for everyone).

That's true. I guess if we did go to a 401(k) style plan we would first have one generation rotting in the streets but the subsequent generations saving like crazy to avoid their parent's and grandparent's fate.

[youbet]

Quote:

Originally Posted by PatrickA5 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.

And you're leaving out the fact that today's youth is being asked to pay higher taxes or accept lower future benefits for themselves to support entitlements for current geezers........ That's the problem with schemes like SS. The gov't promises big benefits while times are good. Sometimes the next generation has to pay for them while times are bad.

Today's young people should be rioting in the streets.

[FUEGO]

Quote:

Originally Posted by youbet Today's young people should be rioting in the streets.

Or save as much as possible right now and then ER very early so our wages won't be confiscated any greater than they are today.

[azphx1972]

Will 401(k) plans keep getting worse? - CNN.com

[youbet]

Quote:

Originally Posted by FUEGO Or save as much as possible right now and then ER very early so our wages won't be confiscated any greater than they are today.

Well, yes, not having wages is a good way to not have your wages taxed. They'll probably have to go after your wealth through a wealth tax, national sales tax or VAT....... Or just continue to print money and your savings will inflate away. Or, or, or...... whatever. It'll have to come from someplace! And the "taxers" can be very, very creative! Look at all the stuff they've created over the past few decades.

But I think the real lesson is that compensation plans need to pay in real time out of current income with zero promises that future generations have to pay for. Signing up tomorrow's workers to pay for stuff for today's geezers is a recipe for failure that we're just starting to have come crashing down on us now.

401k's, IRA's and other retirement saving plans funded with current income/earnings - Yes!
SS, pensions and other retirement vehicles requiring financial inputs decades into an uncertain future - No!

BTW, I admire your attitude, at least on this particular issue!

[ls99]

Another day at the camp. Loaded scrap metal in pickup truck. Weighed 900 lb.

Yup, a good workout.

After getting home and shower, DW graciously applied Blue Emu goop to several achy parts.

[Huston55]

Quote:

Originally Posted by Midpack 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.

Since boomers are the generation btwn the two discussed in these posts, I'll sandwich this comment in here.

The fact is that our (boomers) parents generation did/does sit in a sweet spot regarding DB pensions and SS/Medicare benefit. In addition to what MidPack mentions, our parents will collect significantly more from SS/Medicare than they contributed. That additional amount comes, of course, from us (the next generation).

I expect our children will have their own financial burden to pay, as changes to the compensation and benefits model continue to play out. However, I don't think it's that much more egregious than changes when we were early in our careers, and doesn't rise to 'riot in the streets' level.

Quote:

Originally Posted by youbet And you're leaving out the fact that today's youth is being asked to pay higher taxes or accept lower future benefits for themselves to support entitlements for current geezers........ That's the problem with schemes like SS. The gov't promises big benefits while times are good. Sometimes the next generation has to pay for them while times are bad. Today's young people should be rioting in the streets.

[samclem]

The intergenerational "who had it easier" or "who stole from who" tussles aren't very illuminating. The folks who got the "best deal" from SS are long dead--they contributed virtually nothing and got checks for their whole retirement. There are young workers today who will get a "higher payback" from their SS contributions than average boomers--"payback" depends much more on average earnings level (less earnings=higher "payback") than when you were born. The majority of US workers have >never< had defined benefit retirement plans. And DB plans weren't as great as some folks now seem to believe--ask workers who had to change employers multiple times and either never got vested or never got to enjoy the especially high accumulation phases built into some plans. Or ask a Delta pilot or a Delco management employee if they would have been better off controlling their own retirement money. DC plans and IRAs gave workers a lot more flexibility than they enjoyed under DB schemes.

[youbet]

Quote:

Originally Posted by samclem DC plans and IRAs gave workers a lot more flexibility than they enjoyed under DB schemes.

+1

And DC plans and IRA's don't ask subsequent generations to provide the payouts, regardless of their ability to pay.