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Old 07-25-2012, 08:48 AM   #21
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What's a pension? ...
I had one until 1994 when it was frozen by prior Megacorp, so it didn't amount to much by the time I retired in 2011. I assume many of our generation started their careers with pensions, but fewer have ended careers with them. A blessing in disguise for me at least...
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Old 07-25-2012, 08:49 AM   #22
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When I left mega corp in 2003, I had the option to take a lump sum, annuity or a combination there of. My pension was above the PBGC coverage limit, and therefore decided on lump sum. Also, even back then, I did not have complete faith that I could rely on the PBGC for the remainder of my life if I chose partial annuity.
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Old 07-25-2012, 09:24 AM   #23
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I assume many of our generation started their careers with pensions, but fewer have ended careers with them.
Guilty. In any event, my pension will probably be no more than 15-20% of our living expenses by the time I take it and it doesn't have a COLA, so it isn't a make or break thing for us.
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Old 07-25-2012, 09:38 AM   #24
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There's quite a bit more to the whole pension plan problem than meets the eye.

Those of you who have pensions, will remember that when you entered the pension program, you were told that the plan would be safe, because of the protections provided by the Government. HUH? What government...? Who has oversight over what your plan trustees (did, are doing) to protect your promised returns? Erisa? Congress? The PBGC? The IRS? The Secretary of the Treasury?

Help with this invited... As far as I can determine :
Quote:
The U.S. Department of Labor’s Employee Benefits Security Administration is the agency charged with enforcing the rules governing the conduct of plan managers, investment of plan assets, reporting and disclosure of plan information, enforcement of the fiduciary provisions of the law, and workers’ benefit rights.
... but I'm not sure.

So, how did we get into this mess of underfunded pensions in the first place?

Here's what a friend who was a Pension Trustee told me. Right? wrong?... i don't know, but it made sense to me.
.................................................. .......................
In the early 1980's almost all pension funds were fully funded. The interest rates were high... over 10%... but the pension plans had been established to fund at much lower rates... (safe rates in triple A investments) With the rapid increase in interest, the Pension Funds, suddenly became Overfunded. The parent companies (who were funding the Plans...) decided that the extra monies really belonged to the stock holders, so they revised the plans and based future returns on the current (perhaps 8%) interest being earned. The surplus was allowed to be taken from the plans and meted out to stockholders , (and company officers as bonuses).
Basically this was well and good. The Retirement Funds were healthy, fully funded, and functioning as planned.

That's where it broke down though, because as interest rates and ROI's turned downward, the pension plans were not adjusted. In other words, the Trustees did not adjust, using the logic that the lowere rates were just temporary, and would eventually go back up... Whoever the regulators are/were... were ok with that, and the plans were allowed to go forward.

... Until... the total funding dropped drastically... ( add in here some regulations established by Congress for Pension Fund Holidays... Years when the companies were allowed to stop paying in to the plans... presumably to help the economy, and help the "job creators".

By the time the public became aware of the Pension Plan troubles, the plans were in deep trouble. In stead of forcing the corporations to "catch up" with the underfunding, a different tact was allowed....

Instead of investing in triple A entities, the funds were allowed to go to high return, riskier investments... Hedge Funds, Credit Default Swaps etc... which on paper showed much higher returns. If these investments were "safe", all would have been well. Since 2008, the Trillions of dollars of losses in these funds have left most Pension Funds in deep trouble... Bringing us to Today.

.................................................. ..
That's my story, and i'm sticking to it...

Until someone here, can straighten me out...

BTW... still not sure about who rules on Pension Plan Safety... Who has direct oversight. I looked on the internet, but had trouble finding a good answer.
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Old 07-25-2012, 11:07 AM   #25
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There's quite a bit more to the whole pension plan problem than meets the eye.

./.

So, how did we get into this mess of underfunded pensions in the first place?
Was your question about PCGC answered?

There are many threads about pension funding, you might want to do a search to see them. A few

Underfunded pensions? Anyone here have their pension payments reduced?
how is the health of your pension?
Funding percentage of a pension fund
Demand soaring for pension transfers to insurers
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Old 07-25-2012, 11:17 AM   #26
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I'm currently in the process of reading " Retirement Heist" by Ellen Schultz and if there was ever a book that really explains how companies and executives plunder the pension funds, this is it. It is a good read however it will royally piss you off when you find out how companies (damn near every last one of them) have screwed their workers by using legal accounting shenanigans and tax incentives to enrich those at the top of the executive food chain, all the while short changing hard working employees who have given their lives to the company in the hopes of getting a fair shake via a decent pension.
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Old 07-25-2012, 11:36 AM   #27
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I'm currently in the process of reading " Retirement Heist" by Ellen Schultz and if there was ever a book that really explains how companies and executives plunder the pension funds, this is it. It is a good read however it will royally piss you off when you find out how companies (damn near every last one of them) have screwed their workers by using legal accounting shenanigans and tax incentives to enrich those at the top of the executive food chain, all the while short changing hard working employees who have given their lives to the company in the hopes of getting a fair shake via a decent pension.
That book has been discussed in the other threads that MichaelB helpfully linked to (I'm in the process of re-reading those). Just my opinion here, but I think it would be helpful to leave references to that book out of this thread. I'd rather stick to facts, rather than what appears to be an emotional outburst against MegaCorps.

