Pension Guarantees

[maddythebeagle]

There seems to be some innuendo on these boards about people losing pensions and living on cat food? Has anybody really had their pensions taken over by the federal government and what percentage of their pensions (and dollar figure) did they get? And if you rec. a cut in pension, did you have other savings, home equity, etc. that was enough.

Also, what is the attitude on corporate pensions, should they be made whole by the government? or is this shifting too much risk to all taxpayers. How would this be done considering that the federal program is in the red? or is it just better for companies to continue to shift towards 401k like plans with matches.

 

[Brat]

Another option would be for the USDL to send a letter to fund participants in under-funded plans to warn them of what will happen if their plan defaults.  In that way employees could make back-up plans.  Employers won't like that either can you imagine the retention and recruiting issues

My concern about 401K programs is that many employees choose not to participate, or do so inadequately.  Too many are short term financial planers (next paycheck thinkers).  Employers who are making participation the default option and making a balanced fund the default fund are doing the employees a favor.  I would like DOL to set standards on the services and fees charged by fund administrators. 

Frankly, I think 401K plans are best for those with 20 years of employment ahead of them.  The trick for defined benefit plan administrators shifting to the 401K is how to manage the actuarial assumptions in the defined plan - the plan administrator assumed that some of the participants leave the plan prior to vesting (or vest at a low level), some of the funding shifts to long term participants.

The best may be a pension program with both elements, a defined plan that pays a very modest amount in addition to Social Security and a 401k for the balance. 

 

[Michael]

Also, what is the attitude on corporate pensions, should they be made whole by the government?

I would think so, since it was government regulations that told companies not to bother funding the pension plans. They even passed laws that prevented pension plans from collecting a share of bankruptcy proceedings along with the other creditors.  The employees were not even allowed to know that the plans were not funded.

The government is directly responsible, since it made the laws that prevented employees from monitoring their pensions, and doing something about it.  If they had known, they could have at least looked for another job with a secure plan.  When enough left, the company would have been forced to fund it.

Employers won't like that either can you imagine the retention and recruiting issues

That's what it is all about.  They want to be able to cheat people, without their victims finding out about it.  Pay off the politicians, and they get away with it. What a scam.

 

[Brat]

That's what it is all about.  They want to be able to cheat people, without their victims finding out about it.  Pay off the politicians, and they get away with it.  What a scam.

Ah, you are much TOO YOUNG to remember the days when there was NO pension benefit guarintee program.  One of my Mother's friends commited suicide when his plan failed.

So, the wise person takes nothing for granted and plans accordingly.

 

[SteveR]

My former company's 401(k) was (25 years ago) gave two options: company stock and a guaranteed (read savings account) fund. Those that rode the 1980'2 and 1990's wave of stock splits were all mulitmillionaires. The problem hit in 1999 when the company stock price went from 58 to 29 in only a few days. It has not recovered to date and those heavy into company stock and stock options are still waiting for the price to rise enough to break even if they can. Many ERs were busted because of this. I was lucky as I was able to move a big chunk of stock to other places that did not take the same hit. I did lose 30% of value which I have not made up but I feel good I was able to move out what I did. My options are still underwater and in a couple of years will expire. The stock price is still spinning in circles so I have written these off as potential assets.

The pension program was fully vested after 10 years and was paid for my the company after 1985 so my $2000/month pension only cost me about $3500 total. I have been getting it since I took ER three years ago and I bank it every month in a MM fund until I move it to longer term investments in chunks. I am thankful I have it and some day I will need it as part of my total ER package but for now it is investment seed money.

 

[Patrick]

There seems to be some innuendo on these boards about people losing pensions and living on cat food? Has anybody really had their pensions taken over by the federal government and what percentage of their pensions (and dollar figure) did they get? And if you rec. a cut in pension, did you have other savings, home equity, etc. that was enough.

Also, what is the attitude on corporate pensions, should they be made whole by the government? or is this shifting too much risk to all taxpayers. How would this be done considering that the federal program is in the red? or is it just better for companies to continue to shift towards 401k like plans with matches.

I saw an interview with a retired airline (United, I think) pilot a few days ago.  He said his benefit is reduced to only about 40% of what he was getting.

I think the corporations should be responsible.  Why can they continue in business while the retirees get screwedf?    I say liquidate the company and pay the retirees first.

The system should be changed so that the pension portion is not a part of the company - it should be an independent operation that the company can't "raid" when it gets in financial difficulty.

 

[RockMiner]

I think the corporations should be responsible. Why can they continue in business while the retirees get screwedf? I say liquidate the company and pay the retirees first.

It sounds cold, but the fact is corporations are not run for the benefit of their employees. They are supposed to make money for the share holders. Employees are treated well mostly only insofar as it stands to benefit the company.

I used to envy those with DB pensions, but now I'm not so sure...now, government jobs are another story.

 

[Patrick]

It sounds cold, but the fact is corporations are not run for the benefit of their employees.  They are supposed to make money for the share holders.  Employees are treated well mostly only insofar as it stands to benefit the company.   

I understand that.  It just amazes me that a bankruptcy court will reorganize a corporation and allow it to continue operating while it leaves the retirees twisting in the wind.

 

[youbet]

I understand that.  It just amazes me that a bankruptcy court will reorganize a corporation and allow it to continue operating while it leaves the retirees twisting in the wind.

Agreed.  For example, why should United retirees collect a reduced pension when the company's doors could have been nailed closed, assets sold and the pension plan saved?  Sure a few thousand folks would have lost their jobs, but it's the retired folks we should be concerned about. 

 

[Martha]

I understand that. It just amazes me that a bankruptcy court will reorganize a corporation and allow it to continue operating while it leaves the retirees twisting in the wind.

Bankruptcy courts do this because it is part of the law. For how it works, see my reply number 39 in this thread.

 

[Michael]

Exactly. The law is written so that pension plans cannot get a fair share of assets in bankruptcy. You would have to convince your Congressman and Senators to change the law, if you wanted pension plans to be first in line at bankruptcy proceedings.

Employees are treated well mostly only insofar as it stands to benefit the company.

This reminds me of old time mining owners, who told the rescue workers to save the mules first before they saved any of the people. Mules cost money to replace, and the people were free.

Better watch out for your own skin. Its a hard world.

 

[greg]

"The is in the details." During the early years of the W administration, W allowed corporations to 'not fund' their pension programs for a while. This showed up (somehow ) as increased profits on the corps bottom line. It increased money to shareholders, but created a greater deficit in the pension programs. Hmmmm!

He also gave GM and other corps big wads of cash when his new health care plan was enacted. Guess where some of that money showed up? I suspect some of it was in bonuses.

There are parts of unions that I don't like, but at least they sometimes try to inform members about how their pensions are being messed with by gov't.

Plus, I am NOT a political animal, so I'm done. Sorry for blowing up. I hate seeing the country raped.

--Greg