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I'm the latest pension plan victim!
Old 03-04-2006, 11:09 AM   #1
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I'm the latest pension plan victim!

I knew my works defined benefit plan was too good to last, but it still hurt to recieve the letter yesterday:

"We are all no doubt aware of the changes many companies have had to make to their retirement benefits......the media is filled with stories about companies, some in our industry, that have stopped making contributions.....terminated their plans outright."

"The facts of the matter are that lower investment returns and teh increased longevity of retirees have combined to put significant pressure on pension plans. In the past few years ********* has contributed hundreds of millions of dollars to our pension plans. We remain commited to providing....." blah blah blah for a while longer.

This is my favorite sentence of the bad news letter: "These changes are designed to maintain the viability and stability of our benefit programs, and to make our retirement program costs more predictable and manageable in a highly competitive business environment." - Notice how they manage never to say "WE ARE CUTTING YOUR BENEFITS." :P

Long story short, they are changing the normal retirement date from 62 to 65, calculating your benefit as an average of the last 10 years instead of just 3 (to make the payment lower), and jacking new hires after mid 2006 even more so they can grandfather out us "old timers".

They just lowered the benifits in 2003, to have to re-adjust again 3 years later does not bode well! Man, this is really messing with my SWR!

The thing is, I see them working, I predict in ten years the pension will be completely gone for new hires, and won't be worth much to us old timers either. I guess they feel they can't just wipe it away in one stroke without upsetting the employees, but if you boil the frog slowly...stops being an intillectual conversation when it happens to you! :P
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Re: I'm the latest pension plan victim!
Old 03-04-2006, 11:20 AM   #2
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Re: I'm the latest pension plan victim!

I guess the only silver lining in this cloud is that you're not working in the steel, airline, or auto industries.
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Re: I'm the latest pension plan victim!
Old 03-04-2006, 11:58 AM   #3
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Re: I'm the latest pension plan victim!

Although my non-cola small pension (nice pocket money) that I would receive at 65, froze for me when I got sacked. The company just announced that the pension plan will be frozen for all current employees. To be frank, I am not sure if the company will be around 10 years from now.

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Re: I'm the latest pension plan victim!
Old 03-04-2006, 11:59 AM   #4
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Re: I'm the latest pension plan victim!

Welcome to the club!

I lost my defined benefit 5 years ago, when my company was bought (again) by an international firm that did not want to be bothered with the administration of the existing plan (the owners, and most of the existing organization is in Europe, who rely on their own government retirement plans, and don't administer anything on a company level).

Anyway, we were "converted" (like the rest of their existing US units) to a "cash balance" plan. *I won't go into what that is, since it's been covered so much in the news for the last few years (e.g. IBM).

I could have retired in January this year ('06) with a monthly benefit of $1500. *But with the "conversation" to a lump sum, the current annuity value would allow me to retire (today) at an $1100 monthly ($4800 less per year).

In addition, if I don't invest the lump sum in an annuity, I take the "investment risk" of the future returns (of course, I really don't have a problem with that, since I'm comfortable with managing the rest of my/wife's retirement portfolio - in fact, maybe I could do better *:

Defined benefit plans are like everything else in this world. *Constantly evolving - never staying the same.

Remember, in 100 years it won't mean a thing
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Re: I'm the latest pension plan victim!
Old 03-04-2006, 12:31 PM   #5
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Re: I'm the latest pension plan victim!

More than anything, this trend has got to make people further consider saving for their own early retirement...or regular retirement for that matter.

Nothing can suck harder than working for someone for 40 years presuming your pension will pay your retirement and then hearing that its all gone. Actually happened to my uncle on his fathers side...worked for a smallish printing company all his life, which was sold a few years to a new owner before my uncle retired. When he gave notice of his retirement and inquired about the pension he had been promised when he hired on, he got "What pension? Theres no pension! When I bought the company nothing was ever said about pensions!". That he had it in writing was apparently uninteresting and he got nowhere trying the legal route.

Presumably the original owner is enjoying a little extra income...
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Re: I'm the latest pension plan victim!
Old 03-04-2006, 01:14 PM   #6
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Re: I'm the latest pension plan victim!

defined benefit plan => demised benefit plan
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Re: I'm the latest pension plan victim!
Old 03-04-2006, 01:29 PM   #7
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Re: I'm the latest pension plan victim!

