My employer (Boeing) froze my pension plan today...

[ERD50]

Bummer. The " Cradle to Grave" programs offered by mega corps are all but gone now. If you have a pension, feel blessed as these things are out dated and too costly.

I say 'good riddance' to DB pensions. As I've mentioned many times, these are promises made today by people who won't be there tomorrow to keep them. Not a prudent thing to base your retirement on. And worse, many people seem to depend on these and then never learn the basics of investing and planning for their own future. It leaves hem very vulnerable.

Much better, IMO, to have things set up more like a defined contribution pension. It could be good to offer some kind of government regulated annuity system once you have retired, which could help people pool their 'longevity risk'. But the annuity payments should be allowed to float to reflect the reality of the funding of the system, not a promise that maybe cannot be kept. With conservative management, the payments ought to be reasonably predictable.

-ERD50

 

[stepford]

I just saw a article on cnbc.com it even includes the CEO.

Time to shed one small tear for the CEO... whose pension will be frozen at $3.6M/yr (coincidentally just about 100x where mine will be frozen).

 

[DAYDREAMER]

Wife and I are Boeing engineers (speea represented). The writing's on the wall for our pension to be frozen in 2016 also. I'm 49 and wife is 50 and plan on retiring at 55. Due to the change, i've been crunching numbers (my spread sheets smokn!). I will have 14 years vesting and wife will have 25 vesting by 2016. A freeze in 2016 will reduce our combined monthly payout by 700/month.

I've learned by crunching the numbers, the pension (non cola'd) becomes less and less important to our finances as i get older due to inflation (meaning when we age to 85). The 401k looks amazing when you project it out to age 85 at an average 5% annual growth. Social security also plays a significant roll in propping up that third leg of the financial bench (hate using the word stool).

So summarizing my post, the frozen pension will have minimal impact to us.

 

[travelover]

Time to shed one small tear for the CEO... whose pension will be frozen at $3.6M/yr (coincidentally just about 100x where mine will be frozen).

A man has gotta eat.

 

[haha]

Yes, I'm talking about the headlines. They never seem to miss a chance to push "us versus them" division with every chance they get.

That isn't really true. Most people who are interested in Boeing pay are Boeing workers and retirees, as well as other is areas where Boeing payrolls are important. And most of these people understand very well the details involved.

 

[Turboslacker]

Wife and I are Boeing engineers (speea represented). The writing's on the wall for our pension to be frozen in 2016 also. I'm 49 and wife is 50 and plan on retiring at 55. Due to the change, i've been crunching numbers (my spread sheets smokn!). I will have 14 years vesting and wife will have 25 vesting by 2016. A freeze in 2016 will reduce our combined monthly payout by 700/month.

I've learned by crunching the numbers, the pension (non cola'd) becomes less and less important to our finances as i get older due to inflation (meaning when we age to 85). The 401k looks amazing when you project it out to age 85 at an average 5% annual growth. Social security also plays a significant roll in propping up that third leg of the financial bench (hate using the word stool).

So summarizing my post, the frozen pension will have minimal impact to us.

STOOL
There I did it for ya

Sent from my HTC One using Early Retirement Forum mobile app

 

[Huston55]

Notice that Boeing gave employees a raise. That goes back to public employees arguments that employees with no pensions tend to make more money than people with pensions (public employees specifically).

Of course, that argument is specious.

 

[Hermit]

I say 'good riddance' to DB pensions. As I've mentioned many times, these are promises made today by people who won't be there tomorrow to keep them. Not a prudent thing to base your retirement on. And worse, many people seem to depend on these and then never learn the basics of investing and planning for their own future. It leaves hem very vulnerable.

Much better, IMO, to have things set up more like a defined contribution pension. It could be good to offer some kind of government regulated annuity system once you have retired, which could help people pool their 'longevity risk'. But the annuity payments should be allowed to float to reflect the reality of the funding of the system, not a promise that maybe cannot be kept. With conservative management, the payments ought to be reasonably predictable.

