The pension system destruction continues

[bbuzzard]

This is just nonsense. Pension obligations do not cause bankruptcy. List the expenses for a large company -- all of them. They would include executive compensation, executive perks, stock option giveaways, the HR budget to circulate full-color inspirational posters all over the facility, . . . as well as all those things actually required to make a product or deliver a service.

As a company owner, let me point out a problem to you from a pragmatic standpoint. If you have a pension, and I don't, I can undercut your fees/cost/pricing. If your pension obligations are 10-20% of your gross revenues (and some are this high), I am going to put you out of business. What are you going to do then? I will mention that we to not have a DBP, only a DCP.

Don't get me wrong, promised benifits should be delivered, under force of law. However, people are confusing promised with hoped for. I hoped to win the lottery all three times I played, and the advertising of the lottery commission sure implied I am going to win, but I do not get angry when I loose.

OTOH, I will be honest and admit that if my DBP got eliminated when I was 45-50, I would be PISSED.

 

[MasterBlaster]

BBuzzard - company owner:

well my take is that a pension plan funded over a few decades shouldn't cost more than 5-10 percent of salaries. And since pensions insure long term loyalty you can probably drop the salaries that you pay by the same 5-10 percent (or more) over market rates.

By my calculations - you the business owner come out ahead

 

[sgeeeee]

As a company owner, let me point out a problem to you from a pragmatic standpoint.  If you have a pension, and I don't, I can undercut your fees/cost/pricing. If your pension obligations are 10-20% of your gross revenues (and some are this high), I am going to put you out of business.  What are you going to do then? I will mention that we to not have a DBP, only a DCP.

Let's just use this reasoning and take it a step further . . . As a company owner, if you have to pay your workers and I have slavery, I can undercut your fees/cost/pricing. If your labor expenses are 10% of your gross revenues (and most are much much higher), I am going to put you out of business.

There. I have justified the use of slavery in our capitalist economy.

Every company has certain advantages and disadvantages over other companies in other locations, with different laws, tax structures, regulations, etc. One plant is in a state with special tax priviledges. One plant is in an area where labor is more expensive, one in a place where access to highly skilled people is difficult, . . .

Why have pension benefits been singled out as THE cause of competitive disadvantage? I'll give you a hint: This administration is a government of the wealthy elite, by the wealthy elite, and for the wealthy elite. They have signaled a willingness to let corporations reduce cost at the expense of labor. Corporate executives may not be too bright, but they understand that message and are working to take advantage of it while they can.

Don't get me wrong, promised benifits should be delivered, under force of law. However, people are confusing promised with hoped for. I hoped to win the lottery all three times I played, and the advertising of the lottery commission sure implied I am going to win, but I do not get angry when I loose.

It's a little more than hoped for. When I went through orientation at new companies, the HR representative who talked about pension benefits spent quite a bit of time explaining how valuable the pension plan was and how stable and secure it was. They made every effort to convince us that the pension benefit they offered to long-time employees was very valuable and that it was safe. The existence of the pension plan is usually one of the rationals given for lower compensation.

Although my pensions are still safe for the moment and I can't claim to have ever worked for IBM, I would be very surprised if the IBM orientation presentation wasn't much the same. And newguy was clearly misled about the security of that pension system.

 

[alphabet soup]

To Jay Republican Gatsby and all other apologists for the corporate state: Why are all of you justifying the looting of pension funds by government and underfunding by business while never pointing to obscene compensation packages of top corporate management and their expense accounts "perks" which are just tax rip offs?

Just curious.

 

[HFWR]

That would make him "J.R."...

 

[alphabet soup]

One JG is quite enough, thank you.

 

[bbuzzard]

There. I have justified the use of slavery in our capitalist economy.

No ... slavery is illegal. Eliminating a DBP, or operating a company without a DBP is not illegal. Signifcant difference.

