If GM Goes Chapter 11: Retirees' Plight

[travelover]

What will be the probable fate of GM retirees if the company goes into Chapter 11? My brother just retired after 38 years: many years with lots of 7 day work weeks and some wear and tear injuries that he never claimed but just worked through. Is there a chance that the retirement won't be fobbed to the federal fund?

You might find this article in the Detroit Free Press useful:

Anxiety about GM, Chrysler bankruptcies grips retirees | Freep.com | Detroit Free Press

 

[windsurf]

Thank you to Zathras, Gumby, Gearhead, Masterblaster and Travelover for substantive advice and/or helpful links. This is a tough situation that is affecting hundreds of thousands of people (and their famiies) who worked their butts off for decades. I fear the health problems (physical and mental) that are likely to increase in the aftermath.

 

[Midpack]

Thank you to Zathras, Gumby, Gearhead, Masterblaster and Travelover for substantive advice and/or helpful links. This is a tough situation that is affecting hundreds of thousands of people (and their famiies) who worked their butts off for decades. I fear the health problems (physical and mental) that are likely to increase in the aftermath.

And to the rest of us, not so much...

 

[Looking Ahead]

Originally Posted by windsurf
This is a tough situation that is affecting hundreds of thousands of people (and their famiies) who worked their butts off for decades. I fear the health problems (physical and mental) that are likely to increase in the aftermath..............

Likewise for all of us suffering from huge losses from our 401K's..

 

[randyman65]

"I really feel for people who put their faith in a company or a Government system, and then get crapped on."

Give me a break. No one is getting "crapped on" - the unions demanded benefits that anyone who has mastered basic arithmatic couls see were unsustainable. Cry me a river. Those of us who have to - gasp - save for our retirement have difficulty mustering up sympathy for those who feel they're owed a guaranteed retirement with no contribution of their own.

For twenty years we've all heard how unsustainable the UAW pensions and benefits were, how they would bankrupt the company, and how it would someday break. Guess what - it happened. But it seems like those counting on the pensions willfully refused to believe what everyone else knew to be true.

 

[Zathras]

As mentioned earlier, the CEO's and upper management really didn't have many consequences to giving into UAW demands that would bankrupt the company 'later' after they left.
The UAW though, as an entity, would have to deal with the consequences as the workers (although not necessarily the same individuals) would be around when the house of cards falls down.

 

[ziggy29]

As mentioned earlier, the CEO's and upper management really didn't have many consequences to giving into UAW demands that would bankrupt the company 'later' after they left.
The UAW though, as an entity, would have to deal with the consequences as the workers (although not necessarily the same individuals) would be around when the house of cards falls down.

Seems to be a recurring theme, doesn't it? A current decision-making body looking at a potential crisis and not trying to fix the long-term problem, but rather trying to defer the blow-up until they're long gone?

 

[randyman65]

Yeah - say hello to your local, state, and federal governments.

 

[al_bundy]

Seems to be a recurring theme, doesn't it? A current decision-making body looking at a potential crisis and not trying to fix the long-term problem, but rather trying to defer the blow-up until they're long gone?

the rank and file have to vote on any new contract. few years ago they either voted down a proposed contract with chrysler or it passed with a very slim margin. i think the contract was supposed to reduce some medical benefits

 

[Westernskies]

"I really feel for people who put their faith in a company or a Government system, and then get crapped on."

Give me a break. No one is getting "crapped on" - the unions demanded benefits that anyone who has mastered basic arithmatic couls see were unsustainable. Cry me a river. Those of us who have to - gasp - save for our retirement have difficulty mustering up sympathy for those who feel they're owed a guaranteed retirement with no contribution of their own.

For twenty years we've all heard how unsustainable the UAW pensions and benefits were, how they would bankrupt the company, and how it would someday break. Guess what - it happened. But it seems like those counting on the pensions willfully refused to believe what everyone else knew to be true.

I had a friend (retired labor mediator) who used to say the difference between the UAW and terrorists was that you could negotiate with terrorists.

 

[randyman65]

If I recall correctly, it was similar to the contract negotiated by the NYPD a few years ago. It essentially cut wages and benefits for unborn workers while grandfathering in then current workers. Nothing like closing the barn door after the horse got out. With the current economic conditions, our local governments have been scrambling to cut costs - with tax revenues down and having spent money like water in previous years, the well suddenly started to run dry. The county executive asked all county employees to take a 7% pay cut to be able to preserve all jobs. Predictably, the CSEA and police unions (police are very, very well paid here) refused to budge an inch. The result was that about 10% of the workforce lost their jobs.

At first blush a defined benefit plan is a contract between a worker and a company. But in reality, it ends up being a contract between an older worker and younger ones. Unless the pension started out fully funded, it would require increasing contributions to remain solvent as an increasing number of workers entered the retirement ranks.

 

[randyman65]

"I had a friend (retired labor mediator) who used to say the difference between the UAW and terrorists was that you could negotiate with terrorists."

From my local experience, the "negotiation" is largely limited to attempted bribery, intimidation, or political pressure.

