The pension system destruction continues

[dumpster56]

First, I think you have gone off subject a bit with the war talk... but that is just me....

When people talk about how great the European system is with 'universal' healthcare, I do not know if they really know what they are talking about...  yes, for most normal things it is good, but, there is a thriving market for foreign diplomates and rich people coming here to Houston and getting medical procedures... Houston has the largest hospital district with some of the best hospitals... I believe that Methodist even has a 'rich wing' section so they do not have to deal with the common folk...  IF their home system was so great, why come over here to get medical treatment

Interesting point.

However again I will say like a broken record, pensions that have been promised by companies, and governments should be honored. If you must raise taxes to do it so be it.

Think about this, 1 billion a day in Iraq on the war.

Who is gonna pay for this??

The Iraqi oil money??

$hit we americans use how much of the worlds crude a day 30%

At 60+ dollars a barrel we are STILL GONNA be paying Iraq cash long after the last american GI leaves.

Pensions and capitalism can live together. it is the awful GREED that is inherient in Humans in a capitalistic system.

The guy running IBM and his upper management types are making how much more than the average IBM worker??

And they will still have a pension.

$hit a one term American Congressman gets a GOVERNMENT PENSION!!!

 

[Nords]

I've always considered the US civil war to be a pretty big "devastation" for the US. 

Especially considering the fact that it isn't over yet. I bet there's a chapter of the Civil War Roundtable in every community of more than 1000 people.

My kid has been watching "Gettysburg" and I'm trying to find her a copy of Discovery Channel's "Undiscovered History" about the battle. I know it's drama and I know how it ends but I still can't bear to watch those fools patriots stand up and charge each other.

But if it helps her make a decision about a service academy, then I'm all for the education...

 

[REWahoo]

Especially considering the fact that it isn't over yet. I bet there's a chapter of the Civil War Roundtable in every community of more than 1000 people.

My kid has been watching "Gettysburg" and I'm trying to find her a copy of Discovery Channel's "Undiscovered History" about the battle. I know it's drama and I know how it ends but I still can't bear to watch those fools patriots stand up and charge each other.

But if it helps her make a decision about a service academy, then I'm all for the education...

When you think she's ready for it, get her a copy of Michael Shaara's "The Killer Angels". Yeah, it's fiction, but it's damn good at describing what really took place at Gettysburg.

 

[ladelfina]

Texas Proud, you have a point, but here in Italy it's almost a "chi-chi" (as in 'chic') thing to scorn the public system and opt for a private clinic. It has a boutique flavor.

I have relatives who have been both doctors and patients both in the private and public systems, and either way it seems to be a crap shoot; they have had good and bad experiences either way. What counts is the particular facility and overall the number of similar prodecures they have done. Practice makes perfect. A structure that does 1000 hip replacements a year will have better odds than one that does 100, or 10.

Some people who have the bucks to go to the US or Switzerland will continue to do so, even if the structures at their disposal are perfectly OK. In Italy you might be put on a ward in a room with 12 beds, but they might have high-tech equipment equivalent to that in a US hospital.

One thing to worry about is the "brain drain" of doctors away from the rest of the world and into the US, though it may be less of an issue in Europe than in India or Singapore.

 

[jug]

First, I think you have gone off subject a bit with the war talk... but that is just me....

When people talk about how great the European system is with 'universal' healthcare, I do not know if they really know what they are talking about...  yes, for most normal things it is good, but, there is a thriving market for foreign diplomates and rich people coming here to Houston and getting medical procedures... Houston has the largest hospital district with some of the best hospitals... I believe that Methodist even has a 'rich wing' section so they do not have to deal with the common folk...  IF their home system was so great, why come over here to get medical treatment

When you talk about people coming to Houston for treatment, its usually the mid-east oil thugs. Most Europeans stay in Europe. Take a look at the bulk of the names coming to the US, there are no good facilities in the mid-east for cutting edge technology, save for those in Israel, so they fly here. Says something about a normal grunt in the mid-east with serious illness, not much hope, despite big time oil revenue. The sheiks horde de gold.

As for the rich, they get top notch care both in US and Europe For a normal grunt who has health insurance it is still iffy in the US and Europe as to how you are treated with a serious illness.

If you are rich in the US or Europe, yes , you will attract the top notch facilities and cutting edge doctors to your case. Both the US and Europe have the best facilities in the world, and whether the bill is picked up through socialized medicine or the US conterpart, the big insurance scheme, the rich will get preferential treatment , cos the old adage goes, "those with de gold shall rule"

The rich get first crack at transplants, money and fame talk big time. It doesnt matter.

Check the list of names at the Houston medical centers, if you can get near them, probably use anglo names to hide their identities, dont want to piss off too many americans. However, when a donation is made, the mid-east moniker goes up, good for publicity.

jug

Remember de golden rule, "those wit de gold rule"

 

[justin]

A while back, the sheik or somebody from Saudi Arabia flew into Raleigh-Durham in his personal 747 jet to go to Duke Medical Center in Durham, NC for a major procedure of some sort. He had a motorcade and everything. I guess that says good things about the local hospital!