-ERD50

ERD50, you always forget to mention the very bright politician who will soon figure out a way for the government to "borrow" the funds put in to this wonderful regulated annuity.

 

[Redbugdave]

The govt already "borrows" govt workers civil service 401 money in one particular fund...the "G" fund on occasion. Even though the money does not belong to the govt...it belongs to the workers that deposited into that fund...the govt does it anyway. I believe the last time they got into our 401 wallet was during the latest govt shutdown. I am now a retired govt worker and when I reach 59 1/2...my 401 money will meet Mr. Bogle at Vanguard.

I think that since Wall St and Congress sleep with each other, (bailouts, lobby money, etc), the conclusion about the govt getting into regulated private money makes sense. Even "The Fed" is not The Fed.

 

[growing_older]

Defined benefit pensions had a bad rap recently and there were certainly abuses. But there were also problems with funding that there didn't have to be. You can make an actuarially sound estimate of what is required to fund a defined benefit pension and if you actually make the suggested contributions the system works fine. If the pension funds are invested appropriately then there's plenty of money available when needed to pay benefits. The two problems that arose were that first this is a lot of money and all the sharks came out to get a piece of it. Sometimes pension boards were swayed by flashy arguments and many inappropriate investments were made, and lots of money spent on fees. Second, if the investments did well for a time, instead of seeing that as normal fluctuations, many sponsors of the plans took the opportunity to raid the plan for the "excess" dollars. Meaning that underfunded plans became the norm as "overfunded" ones were terminated by irresponsible, but often well paid, raiders. Exposing one of the critical flaws in such plans: the promises are only as good as the people and institutions making them, because the participants have little if any direct control.

 

[Chuckanut]

that arose were that first this is a lot of money and all the sharks came out to get a piece of it. Sometimes pension boards were swayed by flashy arguments and many inappropriate investments were made, and lots of money spent on fees. Second, if the investments did well for a time, instead of seeing that as normal fluctuations, many sponsors of the plans took the opportunity to raid the plan for the "excess" dollars. Meaning that underfunded plans became the norm as "overfunded" ones were terminated by irresponsible, but often well paid, raiders. Exposing one of the critical flaws in such plans: the promises are only as good as the people and institutions making them, because the participants have little if any direct control.

The book Pension Heist documents how this stuff was done.

Direct control by participants is the only cure for this kind of immoral greed.

 

[growing_older]

Did you mean: Retirement Heist How Companies Plunder and Profit from the Nest Eggs of American Workers By Schultz, Ellen ?

I'm off to the library to get a copy. Sounds interesting.

 

[youbet]

Did you mean: Retirement Heist How Companies Plunder and Profit from the Nest Eggs of American Workers By Schultz, Ellen ?

I'm off to the library to get a copy. Sounds interesting.

The title should be "Retirement Heist How Companies and Governments Plunder and Profit from the Nest Eggs of American Workers." Governments have recently gone where private employers dare not tread in terms of screwing retirees.

 

[Chuckanut]

Did you mean: Retirement Heist How Companies Plunder and Profit from the Nest Eggs of American Workers By Schultz, Ellen ?

I'm off to the library to get a copy. Sounds interesting.

Yes. Sorry for the error.

 

[ERD50]

Did you mean: Retirement Heist How Companies Plunder and Profit from the Nest Eggs of American Workers By Schultz, Ellen ?

I'm off to the library to get a copy. Sounds interesting.

That book has been discussed here before. From the responses, the book seems to frame things in such a way to rile up the masses. I'd suggest you keep plenty of grains of salt handy as you read.

The question I kept asking was - were any of the private pensioners left with less than PBGC guarantees? I think the answer is "no", unless they go back in time before the PBGC was in effect.

IIRC, there were cases where companies froze the current pensions, and spent any over-funding of those pensions (within PBGC guidelines), and the pensioners received the full amount of the pensions they had earned to that date. I think that's a little different from what the title suggests (heist and plunder).

