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Old 05-07-2013, 10:25 AM   #21
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OK. But you are referring to a situation where corporate mgm't is exploiting accounting and tax regs and walking the narrow grey line. A fair point. My comment referred to the average DB plan. Even though the benefit jumped up over the final couple of years, that is not how most corporations accounted for the pension. More often than not the accrual was higher, closer to a straight line than exponential curve. IOW, the tax books reflected a greater pension accrual. Ironically, the greater level of funding, even just book accounting, is what led many to do away with the plans or RIF the employees, because that came back onto the financial statements as profit (reversal of prior years expenses).
Agreed, and I include that as a form of "mismanagement". When a pension plan overpromises benefits (and when it has a huge "spike" in obligations above 30-40 years of service), it has a vested interest in whacking all the old-timers, whereas with a more linear payout scheme (i.e. 20 years gets 2x more than 10 years, 30 years gets 3x more than 10 years, et cetera) that incentive would be reduced. It usually seems close to linear but many plans have a "magic number" at which point it suddenly becomes a *lot* more lucrative. Think about how many times you hear someone say they need to hang on until (insert date here) because it will make a huge sudden difference in their pension.

I guess once upon a time retention of the older and more experienced folks was seen as a net positive for businesses; now they treat that as a liability that needs to be excised like a corporate tumor.
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Old 05-07-2013, 11:05 AM   #22
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In my experience, megacorps target older workers not simply because of the rising costs of DB pensions. The entire employee cost envelope is considered...salary, benefits, vacation, illness. Everything. The cost envelope to bring in youger staff is typically much less.

Many megacorps actually self fund for medical/benefits. They pay a third party to manage it for them.

A few of the large HR/Benefit consulting companies have models that provide megacorps with the most 'cost efficient' age groups to downsize based on salary and benefits.

I know of at least one megacorp that has implemented recommendations from a consulting company like this and realized the cost savings. But the cost savings were fleeting due to severe decreases in employee morale, productivity, and the ability to attract talent.
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Old 05-07-2013, 11:14 AM   #23
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A few of the large HR/Benefit consulting companies have models that provide megacorps with the most 'cost efficient' age groups to downsize based on salary and benefits.
And a team of lawyers to find excuses as to why this doesn't constitute illegal age discrimination, where workers between the ages of 40 and 70 are "theoretically" protected.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

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Old 05-07-2013, 06:47 PM   #24
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They have a much nicer, inocuous name for it but the bottom line is the same. Input the parameters, run the program, and the name, ee numbers etc. and the results pop out in order of payback. The rest is up to management discretion.

If you are in a management/supervisory position in a company that regularly downsizes you may be accustomed to the usual... please cut your headcount by X headcount, X dollars, whatever. Just give us a list of the names.

If this changes and the company gives you a list of ees to downsize instead of having you selecting them this is a good indication that something other than your judgement is at play.
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