 

[Jay_Gatsby]

A while back, the sheik or somebody from Saudi Arabia flew into Raleigh-Durham in his personal 747 jet to go to Duke Medical Center in Durham, NC for a major procedure of some sort.  He had a motorcade and everything.  I guess that says good things about the local hospital!

Actually, it says more about the surgeon. Hospitals are, for the most part, relatively fungible. It's the concentration of skilled surgeons and their support staffs that really make or break a hospital's reputation.

 

[REWahoo]

Good riddance to pensions
Corporate pensions are an unstable, unfair and economically perverse means of paying for retirement.

By Justin Fox, FORTUNE editor-at-large

NEW YORK (FORTUNE) - It really is over for the corporate pension. Now that IBM has opted out, telling employees last week that their pension benefits will be frozen in 2008, it's hard to see what's to stop every last American corporation from preparing its eventual exit from the pension business. Lots of reasonably healthy companies -- Verizon, NCR, Lockheed Martin and Motorola, to name a few -- already have.

This phenomenon, along with the more dramatic cases of companies going bankrupt and defaulting on existing pension commitments (think United Airlines), has gotten tons of press, most of it of the "ain't it a shame" variety. But the real shame may be that we ever put so much faith in such an inherently unstable, unfair and economically perverse means of providing for retirement.

<snip>

So what's the alternative, when it's also clear that many otherwise productive members of society are incapable on their own of setting aside enough money and investing it wisely enough to fund a comfortable retirement?

Toronto-based Ambachtsheer... has become a big believer in individual retirement accounts that are aggregated into what he calls "buyer's co-ops."

That is, the money belongs to the individual, but the choices of how much money to set aside and how to invest it are at least partly in the hands of professionals who aren't in the employ of a for-profit mutual fund company or brokerage firm. The closest thing to such a co-op currently in existence in the United States is TIAA-CREF, the retirement fund for academic, medical, cultural and research workers. But more and more corporations are now approximating the buyer's co-op model by reinventing their 401(k)s as paternalistic organizations that automatically set contribution percentages and investment choices unless employees opt out.

That still leaves the majority of Americans who don't happen to be professors or employees of especially enlightened corporations. To help them provide for retirement, we could move to a system like Australia's, where 9 percent of every worker's income (up to a limit similar to the wage ceiling on Social Security payroll taxes) is automatically funneled into retirement accounts managed by organizations akin to Ambachtsheer's buyer's co-ops.

http://money.cnn.com/2006/01/12/news/economy/pluggedin_fortune/index.htm

 

[Nords]

Yeah, it's fiction, but it's damn good at describing what really took place at Gettysburg.

Yep, good book. It's the only way I can follow the conversation between our kid and her grandparents...

 

[BearlyWorking]

Another aspect of dropping DBP's I did not see discussed is the relationship between employee and employer. With a DBP there was a paternalistic incentive to remain loyal to a single company. With DCP's it is just the opposite. Employees are now better off job-hopping than staying in one place. In fact, jobs can now be considered to be active investments. If your present investment does not match the market, then you change it. When you get a new job you go into it with an exit strategy.

 

[justin]

Another aspect of dropping DBP's I did not see discussed is the relationship between employee and employer. With a DBP there was a paternalistic incentive to remain loyal to a single company. With DCP's it is just the opposite. Employees are now better off job-hopping than staying in one place. In fact, jobs can now be considered to be active investments. If your present investment does not match the market, then you change it. When you get a new job you go into it with an exit strategy.

Unless companies have a vesting period before you get your employer matching contribution. I think ERISA allows a maximum of 5 years to vest 100%, or phased vesting between years 3 to 6. So you have 5 or 6 years of incentives to not job-hop.

My current employer has an ESOP that has phased vesting over years 3 to 6. A big reason not to switch jobs! Of course the amount at stake has to be big enough to make the employees think twice about jumping ship.

 

[BearlyWorking]

Unless companies have a vesting period before you get your employer matching contribution. I think ERISA allows a maximum of 5 years to vest 100%, or phased vesting between years 3 to 6. So you have 5 or 6 years of incentives to not job-hop.

My current employer has an ESOP that has phased vesting over years 3 to 6. A big reason not to switch jobs! Of course the amount at stake has to be big enough to make the employees think twice about jumping ship.

Yep, but just part of the exit strategy. During vesting you can also plan to hop within the company. The important difference, in my mind, is that when I started working I never thought about the next job move. When my kids start working it will be one of their first lessons.

 

[justin]

True. But then you have another 5-6 year vesting period at your new company, and there's the initial lost time at start-up - months of ineligibility for health insurance, 401k, vacation, etc.

I'm more of the "stay in one place" kind of person, although my company makes it worth my while to be that way.

 

[SteveR]

Unless companies have a vesting period before you get your employer matching contribution.  I think ERISA allows a maximum of 5 years to vest 100%, or phased vesting between years 3 to 6.  So you have 5 or 6 years of incentives to not job-hop. 