Sorry to hear that Laurence.
I'm sure your ER plan will survive, but I feel bad for all the others who don't have a plan B.
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Re: I'm the latest pension plan victim!
Old 03-04-2006, 03:53 PM   #8
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Re: I'm the latest pension plan victim!

Waiting for my pension papers to show up to see whether lump sum is better than monthly pension (annuity). Trouble with the lump sum will be the high discount rate. Gonna grab something end of April and run with it while I have a chance.
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Re: I'm the latest pension plan victim!
Old 03-05-2006, 10:17 AM   #9
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Re: I'm the latest pension plan victim!

I wonder how retirement plans will change in the next 30 years, Laurence's horizon. What is available now is considerably different than what was available in 1976.

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Re: I'm the latest pension plan victim!
Old 03-05-2006, 10:25 AM   #10
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Re: I'm the latest pension plan victim!

When you were only a little 8 year old?
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Re: I'm the latest pension plan victim!
Old 03-05-2006, 09:57 PM   #11
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Re: I'm the latest pension plan victim!

Scott burns called it "the Great Reneging" today.

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Re: I'm the latest pension plan victim!
Old 03-06-2006, 10:37 AM   #12
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Re: I'm the latest pension plan victim!

Quote:
Originally Posted by rs0460a
Welcome to the club!

I could have retired in January this year ('06) with a monthly benefit of $1500. *But with the "conversation" to a lump sum, the current annuity value would allow me to retire (today) at an $1100 monthly ($4800 less per year).
By law they can not take anything away from you... if you retired today you would get your $1500 benefit as you have already earned it.

But you are right, the cash balance can be less than needed to fund that benefit, so you will be working for a few years to get caught back up to where you were... it might be a good time to change jobs and actually make some cash balance in another company. That is if your current company does not use seniority as a determination of contribution percentage...

Also, if there is a lot of people in your situation, why not sue? Our company did the same thing many years ago and got sued by some highly paid people... seems that the difference in thier cash balance needed to fund what they had earned was in the $300,000 range... they won and got the extra money put into their cash balance accounts.
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Re: I'm the latest pension plan victim!
Old 03-06-2006, 11:30 AM   #13
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Re: I'm the latest pension plan victim!

My wife's plan recently had the contribution raised from 5% to 7.4%.

Since she'll be nowhere near the min age/years when we jump and thus will be taking lump sum cash we think it's great since they match 100% (vesting 20% incs from 5-10 years in) and give a pretty solid guaranteed rate of return.
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Re: I'm the latest pension plan victim!
Old 03-06-2006, 05:01 PM   #14
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Re: I'm the latest pension plan victim!

Quote:
Originally Posted by Texas Proud
By law they can not take anything away from you... if you retired today you would get your $1500 benefit as you have already earned it.

But you are right, the cash balance can be less than needed to fund that benefit, so you will be working for a few years to get caught back up to where you were... it might be a good time to change jobs and actually make some cash balance in another company.* That is if your current company does not use seniority as a determination of contribution percentage...*

Also, if there is a lot of people in your situation, why not sue?* Our company did the same thing many years ago and got sued by some highly paid people...* seems that the difference in thier cash balance needed to fund what they had earned was in the $300,000 range...* they won and got the extra money put into their cash balance accounts.
Unfortunately, with many/all retirement plans, you have no option. The "big guys/girls" have their own contract/agreements. For the "little people", here's what is stated on my annual benefit statement...

"Although the Company intends to maintain the retirement plans indefinitely, the Company reserves the right to amend or terminate the plans at any time"

So it goes...
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Re: I'm the latest pension plan victim!
Old 03-06-2006, 05:15 PM   #15
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Re: I'm the latest pension plan victim!

I retired 22 months ago so my pension is ok.
But, my company froze pensions as of 12/31/05. That means my wife and son, who both still work there, had their pensions frozen ( and halted ) on 12/31.
My wife has a minimum of 8 years to go and my son a minimum of 20 years - and that's to receive a vastly reduced pension at age 55. Normal pension for them is age 65, for me it was 62. IOW, my pension was reduced less than theirs will be.
AND, since their's was frozen, my wife's expected pension will be about $700, my son's about $400. Can you imagine with inflation, what the real value will be in 2014 for my wife and 2026 for my son ? answer: PEANUTS
.
Why does the law allow this ? Shouldn't the value of their pensions today be moved into their 401k, so that it can gain over the upcoming years through proper investments ?
.
Next up: the company eliminates medical for retirees. I'm sure that will happen very soon.
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Re: I'm the latest pension plan victim!
Old 03-06-2006, 05:41 PM   #16
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Re: I'm the latest pension plan victim!

