Pension Plans in Corporate America for those 40 and under

[JayOh]

Every story I read online about financial/retirment planning seems to talk about how rare corporate pensions are nowadays and that most companies provide the matching 401k option instead.

According to the stories, the company I work for seems to be an exception to the rule since they have both a pension plan and a matching 401k plan (will match a maximum up to 4% if you put in 6%).

Currently I have been here for almost 6 yrs and have no plans of leaving in the foreseable future (not many places I could go and still have the same career). I was just curious how many of the working members here still have corporate pension plans?

 

[Bimmerbill]

I'd answer, but I'm 41 and work for the Feds ;-)

 

[Rambler]

No pension, no 401k. I participate in a non-qualified plan with a match which simply defers income. When it is time to leave or retire, it is paid in lump sum or installments over several years. BUT, it is only a phantom plan and is not backed...that means it is much more risky than investments in a mutual fund (if megacorp ever went under, all that is saved in the plan is gone). We do have a matching 401k plan, but the highly comped can't participate. So I have a choice to trust my employer so I can get the match, or put it all in after tax investments. (make too much for an IRA or a Roth as well)....ya win some and ya lose some, I guess...

R

 

[mexmeme]

We too had both a defined pension plan and a 401-k, but when the company was sold, the pension plan halted right there, and that was the last defined plan we had. It was frozen at 46 yrs old, so that is our small pension plan. Don't count on it like we did. We thought the 401-k was our fun money and 2nd home, but it is all that is keeping us afloat in retirement. As they say "the lord giveth and the lord taketh away". And the companies can also drop you like a hot potatoe.

 

[lucija]

I voted 401(k) only, but technically we also get a type of pension. They call it pension, I call it addition to 401(k), it is basically an automatic company contribution into some type of stable value fund. It accrues monthly; the contributions are derived by a combination of years at company & base salary. When I quit/get fired, I will roll it over into an IRA. We do not have any retiree heath bennies. I can't complain, our 401(k) is pretty decent (great options + 3% match).

 

[ER_Hopeful]

my j*b also offers a pension and a 401k(4% match). It's getting less and less interesting everyday and current project is kind of a dead end. Been contemplating if I should forget about the pension and jump ship.

 

[statsman]

My company did away with pensions for new hires starting in January 2006. The rest of us are grandfathered, but for those who haven't started their pension payments, you have to wonder if they will be there at the current level. I suppose there isn't anything to prevent the company from taking away the pension from those who haven't retired yet. For the new hires, they have the 401K plan (up to 4% match).

 

[Darryl]

Yes on the pension and a 401k but no match.

 

[Achiever51]

Have both a non-COLA'd pension and participated in a 401(k) with an employee match up to 4% for the first $xxx (can't remember the exact max.)

Without these, I wouldn't be an early retiree!!

 

[lazygood4nothinbum]

oh so sadly over 40 here. but just checked my x-fortune5 employer. they still offer noncola'd pension plus profit sharing plus 401k with the first 3% matched at 100% & the 2nd 3% of pay matched at 50%.

 

[JayOh]

I realize this is only a handful of responses but it sure does not seem as dire as the media makes it out to be. Thanks to everyone for their replies. I'll mkae sure to check back later to see if more response appear.

Oh yeah, the 40 thing just seemed like a good cut-off to separate the people that started out their professional lives with pension only, didn't mean to leave anyone out deliberately.

 

[fisherman]

44 and ESR'd five months ago. Both DW and I have a pension available at 55 reduced or 62 full. We also had 401k matching when we were w*rking. Mega Corp did away with pensions for new hires sometime around 2004. They also starting cutting health insurance drastically and applied those cuts to retirees also. Indications are that retiree health benefits will be cut completely soon. Not sure if that will apply to current retirees or just future retirees although all previous cuts applied to both employees and current retirees. I was fortunate that we were all in good health and could get private insurance which I did over a year ago.

 

[scooter260]

My company has both. Guaranteed match of $0.50 on the dollar up to 6%. I am convinced that having both a pension and a strong 401k match plan is a significant competitive advantage for us to hire and retain the best and brightest from colleges and within the industry. As long as we keep both and others continue to eliminate pensions, this advantage should only grow. I feel blessed and lucky to have both....keeping fingers crossed that the pension stays intact!

 

[fireby40]

This thread makes me realize how lucky I am.

I get a full 7% 401k match, and my employer has a pretty decent pension plan as well. Since I plan to check out long before 55 I'll need to wait until I'm 62 before I can get the 'full' benefit which I expect to be something around 25% of my ending salary, assuming I leave at age 40. Inflation will not be on my side!

 

[UncleHoney]

Old mini megacorp still has noncola pension and 401K with 4% match for all new hires. The only thing missing these days is healthcare coverage in retirement for new hires as of July 2005.

 

[MooreBonds]

I voted 401(k) only, but technically we also get a type of pension. They call it pension, I call it addition to 401(k), it is basically an automatic company contribution into some type of stable value fund. It accrues monthly; the contributions are derived by a combination of years at company & base salary. When I quit/get fired, I will roll it over into an IRA. We do not have any retiree heath bennies. I can't complain, our 401(k) is pretty decent (great options + 3% match).