As far as I was able to determine from the posters defending that book, no 'hard working employees who have given their lives to the company' had their pensions cut (with the possible exception of some 'high earners'). It is true that some MegaCorps pulled out what was considered 'excess funding', and used it for other purposes, but they kept them funded per PBGC rules, and earned benefits were paid. And the formulas for pensions earned forward from that date were changed, but these were not retro-active.

I'm interested in the facts of how secure the earned benefits of our PBGC insured pensions are, which is the topic of the OP, and I hope to learn more about that subject. It is very relevant to many of us FIRE'd folks. The history of any changes to our forward-looking pension formulas while we were working is water under the bridge (and I was affected - twice), and there is nothing we can do about that now.

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Old 07-25-2012, 11:40 AM   #28
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That book has been discussed in the other threads that MichealB MichaelB helpfully linked to (I'm in the process of re-reading those).
fixed it for you

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Just my opinion here, but I think it would be helpful to leave references to that book out of this thread.
Yep. Prior discussions involving that book have not ended well.
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Old 07-25-2012, 12:07 PM   #29
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That book has been discussed in the other threads that MichaelB helpfully linked to (I'm in the process of re-reading those). Just my opinion here, but I think it would be helpful to leave references to that book out of this thread. I'd rather stick to facts, rather than what appears to be an emotional outburst against MegaCorps.

As far as I was able to determine from the posters defending that book, no 'hard working employees who have given their lives to the company' had their pensions cut (with the possible exception of some 'high earners'). It is true that some MegaCorps pulled out what was considered 'excess funding', and used it for other purposes, but they kept them funded per PBGC rules, and earned benefits were paid. And the formulas for pensions earned forward from that date were changed, but these were not retro-active.


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You should have followed your own advice and not interjected that 2nd paragraph
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Old 07-25-2012, 12:11 PM   #30
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Excuse me !
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Old 07-25-2012, 12:20 PM   #31
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You should have followed your own advice and not interjected that 2nd paragraph
Perhaps you are right. I only meant to provide a little perspective as to why it gets controversial, rather than just say it w/o any justification/reason.

It may have been wrong for me to do so, and I'm sure it's not the first nor the last time, there are lots of shades of gray. At any rate, I am very interested in learning more about the subject of the OP (security of earned benefits), and if there is anything we should be doing. I wonder if AARP has a position on this?

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Old 07-25-2012, 12:25 PM   #32
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This site may help understand how the PBGC works and pays benefits.

Your Guaranteed Pension
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Old 07-25-2012, 12:33 PM   #33
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MichaelB asked:
Quote:
Was your question about PCGC answered?

There are many threads about pension funding, you might want to do a search to see them.
I've spent some time looking through previous threads... not all... but so far, I haven't found a definitive answer to this question.

Quote:
Those of you who have pensions, will remember that when you entered the pension program, you were told that the plan would be safe, because of the protections provided by the Government. HUH? What government...? Who has oversight over what your plan trustees (did, are doing) to protect your promised returns? Erisa? Congress? The PBGC? The IRS? The Secretary of the Treasury?
So the question... WHO was/is responsible for oversight?
When things go wrong in a program that has government blessing, the normal thing to do is find out what went wrong.

Every source that I have found speaks of reports... documents... filings... and all kinds of paperwork, but I don't seem to be able to find anything that tells WHO, and HOW the oversight is conducted. The best answer I found was the one I posted, but even going to the department no clarity.
Quote:
The U.S. Department of Labor’s Employee Benefits Security Administration is the agency charged with enforcing the rules governing the conduct of plan managers, investment of plan assets, reporting and disclosure of plan information, enforcement of the fiduciary provisions of the law, and workers’ benefit rights.
Boil it down... If I was losing my pension, and someone screwed up, I sure would wanna find out who that was, and at least, fire his a**.

I'll make it even more simple... was there any oversight or law that would have prevented investing all of GM's retirement funds in Bernie Madoff's scheme?
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Old 07-25-2012, 12:57 PM   #34
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HAH!
Found an answer at the Government Accountability Office:
GAO: High Risk | Issues By Agency | Department of Labor | Improving Private Pension Plan Monitoring and Enforcement

Here's the answer!!!!
Quote:
Labor's Employee Benefits Security Administration (EBSA) lacks information it needs to provide effective oversight of private pension plans, such as specific information on 401(k) plan fees, which could improve monitoring and compliance efforts.
Highlights of GAO-07-21 (PDF)
Seek and ye shall find...