MIne got rid of medical for retirees in 2002. My plan? Keep in shape and get a high deductable health care plan.
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Re: I'm the latest pension plan victim!
Old 03-06-2006, 06:35 PM   #17
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Re: I'm the latest pension plan victim!

Quote:
Originally Posted by Laurence
MIne got rid of medical for retirees in 2002.* My plan?* Keep in shape and get a high deductable health care plan.*
Yes, I believe the new "retirement health care plan" is Medicare*
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Re: I'm the latest pension plan victim!
Old 03-06-2006, 07:29 PM   #18
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Re: I'm the latest pension plan victim!

It's amazing to see how many people and companies this has happened to. We went through the same corpobabble anouncement. In our case they talked about how other companies are doing the same thing and the pension benefits were reduced to stay competative. Not a bad line actually, as it probably hints at the truth.

Our accumulated benefits were frozen and the future contributions by the company were reduced to about half of the previous rate. Medical went from fully paid to 65 to retiree pays 20 percent. Almost sounds like I might have got off easy? I work for a manaufacturing firm and it's probably a good thing we produce a perishable product (OK I work in a brewery). I guess I feel fortunate that it's too expensive to ship good beer from China without it spoiling a bit and illegal to sell it at WalMart (at least in my state). I've got about 263 days (not counting or anything) left before ER and hope they don't change it again before I leave. If nothing else it should be a good lesson for others not to put too many of your retirement eggs in a promised benefit.

What's sort of scary is that, as I understand it, there are some legal obligations to accumualte pension benefits, but they can mess with your medical at any time. And then there's SS and medicare.
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Re: I'm the latest pension plan victim!
Old 03-07-2006, 10:22 AM   #19
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Re: I'm the latest pension plan victim!

Quote:
Originally Posted by rs0460a
Unfortunately, with many/all retirement plans, you have no option.* The "big guys/girls" have their own contract/agreements.* For the "little people", here's what is stated on my annual benefit statement...

"Although the Company intends to maintain the retirement plans indefinitely, the Company reserves the right to amend or terminate the plans at any time"

So it goes...
I agree that they can change and amend the plans. What they sued over was the starting balance of the new cash balance plan. Instead of a defined benefit plan, they created a defined contribution plan 'converting' our old cash balance of the plan (at the frozen amount) to a starting balance. Their starting point was below what it would cost to buy an annuity to pay for what had been earned (they discounted it a lot more than normal).. it created a scenario where you could work for many years with them putting in between 4 and 14% of your salary and in the end you would not get any more in an annuity then when they converted. I believe that it would be 10 years for them to 'break even'... This is what you have presented... you could buy an annuity that pays $1100 vs the $1500 you have earned... they shorted your starting balance.
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Re: I'm the latest pension plan victim!
Old 03-07-2006, 10:33 AM   #20
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Re: I'm the latest pension plan victim!

Quote:
Originally Posted by bennevis
I retired 22 months ago so my pension is ok.
But, my company froze pensions as of 12/31/05.* *That means my wife and son, who both still work there, had their pensions frozen ( and halted ) on 12/31.
My wife has a minimum of 8 years to go and my son a minimum of 20 years - and that's to receive a vastly reduced pension at age 55.* *Normal pension for them is age 65,* for me it was 62.* *IOW,* my pension was reduced less than theirs will be.
AND,* since their's was frozen,* my wife's expected pension will be about $700, my son's about $400.* * Can you imagine with inflation, what the real value will be in 2014 for my wife and 2026 for my son ?* *answer: PEANUTS
.
Why does the law allow this ?* * Shouldn't the value of their pensions today be moved into their 401k, so that it can gain over the upcoming years through proper investments ?
.
Next up:* *the company eliminates medical for retirees.* I'm sure that will happen very soon.
Bennevis,

That is what I am trying to say.. the cash balance needed today for a $400 annuity in 20 years is VERY LITTLE... and then they try and discount it a bit more which is stealing.... I have to agree that they have the right to freeze your pension... and you have the right to go find another job that gives you one...

As for getting rid of medical... my company just did that... and you had to be 50 to get grandfathered... I am only 48 so I am a bit pissed... but that is the way it goes...
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