Rolling with the punches -- new benefits cuts from MegaCorp

[kjpliny]

I started at my company 15 years ago...I was only there for about 3 years when they got rid of the defined benefit pension and replaced it with a cash balance plan. There was basically no conversion of funds for me as I was new and at a very low salary. Maybe my cash balance amount was $1k or so at the time.

What's scarey is that after 15 years, I just received my annual cash balance pension statement and there's only $21k in it. They add 3% of my salary per year. Next year that will go up to 4%. Peanuts.

Thank goodness I've been maxing out my 401k...without that, I'd have to work forever. My wife will receive a generous DB pension when she turns 55, at which time I'll be 57. Hopefully I won't have to work that long though.

 

[jazz4cash]

I started at my company 15 years ago...I was only there for about 3 years when they got rid of the defined benefit pension and replaced it with a cash balance plan. There was basically no conversion of funds for me as I was new and at a very low salary. Maybe my cash balance amount was $1k or so at the time.

What's scarey is that after 15 years, I just received my annual cash balance pension statement and there's only $21k in it. They add 3% of my salary per year. Next year that will go up to 4%. Peanuts.

Thank goodness I've been maxing out my 401k...without that, I'd have to work forever. My wife will receive a generous DB pension when she turns 55, at which time I'll be 57. Hopefully I won't have to work that long though.

As they have transitioned away from DBP, my company has grandfathered our retirement plans over the years, so we now have three different plans depending on your hire-in date. The newer guys have the cash balance plan using the 401k. I accidentally clinked the wrong hire-in date on the pension estimator one time, and I was shocked to see how small the payouts under these plans can be. I felt really lucky to have kept a watered down DBP (so far) plus 401k w/ measly match. Since then, I have descreetly pulled several younger co-workers aside to urge them to max out if possible. All responsibility is shifting away from the Mega Corps.

 

[bssc]

April Fools Day is when our MegaCorp is going to switch over to a new plan. Anyone hired after it will not get the additional plan "conversion contribution."

 

[Lazarus]

For younger people, why work at a Megacorp? If there is no security and no good benefits?

I will have a pension, although it has been downsized by a buyout by another company. Good thing I have a 401. The pension would not be enough for me.

 

[bssc]

I work for a MegaCorp since I am not very good at working on my own and three of the smaller companies I worked for ran out of money and at least one ran off with the 401(k) money.

MegaCorp may be cutting back on benefits but it, like Democracy, seems to me to be better tan the alternatives.

 

[Brat]

....one ran off with the 401(k) money.

I presume this was reported ...

 

[Texas Proud]

For younger people, why work at a Megacorp? If there is no security and no good benefits?

I will have a pension, although it has been downsized by a buyout by another company. Good thing I have a 401. The pension would not be enough for me.

The trend is to pay now, supply benefits that can be used now, supply a 401(k), supply some kind of cash balance account that can move with the person... what they don't want is some potential liability that can baloon in the future... when you leave... you are gone for good..

But, they usually still pay better than the smaller firms and the benefits are still better..

 

[Outtahere]

When I was a kid first into the work force someone explained pensions to me. I remember naively thinking why would a company keep paying people that don't work for them any more and what happens if they stopped paying? My gut feelings back then were, these "pensions" could/would go away were pretty much correct. I don't have a pension and in a way I'm almost glad I don't, I'd be some upset to have it changed or taken away from me after working 10/20/30 years.

 

[bssc]

I presume this was reported ...

We did and got our money back because he wanted to take the company public. This was one of his other companies. http://www.dol.gov/ebsa/newsroom/pr041202.html

Thank goodness for Billy Beaver.

 

[ERD50]

We did and got our money back because he wanted to take the company public. This was one of his other companies. http://www.dol.gov/ebsa/newsroom/pr041202.html

Thank goodness for Billy Beaver.

Wow, that is scary.

I guess that is one reason I felt better with a 401K rollover to an IRA at a large financial institution. I suppose something fraudulent could happen there, but I'd bet things are a bit more transparent than at a business.

So, it looks like all the funds were restored by the company, the govt did not need to cover anything? DId the govt hit the execs up for legal fees, or any fines (beyond barring them from serving as trustees or fiduciaries to any employee pension benefit plan.)?

-ERD50

 

[bssc]

I don't know if the Government ended up footing the bill. However, the investors in his company sure did. As soon as my money hit the account (since I had left), I rolled it over.

The worse case was the guy who rolled his 401(k) from his old plan into this new one. Since the President never set up our 401(k), the guys money was rejected and sent to him less taxes and a 10% penalty. Ouch.

 

[Dog]

I worked at megacorp for over 27 years. Every year they mailed employees a statement that showed the value of their overall package - adding in pension and healthcare benefits (DH gets a similar statement from USPS). Interestingly, in the past two years megacorp has frozen the pension, and cut healthcare coverage, but no real increase in pay (in fact merit increases have been trending down). Take away....people will need to become much more self sufficient in their retirement planning and corporations will have to plan on constant churn.....no reason to be a lifer anymore. I wonder who wins in that tradeoff? Time will tell.....could be a great Harvard Business Case Study.