The pension system destruction continues

[BUM]

Pensions are part of a compensation package. Defered income for future income. Workers ARE getting screwed. By managements inefficiencys, and goverments lack of goverenance. Managments make sure they do very well no matter what the outcome is from their decisions or companies. Politicians benifit from industries deep pockets. Don't blame the workers for the loss of pensions.

Nothing personal Chris24. I just picked your post for a reply because you covered so many areas, management, government and politicians. I've said this before and it still rings true. DBPs ARE a promise not a guarantee (unless you have an employment contract). The promise holds true as long as it makes sense to keep the promise. As a former employer and a former employee, I've seen both sides. DBP make a great deal of sense, until things change. Healthcare costs don't just go up they skyrocket. Competitive pressures demand adjustments. Previously fat margins erode. DBP go the way of gifts, benes, promises, entitlements, etc,.

Brutal bottom line...You are responsible for you and yours. Corporations are responsible to their shareholders. Thats the way it is.

 

[BUM]

Hi Who,

I don't believe this is the B school party line. This is the way it always was. The bottom line decades ago (in the case of IBM and some others) landed in favor of the employee AND the shareholder. Not so today.

Reality bites.

 

[SteveR]

Steve...  I am saying this is a nice way, ie. I am not being personal...  but I call 'bullsh**' on this post..  now, I can be wrong, but the fact you gave do not add up..  YOUR pension payments will be coming from the save pool that would be available to the others... they could not have lost everything unless you had lost everything... and if the company was viable, they could not take away earned pension benefits anyhow... then can stop you earning anything new, but they can not take away what is already earned..

Call it what you wish, the facts still remain.

My former company spun off a division of the company and a whole new company was created from it.  The new corporation has no ties to the parent company.  The empoyees that were spun off from the mother company were not able to take their pension benefits with them.  Employees were not allowed to retire from the mother company during the transision.  


The mother company had a DBP; the new company does not.  

Employees of the new company (former employees of the mother company) no longer have a DBP since they are no longer employed by the mother company.  
Only those employees who actually retired before the new company was formed are able to take their pension. I was lucky to have bailed before this happend.  

And that is the rest of the story...

 

[HFWR]

New paradigm: Be an owner...

Corollary: Mobile, agile, hostile...

Thanks Bear and UM!!

 

[haha]

Some here are missing my point.

I was givin NO CHOICE in 1978!

I was TOLD I must contibute to the state teachers annuity pension fund!

They have taken out 5% of my teaching salary for almost 30 years.

And NOPE I cannot take out the pension in one lump sum.

I never expected to get rich as a teacher however I expect to have the compensation that was promised and REQUIRED by the state of New Jersey.

Oops again politicians both republican and dems have stolen the money from our system to pay other DEBT!!!

As one who has nothing coming from anybody, I feel for you buddy, really I do.

Ha

 

[Gone4Good]

Just goes to show that companies can't overpay their employees forever.

 

[haha]

Yes, this is the current B-school line, for now.  Wasn't always that way.  Just a few years ago, the line was about stakeholders -- employees, shareholders, community, and customers -- balancing their interests, not just optimizing stock price.  Whether a person accepts this change as good depends, I suppose, on whether the person thinks that there is more to a good life and a decent civilization than money.

Life is a lot more than money. Its just that I can' t understand out of all the expedient promises that are modified by people and corporations every day, everywhere- why we get upset about somebody not getting quite the gravy train that he was (perhaps unwisely) hoping for?

Ha

 

[Spanky]

Just goes to show that companies can't overpay their employees forever.

except for management.

 

[Spanky]

Corporations are responsible to their shareholders.

Should they also be responsible for the community, the environment, and the people (who work for them)?

 

[haha]

Should they also be responsible for the community, the environment, and the people (who work for them)?

Law and regulations see to that. And as to community, what community? Dallas, where the home office is? Or Bangladesh, where there is a plant?

IMO, better stick to taking care of the shareholders. Management, and employees in genreal will see to themselves.

