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Old 04-17-2009, 01:13 PM   #41
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[quote=randyman . . . it would appear that the vested interest lies with a bunch of guys whose names end in vowels.[/quote]


I guess you've said (more) than enough to expose yourself.
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Old 04-17-2009, 01:29 PM   #42
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Originally Posted by ziggy29 View Post
Actually, many of the best-run pension plans I know of *are* administered by the unions themselves.

Think about it: who is likely to be a better steward of a pension fund: those whose retirements depend on its security, or those who have no direct vested interest in its long-term viability? Who's more likely to roll the dice and gamble on a hedge fund?
Ziggy, finally we agree on something! I wasn't being facetious- let the Unions collect dues and fund the retirement acounts- the workers pay in, the union invests where they see fit, and their accounts are fully funded and vested from day one. What could possibly go wrong?
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Old 04-17-2009, 01:41 PM   #43
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While one would hope that the union tries to protect its constituency, that is not always the case. A union is not necessarity a direct reflection on its members. Oftentimes its own interest take precedence. The retirement plans often chosen by teacher's unions are notoriously costly and inefficient.

2 Teachers Sue Union over Retirement Plan

No matter who is managing a pension fund, there is the temptation to satisfy today's retirees at the expense of future retirees. There is the pressure to outperform the market. And of course, there is the temptation to collect hefty management fees to handle the pension funds.
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Old 04-17-2009, 02:43 PM   #44
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Inc case of the Teamsters, it would appear that the vested interest lies with a bunch of guys whose names end in vowels.
whatsamatteryou?
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Old 04-18-2009, 08:24 PM   #45
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I guess you've said (more) than enough to expose yourself.
never saw Casino?

OT but last year they finally arrested the guys who beat the character Joe Pesci played
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Old 04-19-2009, 05:52 AM   #46
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From the PBGC website, the amount they guaranty is based on your age when the plan is terminated. For early retirees the amounts that they guaranty is modest. Here is their table:

Maximum monthly guarantee tables (PBGC.gov)

That seems very generous.
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Old 04-19-2009, 08:01 AM   #47
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You might find this article in the Detroit Free Press useful:

Anxiety about GM, Chrysler bankruptcies grips retirees | Freep.com | Detroit Free Press
About that PBGC table of maxium annual benefits - I'm confused about how age is used in that calculation:

Suppose a person is 65 now, and the company goes bankrupt.
But the person retired 10 years ago at age 55.

From that PBGC table, is this person guaranteed $54,000 or $24,300?
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Old 04-19-2009, 08:16 AM   #48
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About that PBGC table of maxium annual benefits - I'm confused about how age is used in that calculation:

Suppose a person is 65 now, and the company goes bankrupt.
But the person retired 10 years ago at age 55.

From that PBGC table, is this person guaranteed $54,000 or $24,300?
Looking more at the PBGC web site, it appears that $54,000 would be correct, as the tables there refer to "your age on the plan termination date (or the date the sponsor entered bankruptcy, if applicable) or, if you were not in pay status on that date, the date you begin receiving benefits from PBGC."

Maximum monthly guarantee tables (PBGC.gov)
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Old 04-19-2009, 09:10 PM   #49
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The important thing to remember about that PBGC "Guarantee" is that, like most everything from the PBGC, there is less to it than meets the eye.

If, after all the humgous reductions mentioned in my previous post (#11), your adjusted pension is equal or more than the guarantee for your age, they will bring you up to the guarantee level if your pension fund doesn't have enough money to do so.

If their reductions drop you below the guarantee level in the chart, they will only guarantee the amount they calculate you "should" get.

OTOH, if there is enough money in the fund to pay a higher benefit AND their calculations still say you are entitled to that amount, you should get the higher number.
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Old 04-20-2009, 10:51 AM   #50
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The important thing to remember about that PBGC "Guarantee" is that, like most everything from the PBGC, there is less to it than meets the eye.

If, after all the humgous reductions mentioned in my previous post (#11), your adjusted pension is equal or more than the guarantee for your age, they will bring you up to the guarantee level if your pension fund doesn't have enough money to do so.

If their reductions drop you below the guarantee level in the chart, they will only guarantee the amount they calculate you "should" get.