Anyway, my point was this. If I operate a newer company, with no DBP, and no pension obligations to older empoyees, I am going to eat your lunch. The company with these obligations has a choice, they can compete with me and drop the DBP, or they can go out of business (generally speaking). I would agrue that flying the company into the ground to gain a few more years of the pension is unethical, not freezing the DBP.

 

[bbuzzard]

BBuzzard - company owner:

well my take is that a pension plan funded over a few decades shouldn't cost more than 5-10 percent of salaries. And since pensions insure long term loyalty you can probably drop the salaries that you pay by the same 5-10 percent (or more) over market rates.

By my calculations - you the business owner come out ahead

Actually, by an actual poll of all 300 person in my firm (I do not own 100%, or even close), a very strong majority prefer higher salaries with no pension plan at all, DBP or DCP. Unfortuntely for me, becuase I want a stronger DCP, but we gave the employees what they wanted. It is very hard to hire people and we have to compete for every empolyee. People would rather have $1 today than $100 in 40 years.

 

[HFWR]

Intangible: can you attract and retain "better" employees if you have "better" benefits? We've seen the predictions by some that later this decade there may be a shortage of workers...

 

[Lazarus]

Let's just use this reasoning and take it a step further . . . As a company owner, if you have to pay your workers and I have slavery, I can undercut your fees/cost/pricing. If your labor expenses are 10% of your gross revenues (and most are much much higher), I am going to put you out of business.

There. I have justified the use of slavery in our capitalist economy.

They are in effect doing this. Sending as many jobs overseas as they can. Places with no wage or labor laws, no benefits no enviromental laws. Screwing mid career employees out of their pensions while they bank millions. I don't doubt if they could they would institute slavery here. They have become more like feudal
warlords than businessmen. They answer to no one. Not even the government.

 

[bbuzzard]

It's a little more than hoped for. When I went through orientation at new companies, the HR representative who talked about pension benefits spent quite a bit of time explaining how valuable the pension plan was and how stable and secure it was. They made every effort to convince us that the pension benefit they offered to long-time employees was very valuable and that it was safe. The existence of the pension plan is usually one of the rationals given for lower compensation.

OK, I explained my position poorly. What I mean, is that everyone hopes they would be employeed for life and the pension plan would stay the same. I am pretty sure you were never told either one of these was a certainty, but I could be wrong.

 

[Lazarus]

Actually, by an actual poll of all 300 person in my firm (I do not own 100%, or even close), a very strong majority prefer higher salaries with no pension plan at all, DBP or DCP. Unfortuntely for me, becuase I want a stronger DCP, but we gave the employees what they wanted. It is very hard to hire people and we have to compete for every empolyee. People would rather have $1 today than $100 in 40 years.

Thats what I would insist on, If I were a young man. Cash in hand only. No promises. If there is another labor shortage loyalty be dammed I would go to the highest bidder for my services.

 

[HFWR]

Then again, aside from the fine print, it wasn't widely advertised that it might go away, either...  

 

[bbuzzard]

To Jay Republican Gatsby and all other apologists for the corporate state: Why are all of you justifying the looting of pension funds by government and underfunding by business while never pointing to obscene compensation packages of top corporate management and their expense accounts "perks" which are just tax rip offs?

I'll bite. I agree with you entirely. Coporate profiteering of publicly traded companies id obcense, and pension funds should never be allowed to be looted, and should never be underfunded. What you have earned, you should keep.]

However, companies must be free to negotiate what happens in the future. No one should be guaranteed that once in the DBP, always in the DBP, no changes, no modifications. How would you like your salary to operate that way? You are hired for life, can never quit, and your salary is never adjusted?

 

[bbuzzard]

Then again, aside from the fine print, it wasn't widely advertised that it might go away, either...

That, I can easily believe.

 

[sgeeeee]

. . .Anyway, my point was this. If I operate a newer company, with no DBP, and no pension obligations to older empoyees, I am going to eat your lunch. . .

Bullsh#t.  That's like saying, "if I get a 5% tax break on my plant in my location, I'll eat the lunch of every company that has less attractive tax incentives."  Pensions are only one of many factors in the overall expenses.  There are lots of others?  How simple minded do you have to be to think that pension costs are the only contributing factor to competitivness?  