If a company was actually going into BK, then of course they are going to spend any over-funding of a pension system. The PBGC would probably require that before taking it over, it only makes sense - the goal would be to avoid BK and a takeover. You would not leave money on the table, and the 'over-funded' amount technically is not the pensioner's money, it is the company's money, per the rules.

That said, I'll argue that if we are going to have DB pensions, they should be at least 100% funded, based on an assumed return of only keeping up with inflation. If the funding grows faster due to real returns on the investment, the company would not need to contribute as much that year. That would be a much safer way to play it, but I don't get to make the rules.

And even the existing rules are far beyond the (practically non-existent) controls on municipal pensions. youbet makes an excellent point, that 'governments' should have been included in the title - in some cases, the 'heist and plunder' could be an accurate assessment of what has happened in that arena.

-ERD50

 

[growing_older]

The question I kept asking was - were any of the private pensioners left with less than PBGC guarantees? I think the answer is "no", unless they go back in time before the PBGC was in effect.

The pensions I (and my wife) were associated with were all discontinued before we got close to retirement age. I cannot say if the offers we were made were less than the PBGC amounts or not, but I can say for sure that the actual value received was far far less than the value of the pension would have been, In a system (SmallCompany) which would have fully vested at 20 years a pension worth between 1 and 2 % of final three years salary, the plan terminated after 5 years produced a monthly pension (payable at age 65) of less then $20 per month. I assume the guarantees are better for people closer to retirement age. In a system (MegaCorp) that converted to a cash balance plan, the payout was less than half what the company should have been contributing yearly if it really was going to provide the promised benefit. I assume that with a MegaCorp of this size this was all vetted and legal - it certainly attracted lots of vigorous complaints, but they stuck to their low ball figures.

Pensions are great if you have one, but the promise of one is not something I would count on until you are sure it's going to pay out. The "guarantee" didn't do much for me.

 

[ERD50]

The pensions I (and my wife) were associated with were all discontinued before we got close to retirement age. I cannot say if the offers we were made were less than the PBGC amounts or not, ....

Well, the PBGC would not allow them to do less than what is required. If that were to BK them, that is when the PBGC takes over, with caps on the pension amounts (no reductions if you are under the cap).

So what you are describing is, Corp offered xyz pension benefits for several years. Then, going forward, they changed the way the plan works.

While we might all wish and dream that they would never reduce the system from the day we were hired, it is their prerogative.

Just the same as we look for raises and promotions as time goes on - but I'm sure the company would wish and dream they could pay us the same wage as the day we were hired. In times of full employment, the worker often has the upper hand. In times of high unemployment, employers have the upper hand.

My own pension got 'downshifted' a couple times (future benefits earned at a lower/slower pace). I never considered it a 'heist' or 'plundering'. I didn't like it, but my option was to go find other employment, and I decided to stay. I think we are all better off w/o these future promises that also end up being like 'golden handcuffs' (or some baser metals for those of us further down the food chain). Total compensation is more transparent if it is all collected in today's dollars.

-ERD50

 

[growing_older]

So what you are describing is, Corp offered xyz pension benefits for several years. Then, going forward, they changed the way the plan works.

In my case, they also were apparently given some latitude to determine the value of the promise made up until that point. As someone who was not actually collecting the pension, perhaps the PBGC guarantees didn't apply, but the actual value given in exchange for what had already been "earned" under the previous promise was much. much less than would have been expected. The company was free to make assumptions in the model about future value and indeed they did so in such as way to strongly reduce any payouts. None of these were union situations or negotiations, so the decisions were completely one sided and value was not just reduced going forward, but cleverly calculated to minimize value retroactively.

 

[Chuckanut]

That book has been discussed here before. From the responses, the book seems to frame things in such a way to rile up the masses. I'd suggest you keep plenty of grains of salt handy as you read.

Can we see some examples to support that it frames things to rile up the masses? Or where the author erred or misrepresented one of the examples she wrote about?