Ha

 

[Spanky]

And as to community, what community? Dallas, where the home office is? Or Bangladesh, where there is a plant?
Ha

The communities in which the employees work and live.

 

[BUM]

And therefore there is nothing more to a good life and a decent civilization than money?

Certainly there is. However its not up to the employer to provide it. Its up to you.

 

[uncledrz]

Employees of the new company (former employees of the mother company) no longer have a DBP since they are no longer employed by the mother company.  
Only those employees who actually retired before the new company was formed are able to take their pension. I was lucky to have bailed before this happend.  



ERISA requires that benefits which are vested are nonforfeitable. New contributions may not be made at new company, but those already made, if vested, can be taken when "retirement age" as defined under the plan is reached.

 

[Spanky]

If corporate responsibility is truly for the interests of shareholder, why do management give themselves exorbitant compensation package and pension? Yes, it's "every man for themselves" - I tend to forget. To improve the bottom line, management would get rid of employees and forefit pension obligations but give them a big raise for cost cutting while proclaiming that they are doing it for the interest of the shareholders.

 

[Eagle43]

Certainly there is. However its not up to the employer to provide it. Its up to you.

Bingo. And it's not up to the government, either. It's up to you.

 

[frayne]

If corporate responsibility is truly for the interests of shareholder, why do management give themselves exorbitant compensation package and pension? Yes, it's "every man for themselves" - I tend to forget. To improve the bottom line, management would get rid of employees and forefit pension obligations but give them a big raise for cost cutting while proclaiming that they are doing it for the interest of the shareholders.

Read Bogle's book, the quick answer is little or no governance by board of directors.

 

[Jarhead*]

Bingo.  And it's not up to the government, either.  It's up to you.

Eagle 43:  Yep.  That's exactly what I've tried to
convey to my adult children, when they (once in a while) complain about something not being fair.  "Yeah, I know, dad, Fair is where they have Ferris Wheels". (They love my snappy solution!)  Be that as it may, the image you see in the mirror while shaving, (Or in Nords case, pony-tail adjusting), is in the final analysis, the only one you can count on to take care of your family.

Jarhead, who agrees with ReWahoo, that Texas is the best college football team in the country.

 

[AltaRed]

I do

 

[Lazarus]

All this says is that a DB pension is back loaded. That's why it hurts to be cut-off early!

That is the problem exactly. Many people, including some who have a DB plan don't understand this. In my case the greatest benifits come at 60 years old with at least 15 y service. At 55 it's not too bad 50% of what you get at 60. At 50 years old you get 23% and no medical. Most of the money comes at the end. Get layed off at 49. Oh well, too bad. You have a whole 12 years to try and make it up before social security.

I suspect the lack of empathy by some on the board indicates either that they don't have a DB plan or are already collecting it.

My advice for young people is not to believe in promises. Cash that you control is the answer.

I think some government oversite of this problem is called for. If the corps. short their employees while making billions there is a problem. If they are struggling to stay in business, then I can maybe see the need to reduce their expenses.

Consider if you bought an annuity and after a few years the insurance company said. Sorry we don't have enough to pay you any more. After all it was just a promise to pay if we could. I don't think many here would settle for that without fighting.

 

[mb]

DW is one of those mid-career IBM employees that stands to lose from the DB plan change.

Will the changes hurt us financially?  Yes.  Do I fault IBM for the changes?  No not really.

Employees retain their accrued DB plan benefits (DW will have a pension of about $35k/year starting at age 55) and they are improving the DC plans.  The former honors their obligations and the later gives employees ample opportunity to save for retirement.

They have always had a pretty good 401k with a company match and the value of DW's 401k is now greater than the cash value of her DB plan at age 55.  (I'm sorry but I just can't generate a lot of sympathy for those that decided to buy a new car or a bigger house rather than to contribute to the 401k from the start.)

So would I like to still have the DB plan?  Yes, most definitely, but overall they seem to have fullfilled their obligations to employees and shareholders and I suspect that that is better than risk following the steel and airline companies and perhaps the auto companies into bankruptcy.