You also assume that there is no positive benefit to offering a pension.  That also seems pretty simple minded.  Why not simply offere 10% less salary than all your competitors in order to beat their costs?  The answer is because you won't be able to attract competitive talent.  The pension has the same effect.    

 

[justin]

Actually, by an actual poll of all 300 person in my firm (I do not own 100%, or even close), a very strong majority prefer higher salaries with no pension plan at all, DBP or DCP. Unfortuntely for me, becuase I want a stronger DCP, but we gave the employees what they wanted. It is very hard to hire people and we have to compete for every empolyee. People would rather have $1 today than $100 in 40 years.

I've seen the same feelings from most of our staff at the small engineering firm I work for. I'm one of the managers of our ESOP (a pension-like plan but closer to DCP than DBP). Most employees say it is nice to have, but that it doesn't buy them diapers or groceries or put gas in their car like a nice pay raise would. I like it a lot and think it is a great way for me to defer income, and it encourages loyalty through a 6 year graduated vesting schedule. Of course I find a way to buy diapers, groceries and gas too!

Bottom line is that a dollar contributed to the ESOP/401kdoesn't amount to as much (in the minds of employees) as a dollar in their paycheck (or $0.70, after taxes).

 

[sgeeeee]

Actually, by an actual poll of all 300 person in my firm (I do not own 100%, or even close), a very strong majority prefer higher salaries with no pension plan at all, DBP or DCP. Unfortuntely for me, becuase I want a stronger DCP, but we gave the employees what they wanted. It is very hard to hire people and we have to compete for every empolyee. People would rather have $1 today than $100 in 40 years.

Well . . . I can believe this is true.  But that's at least partly because they see that corporations can no longer be trusted.  It's not that they prefer having to invest and be completely responsible for their own retirement, it's that they feel it is a lesser of evils.  

 

[SteveR]

DCB and DBPs are really there to attract and KEEP employees.  It is a benefit for the company to keep experienced people and avoid the "brain drain" and high costs of employee replacement (agency fees, sign on bonus, training time and costs, moving costs etc.).  

Consequently, many people stayed around to get their pensions because they earned them by staying put.  As companies shuck off their benefits employees no longer feel loyality (golden handcuffs) to stick around.  That will increase wages because moving from company to company usually gets you a fatter raise than if you stick with one company and wait for raises or promotions.  Add to that the need to keep everyone at a similar job wage for the same job and you have wage inflation.

Which is cheaper for a company?  Replace employees who jump ship for more money and the spriral of inflation in job wages that it creates to replace them. Or, hold employees hostage for a pension while keeping your over-all employee costs down but having to fund a pension plan for a growing number of retirees that will live a long time?  

It is obvious that most new companies are choosing to go without a pension plan.  This is becoming the norm so younger workers don't miss not having one.  However, the downside is a dumbing down of a company over time.  Experience on how to fix problems leaves with the employee and the new guys have to reinvent the wheel while trying to run 1000 mile per hour to keep up with the competition.  

Just my viewpoint.

 

[bbuzzard]

Bullsh#t. That's like saying, "if I get a 5% tax break on my plant in my location, I'll eat the lunch of every company that has less attractive tax incentives." Pensions are only one of many factors in the overall expenses. There are lots of others? How simple minded do you have to be to think that pension costs are the only contributing factor to competitivness?

Obviously, you have to look at the entire package. However, a pension plan is a very signficant factor. Certainly you cannot ignore the others factors, but you cannot ignore pensions either. Additionally, other cost factors can be contolled much easier in the relative sense. I.e., we are both free to more to cheaper areas of the country, both free to lease cheap office space, both free to negotiate tax rebates, but you still have a DPB to pay for and I don't. How do you match me in this regard, given that my employees would rather have the 3% more I pay now than the 10%-15% you pay but they will not get for 25-45 years? You will not get the new hires, I will. I say this becaase this is what we are actually doing right now. This is not my opinion, this is what our hires tell us. It is what is happening in my HR office and my compeditors. Funny, we just added more vacation. Not to save me money, but to get employees in the door. We would offer a DBP, but that is not what they want.