Technically, it is a pension plan:

In the past, most pensions were Defined Benefit (i.e. they paid you a defined monthly benefit when you reach a certain age). However, there are also Defined Contribution plans -which pay you a defined contribution each year. They're both governed by the "pension" section of ERISA/tax code, so that's why they call it a pension plan. It's similar to a company simply contributing money into your 401(k) plan, but the company essentially manages it, versus each employee managing it.

These days, as pensions become more (relatively) expensive, some employers are simply switching them to Defined Contribution (set % of salary contributed each year) from the old DB (which have a higher potential cost down the road).

 

[2B]

My current position has a 401k available but the company contribution is a "profit sharing" that does not require the employee to participate. It's "free" money and usually runs 4.5 to 5% but they never tell us what their profits are or what our "share" is based on. I view it as a gift. It's paid in March based on employment at the end of the year. If you leave, your out of luck.

We also can participate in a SEPP plan. This is for "key" individuals in the company but I am certainly not a "key" employee. I'm nowhere near management. Everyone with any experience seems to be qualified to contribute. This is a non-qualified plan that deferrs up to 50% of my income while employed but will payout upon leaving the company either immediately or over a few years. The company contributes 8% of whatever the employee contributes (eq. I put in $100 and $8 is added by the company).

I like it for the chance to defer more that the 401k allows plus it actually has a better choice of mutual funds with lower fees. I only pay 0.30% on my S&P index instead of the 0.40% in the 401k.

Pensions are over-rated IMHO. If you put about 2% of your salary into savings, you'd be able to buy an annuity (god knows why) for an equivalent pension from MEGA Corp. With your own plan, there's no worry about vesting, plan changes or terminations.

 

[Charlotte]

My company has both at present, however, they keep making both wording and policy changes to the pension plan. I truly believe that they are going to drop the pension plan or reduce it significantly. They make a LOT of noise in their quarterly associate brochures about how we are responsible for our own retirements. I just don't trust them...

Charlotte

 

[2B]

My company has both at present, however, they keep making both wording and policy changes to the pension plan. I truly believe that they are going to drop the pension plan or reduce it significantly. They make a LOT of noise in their quarterly associate brochures about how we are responsible for our own retirements. I just don't trust them...

Charlotte

They are being honest when they tell you about being responsible for your own retirement. And you are right in not trusting them. They will sharpen their pencil every quarter to look at how they can boost their profits. One way to do it is to reduce pension benefits.

 

[hankster]

My company has a DB pension plan based on years of service, age, etc. and also a 401k with match of 75 cents on the dollar up to 6%. Retiree medical as well after age 55 with at least 15 years of service.

 

[Darryl]

oops I have to edit above I'm 44

 

[jazz4cash]

Im too old for the poll, but we have both DB and 401k w/match which I am generally pleased with. Since 2001, new hires only get 401k with automatic deposit of 4% and 4% match (i.e. if you put in 0 you get 4%, but if you put in 4% company puts in 4% plus 4% match)

I just think 401k-only pensions will be a HUGE disaster for our kids. 401ks are fantastic as a supplement to some type of annuity. Maybe SS will pick up the slack, but 401ks were not meant to be a primary form of retirement savings which is happening now. Apart from this board, the general public (especially 20-somethings) will not be have the skill and discipline to build adequate savings unless some minimum stable-value type allocation is mandated (as described above) or possibly using a target date strategy. I really like the FERS type plan with a 401k-type component, a DB annuity component, and SS. Add some personal savings and you have a four legged stool.

 

[2B]

Im too old for the poll, but we have both DB and 401k w/match which I am generally pleased with. Since 2001, new hires only get 401k with automatic deposit of 4% and 4% match (i.e. if you put in 0 you get 4%, but if you put in 4% company puts in 4% plus 4% match)

I just think 401k-only pensions will be a HUGE disaster for our kids. 401ks are fantastic as a supplement to some type of annuity. Maybe SS will pick up the slack, but 401ks were not meant to be a primary form of retirement savings which is happening now. Apart from this board, the general public (especially 20-somethings) will not be have the skill and discipline to build adequate savings unless some minimum stable-value type allocation is mandated (as described above) or possibly using a target date strategy. I really like the FERS type plan with a 401k-type component, a DB annuity component, and SS. Add some personal savings and you have a four legged stool.

I personally wish my DB plans could be converted to a cash equivalent. I'd much rather have a big pile of cash in my 401k than some insurance product.

 

[Alan]

I personally wish my DB plans could be converted to a cash equivalent. I'd much rather have a big pile of cash in my 401k than some insurance product.

Same here, I would have RE'd 2 years ago if I had that option.

For the record, my company still has a pension plan, 401(k) with 0.5% match on first 6% and retiree health benefits. In the process of being bought out and the expectation is that these will soon be stopped. I only hope us oldies (over 50) get grand-fathered in.

 

[JayOh]

I was just reading an article on CNNmoney:

West Virginia teachers vote on pensions versus 401(k)s - May. 20, 2008

The proportion of private sector workers who participate in a traditional pension plan has dwindled from almost 40% at the beginning of 1980 to only about 17% now.

On this poll alone we have had almost half the people respond that they have a pensions. I find it [-]amusing[/-] scary that the people who are probably best off in terms of potential for comfortable retirement are the ones here on this board sharing startegies and goals, while the ones most at risk of coming up short seem to be oblivious to the vast resources of this forum, nevermind the rest of the internet.