I will say that the above comments are restricted to the IBM plan.  I don't know enough know about what other companies and institutions are doing to comment.

MB

 

[sgeeeee]

Quote from: Nords on January 06, 2006, 02:48:50 PM

Compounding is compounding and the math works the same way whether it's a 401(k) or a DBP.

I have no dog in this fight! 

But the thing about compounding is part of the problem.  When  a DB plan terminates, there is no more compounding.  Say your benefit is worth $10,000 per year in the year the plan terminates.  If you are 65 that year, you get the $10,000 per year.  OK.  If you are a younger person who is say 45 the year the the plan terminatres, and your benefit is $10K, you retire 20 years later at 65, but you still get $10,000 per year, with no adjustment for inflation.  So the middle-age guy (BTW -- I'm past middle age on the downhill side) really gets the shaft.  His 401K has grown only 20 years, and his DB is valued in 20-year-old currency.  You have a runt pension, and a runt 401K.

More than that. Compounding in a pension plan is not typically anything like compounding in other investments. The pension plans I was part of paid relativley insignificant benefits till an employee had over 20 years in. Then they ramped up fast. Payouts are almost always based on highest 3 to 5 years of earning -- which are almost always your final years. Stop accruing before you reach your peak earning years and the impact on the benefit is huge. If you had planned on spending 30 years at IBM, you were probably counting on a pension that would completely fund your lifestyle in retirement. Freeze that pension at the half-way point and you walk away with very little to show for it.

 

[mb]

MB -- this is simply not true.  I remember the introduction of the 401K at IBM quite well (worked there at the time, and signed up for the max immediately).  When I hired in, there was no 401k!!!!

WhodaThnkit,

The word "always" may be incorrect or misleading.

This is what I know.

DW started in '84.  I just checked my records and have an end of year statement for their TDSP (401k) plan for '85.

I don't have any information prior to that but that is still at least 20 years of opportunities.

MB

 

[sgeeeee]

The trend is the US is clearly away from DB plans. Like it or not, we are going to see more, not less, of this in the near future.

When companies eliminate DB plans and replace them with DC plans, the worker always loses something. The company wouldn't be making the change if it were cost neutral. The company is clearly changing the compensation deal they made with their employee when (s)he was hired.

This administration is particularly inclined to let companies out from under pension obligations, so I expect over the next few years to see an acceleration of companies using legal manovers to get out of paying what they owe as well as cancellation of DB plans.

Is this good or bad? I would argue it's not good for the economy because the DC plans require that all workers become competent investment managers. While that may (or may not) be a reasonable thing to expect. It certainly isn't very efficient. Why should every coal miner, steel worker, school teacher, . . . have to spend part of their life learning about investment management? How does that improve the overall economy? Wouldn't it be more efficient if people could focus their energy on their own work?

 

[dumpster56]

Bottom line

If a company can get the worker to work for no pension GREAT for the share holders.

If they should be able to CHANGE THE RULES for workers who have put in 20 25 30 35+ years of service, well my friends the government will let them get away with it and sorry to say the person is efed!
PERIOD!

You do not change the rules during the game.

Again my situation is one where I WAS TOLD AND REQUIRED TO JOIN IN the teacher pension annuity fund when I started my teaching carrer in the mid 1970s!

And today the rules are gonna change BECAUSE darn BAD AWFUL politicians elected by the dumb masses stole funds from a system that was WORKING!!!

America quite frankly STINKS! And CHINA will be the BIG DOG sooner than later, while we all try to stay alive working at mcDonalds at 80+ years of age!

 

[dlhanson]

This administration is particularly inclined to let companies out from under pension obligations, so I expect over the next few years to see an acceleration of companies using legal manovers to get out of paying what they owe as well as cancellation of DB plans.

And the Klintonistas weren't also so inclined?  However, I do agree that pension plans are being dumped on the Pension Guarantee Board and taxpayers will apparently be stuck with the bills.  But that is due to laws that were initiated in and  passed by both houses of the US Congress.