OTOH, if there is enough money in the fund to pay a higher benefit AND their calculations still say you are entitled to that amount, you should get the higher number.
(I'd put this part in the post above but seem to have lost my ability to edit the post. I can edit this post but not that one. Suggestions?)
Here's an example:
You are 55 years old and retire today with a pension of $4,000/month.
Tomorrow your pension is taken over by the PBGC.
They do their math with all the reductions mentioned in post #11, and your "adjusted" pension is now $1,700/month (a reduction of that magnitude is entirely possible).
Your plan only has enough money to pay you $1,000/month.
The PBGC Guarantee will bring you up to $1,700/month, not to the "Guarantee" level of $2,025/month.
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Old 04-20-2009, 11:11 AM   #51
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(I'd put this part in the post above but seem to have lost my ability to edit the post. I can edit this post but not that one. Suggestions?)
The software is set up with a six hour edit window. After that, you can't add to (or change) history...
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Old 04-20-2009, 11:28 AM   #52
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The software is set up with a six hour edit window. After that, you can't add to (or change) history...
Thanks for the info!
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Old 04-20-2009, 11:43 AM   #53
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OT but last year they finally arrested the guys who beat the character Joe Pesci played
That scene was disturbing mainly because of the tighty-whities they had Pesci wearing as he was beating and dumped into the ditch. Couldn't they have allowed him a little dignity in death?
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Old 04-20-2009, 04:52 PM   #54
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Originally Posted by Gearhead Jim View Post
Here's an example:
You are 55 years old and retire today with a pension of $4,000/month.
Tomorrow your pension is taken over by the PBGC.
They do their math with all the reductions mentioned in post #11, and your "adjusted" pension is now $1,700/month (a reduction of that magnitude is entirely possible).
Your plan only has enough money to pay you $1,000/month.
The PBGC Guarantee will bring you up to $1,700/month, not to the "Guarantee" level of $2,025/month.
I agree with your interpretation and it is very depressing reading. I intend to RE at 55 next year with all the basic essentials of my RE budget covered by my pension. If the company plan goes down the toilet in the next few years I will lose a LOT of income over the coming years.

But, c'est la vie, I'm certainly not going to change my plans unless it actually happens.
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Old 04-20-2009, 06:00 PM   #55
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Employees are not responsible for managing the pension or agreeing to onerous contracts. More important to a company is what happens to a pension fund. The issue is not whether or not the pension was too difficult to fund, they are not, GM had years of great profits, had they continued to fund and conservatively invest to pay their obligations it would never built to this point.

There are rules in place that assure you recognize the proper amount of pension expense each year. However the secondary rules are how much you actually need to fund the plan. By not funding the plan with actual cash, you create a nice little positive cash flow for the company to be used for capital expenditures.

Look at this 2002 GM pension 8K filing, they speak of all the expense GM is going to need for it's pension plan, then down 3 pages state no funding will be required until 2006 and in the year 2000 and 2001 the total amount of pension expense was only 35 and 81 million dollars. For 2001 that worked out to $125 of pension expense per covered worker and or retiree. In 2008 Rick Waggoner was reported to receive a retirement pension worth 20 million dollars.
GENERAL MOTORS CORP - GM Current report filing (8-K) ITEM 9. REGULATION FD DISCLOSURE


As an example of the use to a company's retirement fund can be, in 2008 GM was using the retirement fund to pay the special benefits to get employees to take early retirement. To the tune of $11.7 Billion dollars out of the pension plan, that was already underfunded. I have been looking and unable to find the level of actual funding for year by year.

GM Raids Pension Fund: $11.6b for Buyouts, VEBA | The Truth About Cars

This is typical of what companies do with their pension plans legally, use them as a cash till to reduce headcount and expense but not fund the pension fund unless it allows them to produce a favorable story as GM did in 2003/2004 by issuing 13 billion bonds and depositing in pension trust and booking 200 million in pension profit for the years on that transaction.

Market Place; G.M. Profit Gets Lift From Pension Deal - The New York Times

The idea that company management got railroaded by agreeing to untenable pensions is absurd.

The biggest problem is that when the pension expenses were incurred and 10 percent US government long term bonds were available to fully pay the expense from the 1960's 1970's 1980's and early 1990's. GM did not do so because of all the tricks accountants can do with these numbers by producing a variable and estimated return instead of producing a funded return. Combine this will the ability to use pension money to get employees to leave at high prices with no expense to the company and you have a flawed system where the employer is not held accountable and promises can be used to enrich the management short term with stock options and non-qualifed retirement packages.
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Old 04-20-2009, 07:14 PM   #56
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Great post Running Man. Although, it can be dangerous to inject data into a long running rant.
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Old 04-20-2009, 09:10 PM   #57
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Running man, that is great information. I actually had never heard this angle before.
What my next question would be is what is the cash flow for retirees pensions and benifits. And, what level of investment growth would allow GM to support those today if they had not been 'raiding' the pension plan.
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Old 04-20-2009, 10:56 PM   #58
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Running man, that is great information. I actually had never heard this angle before.
What my next question would be is what is the cash flow for retirees pensions and benifits. And, what level of investment growth would allow GM to support those today if they had not been 'raiding' the pension plan.
Actuaries must every year give that information to GM to support the required pension journal entries for expense the following year required funding and OCI charges. Since the actuaries are making assumptions on what the company will be paying on future salaries with assumed pay raises and industry estimates on expected lengths of service, they tend to require larger reserves in my experience than are actually encountered in the future. I would love to see an accurate summary of these over the last 20 years from GM.
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Old 04-20-2009, 11:50 PM   #59
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I seem to recall some discussions, somewhere, that suggested that tax rules prohibited 'over-funding' of pensions. IOW, if the pension fund was X% more than actuarily sound, companies were penalized for adding to it.

Anyone know if this is accurate?
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Old 04-21-2009, 11:10 AM   #60
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I would love to see an accurate summary of these over the last 20 years from GM.
You and me both. That could be incredibly enlightening.
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