Don't get me wrong, I am a big advocate of DCPs. My point is that it is silly to argue that DBPs do not have a signficant financial effect on companies, becuase the fact of the matter is, they do.

 

[sgeeeee]

. . .My point is that it is silly to argue that DBPs do not have a signficant financial effect on companies, becuase the fact of the matter is, they do.

So does paying their bills on time. I don't hear you arguing that companies should stop that practice. No one is arguing the DBPs don't have an effect. It's just that you seem to be arguing that it's the only effect and that justifies whatever it takes to get rid of them. Now that's silly.

 

[dumpster56]

Maybe newguy is a dumb teacher!!

Look let me try again, in 1977 when I began my teaching career with the public schools in the state of new jersey I was TOLD I had NO CHOICE I MUST contribute to the TEACHER PENSION ANNUITY FUND! TPAF!

5.5% of my income was taken from my check every month, now for almost 30 years.

A lump sum is somewhere near 400,000 with the interest made on the money. However I am not allowed to take the lump sum.

Anyway what I am trying to say, If you worked for a company or a public government agency, they should be made to honor the CONTRACT that was SIGNED.

NO??

New people getting into the workforce, oh well a pension is something that was once given. Now they are dinosaurs, oh well america will become a second rate nation sooner than later.

Just wait till CHINA MAKES its move on Tiawan after the 2008 olympics!!

Hope ya like sezhwan chicken!

 

[haha]

NewGuy, have you seen your doctor lately? Perseveration can be sign of incipient neuro-cognitive problems.

Ha

 

[youbet]

To all those lovers of DBP's............ When you've been with your company for 20 years or so, you're in your mid-40's, and the company's business philosophy changes dramatically to something you don't like, don't whine that you're locked into staying because of your upcoming, generous DBP pension. When you hired on, you signed up to stay for better or for worse. After all, you have a DBP pension to collect! Now that the company has changed, you absolutely can't stand it, be sure to stay and stay and stay until you collect......no matter how insanely miserable you are!

Although DBP's have advantages and historically were usually more generous, there are advantages to receiving higher compensation and/or 401K matching in lieu of a DBP. And that advantage is the flexibility to take YOUR MONEY and head on down the road to the next adventure.

 

[Lazarus]

To all those lovers of DBP's............ When you've been with your company for 20 years or so, you're in your mid-40's, and the company's business philosophy changes dramatically to something you don't like, don't whine that you're locked into staying because of your upcoming, generous DBP pension. When you hired on, you signed up to stay for better or for worse. After all, you have a DBP pension to collect! Now that the company has changed, you absolutely can't stand it, be sure to stay and stay and stay until you collect......no matter how insanely miserable you are!

Although DBP's have advantages and historically were usually more generous, there are advantages to receiving higher compensation and/or 401K matching in lieu of a DBP. And that advantage is the flexibility to take YOUR MONEY and head on down the road to the next adventure.

I don't especially love the idea of pensions but that is what I have. I always considered it part of my pay.

How much money would you be willing to leave on the table in order to leave early? Some of us are trapped because of the DB plans. After all one of the reasons they had pensions was to retain people. Backloading of the benefit makes all the money come at the end so I am going to stick it out if they let me. Leaving before the benefits max is not something I can afford to do.

I agree that the more portable benefits such as a 401 are better. If you are starting out with one. Changing in mid life from a pension is not going to work to the employees advantage. Or if the pension is frozen it is at whatever salary you were making when it happened. Retiree medical benefits are usually given dependent on age. An age you are not going to reach if it is frozen.

Fortunately I have both a pension of at least some vested value and a 401. Those who only have a pension like teachers are not going to be able to make up for the loss of their pension in their lifetime.