 

[Westernskies]

Why not turn all future pension plans over to the Unions?- they can fund and administer them out of Union dues- see how well that works...

 

[ziggy29]

Why not turn all future pension plans over to the Unions?- they can fund and administer them out of Union dues- see how well that works...

Actually, many of the best-run pension plans I know of *are* administered by the unions themselves.

Think about it: who is likely to be a better steward of a pension fund: those whose retirements depend on its security, or those who have no direct vested interest in its long-term viability? Who's more likely to roll the dice and gamble on a hedge fund?

 

[randyman65]

Inc case of the Teamsters, it would appear that the vested interest lies with a bunch of guys whose names end in vowels.

 

[windsurf]

I guess you've said (more) than enough to expose yourself.

 

[Westernskies]

Actually, many of the best-run pension plans I know of *are* administered by the unions themselves.

Think about it: who is likely to be a better steward of a pension fund: those whose retirements depend on its security, or those who have no direct vested interest in its long-term viability? Who's more likely to roll the dice and gamble on a hedge fund?

Ziggy, finally we agree on something! I wasn't being facetious- let the Unions collect dues and fund the retirement acounts- the workers pay in, the union invests where they see fit, and their accounts are fully funded and vested from day one. What could possibly go wrong?

 

[randyman65]

While one would hope that the union tries to protect its constituency, that is not always the case. A union is not necessarity a direct reflection on its members. Oftentimes its own interest take precedence. The retirement plans often chosen by teacher's unions are notoriously costly and inefficient.

2 Teachers Sue Union over Retirement Plan

No matter who is managing a pension fund, there is the temptation to satisfy today's retirees at the expense of future retirees. There is the pressure to outperform the market. And of course, there is the temptation to collect hefty management fees to handle the pension funds.

 

[Westernskies]

Inc case of the Teamsters, it would appear that the vested interest lies with a bunch of guys whose names end in vowels.

whatsamatteryou?

 

[al_bundy]

I guess you've said (more) than enough to expose yourself.

never saw Casino?

OT but last year they finally arrested the guys who beat the character Joe Pesci played

 

[Maurice]

From the PBGC website, the amount they guaranty is based on your age when the plan is terminated. For early retirees the amounts that they guaranty is modest. Here is their table:

Maximum monthly guarantee tables (PBGC.gov)

That seems very generous.

 

[DayDreaming]

You might find this article in the Detroit Free Press useful:

Anxiety about GM, Chrysler bankruptcies grips retirees | Freep.com | Detroit Free Press

About that PBGC table of maxium annual benefits - I'm confused about how age is used in that calculation:

Suppose a person is 65 now, and the company goes bankrupt.
But the person retired 10 years ago at age 55.

From that PBGC table, is this person guaranteed $54,000 or $24,300?

 

[ziggy29]

About that PBGC table of maxium annual benefits - I'm confused about how age is used in that calculation:

Suppose a person is 65 now, and the company goes bankrupt.
But the person retired 10 years ago at age 55.

From that PBGC table, is this person guaranteed $54,000 or $24,300?

Looking more at the PBGC web site, it appears that $54,000 would be correct, as the tables there refer to "your age on the plan termination date (or the date the sponsor entered bankruptcy, if applicable) or, if you were not in pay status on that date, the date you begin receiving benefits from PBGC."

Maximum monthly guarantee tables (PBGC.gov)

 

[Gearhead Jim]

The important thing to remember about that PBGC "Guarantee" is that, like most everything from the PBGC, there is less to it than meets the eye.

If, after all the humgous reductions mentioned in my previous post (#11), your adjusted pension is equal or more than the guarantee for your age, they will bring you up to the guarantee level if your pension fund doesn't have enough money to do so.

If their reductions drop you below the guarantee level in the chart, they will only guarantee the amount they calculate you "should" get.

OTOH, if there is enough money in the fund to pay a higher benefit AND their calculations still say you are entitled to that amount, you should get the higher number.

 

[Gearhead Jim]

The important thing to remember about that PBGC "Guarantee" is that, like most everything from the PBGC, there is less to it than meets the eye.

If, after all the humgous reductions mentioned in my previous post (#11), your adjusted pension is equal or more than the guarantee for your age, they will bring you up to the guarantee level if your pension fund doesn't have enough money to do so.

If their reductions drop you below the guarantee level in the chart, they will only guarantee the amount they calculate you "should" get.

OTOH, if there is enough money in the fund to pay a higher benefit AND their calculations still say you are entitled to that amount, you should get the higher number.

(I'd put this part in the post above but seem to have lost my ability to edit the post. I can edit this post but not that one. Suggestions?)
Here's an example:
You are 55 years old and retire today with a pension of $4,000/month.
Tomorrow your pension is taken over by the PBGC.
They do their math with all the reductions mentioned in post #11, and your "adjusted" pension is now $1,700/month (a reduction of that magnitude is entirely possible).
Your plan only has enough money to pay you $1,000/month.
The PBGC Guarantee will bring you up to $1,700/month, not to the "Guarantee" level of $2,025/month.