 

[Texas Proud]

I know there are people on here who complain about their pension at a private company being 'stolen' or some other such wording... but, the truth is that when you are young... it does not cost them that much... so when they freeze it or close it down, you do not have that much money set aside.. it just is simple math....

As ERD50 said, you had a choice... stay where you are at or move someplace else after they make that move... he mentioned that his got 'downshifted'....


Well, I was thinking about it and I have had a total of at least 4 pensions that were I was either 'paid in full', they were closed, they were reduced, or they were switched to a cash balance plan.... and then that cash balance plan was made worse... every time I would curse them a bit, take my money (if they sent it to me) and roll it over... and I stayed most of the time.... why, because I was getting a good wage and all my other benefits were also good... I was well compensated for the job...

I will say that I did like the 401(k) where they matched dollar for dollar up to 6%.... that was really good... I then worked at a place that was 4% and my last job was 3%..... it always seems to go down....

 

[ERD50]

Can we see some examples to support that it frames things to rile up the masses? Or where the author erred or misrepresented one of the examples she wrote about?

I'll suggest you search for the old thread. Been there, done that.

-ERD50

 

[supernova72]

I'm curious why you call this a 'huge change'?

If you were looking to retire in two years, how much affect could moving from a DB to a DC plan for two years make to you? How different are the plans? Are there certain 'gates' that you no longer hit?

-ERD50

Sorry for the delay here. I was very brief in my original posting. Retiring at 57 makes a lot more sense to me so it would mean two years of non pension credit accrual. So---I guess it's not huge to me but to a mid-career person with 15 years to go it's much bigger. Thanks!

 

[supernova72]

How does the 'new' retirement system compare to the executive retirement system?

Hi, the exec DB pension plan is essentially 50% greater than our pension plan. Roughly speaking for a 30 yr IT professional at 55 yrs old it's about $36K a year pension. So the execs (directors and above) get another $18K on top. The "C Series" are much higher of course. Thanks.

 

[supernova72]

I'm still at Boeing too. We expected the pension change was coming soon due to the recent contract with IAM union with a similar shift. Overall not a killer but definitely a reduction in total compensation. They are providing an additional 401k contribution which is nice, but according to my calculations much less personally. I have numbers but it wouldn't be prudent to share in public domain.

It is enough less that Boeing employees will have to adjust either working longer or saving more or live on less in retirement than they had been expecting. Not insurmountable situation, yet impactful nonetheless.

The Company will definitely save Billions as future liability. Good news is that this will help cash flow and earnings. I hope for a nice pop in BA stock. I'm hoping owning BA stock will outperform my loss in pension.

Hi Turbo---now that our plan will be frozen in Jan 2016 the million dollar question for folks located in Puget Sound (WA) is will the retiree medical remain in place. They "de-coupled" the pension from retiree medical in 2006 so I'm thinking they might make some changes there as well. It's ultra cheap at $20 a month from 55 to 65 (no kidding!!).

 

[supernova72]

Wife and I are Boeing engineers (speea represented). The writing's on the wall for our pension to be frozen in 2016 also. I'm 49 and wife is 50 and plan on retiring at 55. Due to the change, i've been crunching numbers (my spread sheets smokn!). I will have 14 years vesting and wife will have 25 vesting by 2016. A freeze in 2016 will reduce our combined monthly payout by 700/month.

I've learned by crunching the numbers, the pension (non cola'd) becomes less and less important to our finances as i get older due to inflation (meaning when we age to 85). The 401k looks amazing when you project it out to age 85 at an average 5% annual growth. Social security also plays a significant roll in propping up that third leg of the financial bench (hate using the word stool).

So summarizing my post, the frozen pension will have minimal impact to us.

Thanks Daydreamer. Many friends who are engineers and SPEEA as well. They also say the writing is on the wall--but wondering when your contract expires in 2016 if there will be push back from the members to maybe add some yrs of service to ER. The IAM deal added two years so at 58 it really means 60 with full bennies.

Good luck!!