It doesn't affect me, but I'm surprised those with pensions, don't seem to worry about why (after promises) the government let them down...
So now... looking for the next windmill, Sancho !
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Old 07-25-2012, 12:59 PM   #35
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I'm currently in the process of reading " Retirement Heist" by Ellen Schultz and if there was ever a book that really explains how companies and executives plunder the pension funds, this is it. It is a good read however it will royally piss you off when you find out how companies (damn near every last one of them) have screwed their workers by using legal accounting shenanigans and tax incentives to enrich those at the top of the executive food chain, all the while short changing hard working employees who have given their lives to the company in the hopes of getting a fair shake via a decent pension.
The part in red raises equal if not greater concerns IMO than what "companies and executives" may or may not have done. Who unnecessarily facilitated the "heist" and why? No reply necessary...
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Old 07-25-2012, 01:01 PM   #36
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So the question... WHO was/is responsible for oversight?
When things go wrong in a program that has government blessing, the normal thing to do is find out what went wrong.

Every source that I have found speaks of reports... documents... filings... and all kinds of paperwork, but I don't seem to be able to find anything that tells WHO, and HOW the oversight is conducted. The best answer I found was the one I posted, but even going to the department no clarity.


Boil it down... If I was losing my pension, and someone screwed up, I sure would wanna find out who that was, and at least, fire his a**.

I'll make it even more simple... was there any oversight or law that would have prevented investing all of GM's retirement funds in Bernie Madoff's scheme?
The reason I asked was the original post was about PBGC, which insures but does not regulate. Pension funds are private and are subject to all kinds of state and federal regulation, but the key regulations and enforcement can be found at SEC, IRS and DOL. The trustees and managers are responsible for the operation, both compliance as well as results. What keeps the GM fund from investing with Madoff would be the fund by-laws and it's own set of management guidelines.

For any specific pension, the best place to look for information is the auditors report and fund annual report. If it is a publicly traded company, the SEC 10-K.
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Old 07-25-2012, 01:12 PM   #37
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It doesn't affect me
So why the hell do you care?
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Old 07-25-2012, 01:52 PM   #38
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One of my pensions has a cash balance type lump sum. But when I compare the income if I rolled it into a SPIA - it falls FAR short of what I can get as an income stream from the pension plan itself.

Some funny math that not in my favor is going on.
In my case it was the exact opposite, CB with a pitiful SPIA, I took the money and ran...it took 8 wks and several exchanges with my megacorp to get it.
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Old 07-25-2012, 02:47 PM   #39
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So why the hell do you care?
Hmm... I suppose you're right.
.................................................. .......
anyway... I think I'm getting closer to answering my own original question about the oversight that was supposed to be present to avoid fraud and mismanagement. Fiduciary responsibility is the operative term.

The question stems from the size of the problem. Current Pension obligations total an estimated Eighteen Trillion Dollars. That's more than the National Debt.
Many of the Pension Funds now being paid by the PBGC were funded at levels as low a 10%, and the new "safe" level of funding seems to be 70%.

How could that happen if there are rules designed to keep these pensions safe... Whatever rules are in place, how did the situation become so grave?

So here's an article from 2011 that sheds some light on the problem, and furthermore seems to indicate that there is no real effort to correct the problem in a hurry.

U.S. to Delay Pension-Plan Rules - WSJ.com

Two quotes from the article:

Quote:
The assistant Labor secretary who came up with the new rules, Phyllis Borzi, had pushed to finish them this year. Supporters say the rules would clean up conflicts of interest that have long plagued retirement plans, especially smaller ones.

But the proposal met heavy resistance on Wall Street, amid questions about its cost and the impact on investors' retirement choices. The Labor Department said Monday it would likely repropose the rule early next year.
Quote:
The Labor Department isn't known as a financial cop. But the agency is more concerned about potential abuses now that assets in pension plans, 401(k)s, IRAs and other retirement accounts have swelled to $18 trillion.
The pushback from the corporations has been so far, successful. In other words, Banks and Brokers can offer risky investments (high interest) to plans, which makes the plans look good on the surface (more projected income to satisfy the numbers part)... but at the same time, has the hidden risk.

edit to add a more recent news article... Pension Plan fixes to be delayed again.... Score Wall Street 2, Public 0
http://in.reuters.com/article/2012/0...8HRDUC20120627


I don't have pension plan losses to cite, but similar funds, like the Harvard Endowment funds went from $37 Billion to $26 Billion in one year.

So, Yes, while I shouldn't care because it doesn't affect me directly with a loss of pension monies, any time 18 Trillion dollars is up for grabs, the ripple effect is enough to think about.
.................................................. ........
While everyone is concerned about the rules that affect how they receive their pensions.... no matter what the rules say today, when the money isn't there anymore, the rules are going to change...
Gotta fix the underlying problem.
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Old 07-25-2012, 03:00 PM   #40
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So, Yes, while I shouldn't care because it doesn't affect me directly with a loss of pension monies, any time 18 Trillion dollars is up for grabs, the ripple effect is enough to think about.
So you are basically a busybody?
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