My current employer has an ESOP that has phased vesting over years 3 to 6.  A big reason not to switch jobs!  Of course the amount at stake has to be big enough to make the employees think twice about jumping ship.

I think one would need to evaluate the potential gain from a higher paying job now vs the employer match vesting in the future to see what makes more sense. My guess would be to take the cash in a higher wage since it might also include more cash in a sign on bonus and maybe stock options that would more than offset the employer matching on the DCP.

 

[justin]

In my case, the ESOP has a very large value that is still unvested (25% of my gross salary). I also have a 7 minute commute with a flexible work schedule. I like the people I work with too.

In general, I agree one must weigh all of the options on the table - signing bonus vs. potential for vesting employer contributions, etc.

I'm not really in a field where hopping from company to company pays off - it's a professional job in a particular field of engineering where pay is usually similar everywhere given the experience I have. One day it may make sense if I'm interested in higher managerial roles (and more hours). Of course, I may be FIREd by then

 

[bbuzzard]

However again I will say like a broken record, pensions that have been promised by companies, and governments should be honored. If you must raise taxes to do it so be it.

I think this quote from the article sums it up:

"That's the problem with pension plans that promise a specific benefit in the future -- they amount, pension consultant Keith Ambachtsheer says, to a contract between current and future generations, and those future generations aren't represented at the bargaining table. As a result, they get stuck guaranteeing the retirement income of their elders while receiving nothing in return."

Now, IMHO this is not true for corporate run PDBs. The corporation and the share holders promised the benfits and should fund promised benefits. If stockholers do not like the obligations, they should not have brought the stock (Now, I stillbelieve companies have the right to freeze plans at current benefit levels).

However, the quote is perfectly true for government run ponzi schemes retirement plans, as the people paying the bills had no place at the table. This includes SS.

 

[sgeeeee]

. . .However, the quote is perfectly true for government run ponzi schemes retirement plans, as the people paying the bills had no place at the table. This includes SS.

This is true for massive budget deficits, laws that effect the environment, building permits, road construction, . . .

 

[Jay_Gatsby]

This is true for massive budget deficits, laws that effect the environment, building permits, road construction, . . .   

The problem is that nobody really cares.  Politicians need to make promises to stay in office, and since those who are going to have to pay for the promise aren't old enough (or even born) to vote them out of office, it's better to bribe provide a safety net for those who can.

 

[Texas Proud]

New Guy,

I agree with you 100% that what was promised should be paid by a corporation or government.. to a point..

In your case, yes, you had money set aside and it was to grow into your defined payment. But, like I had mentioned, what happened in Houston was that the mayor decided to 'raise' the amount for payout without any increase in contribution.. they then had to reduce this increase as there was no money for it... the people are still getting what was 'promised' before the change, but some are saying they had their pension reduced...

SS is completely different.. it is a pay as you go and as such has to be adjusted to what can come in during a given time period for the payouts... it is NOT a retirement system even though a lot of people say it is.

 

[Theo]

This is all a very interesting discussion.  I've been with my company for 13 years now, age 36, and one thing that I've noticed is that they are going against pretty much everthing that is going on in the rest of the economy.  Since I started max DBP benefits have risen from $36k to $80k, with a serious discussion of raising the max to $100k or so.  They've also been plowing in over $100 million a year the past few years in order to fully fund the pension plan.  Of course they were vastly underfunded at one point, but anyways....

Of course some pessimits argue that once they fully fund the pension, they'll freeze it, so who knows.

Also, a lot of the discussion has been with regard to either a DBP or a 401(k).  I wasn't aware that there were companies with DB plans that didn't also have 401(k)'s, so I don't see what the problem is.

I imagine, companies without DBPs have more generous 401(k) matching.  My company only matches 3%.  My wife's company has a less generous pension but matches 5%.  The current value of my pension is double the value of my matching funds in my 401(k), so maybe they'd have to kick in 9% matching for me to break even if they do freeze the DBP.   Not gonna happen.

 

[Texas Proud]

Theo...

The usually change inside a company is between DBP and DCP.. most of the big companies also have a 401(k)...

What does this mean to a company.. they KNOW how much a pension will cost them because it is funded in today's dollars. If they have a DBP, they do not really know their liability until you retire. If there is a lot of wage inflation, then your pension payments will go up... if you get a promotion and a lot higher wage, your pension goes up.. So, let's say you are a wage slave for 25 years at an average of $20,000 and then you hit it big and make $100,000 the last 3 or 5 years (according to your plan)... your pension is based on the $100,000 EVEN THOUGH YOU DID NOT EARN THAT MUCH FOR 25 YEARS... Yes, it is what was promised you, but it now means they have to make up for those 25 years of low contributions..

If they had a DCP, they just put in the percentage they say you earn each year and be done with it... you do have a pension, but not near as much as with the DBP above.. but, if you stayed a wage slave for the last 5 years, you should be close either way if the company is paying the correct percentage into your DCP... now, let's vote on if we think this is happening!!!

 

[New Thinking]

An additional point that is sad is that many women will head into poverty. DB plans protected women through joint and survivor annuities, which were required to be signed off on if they were turned down..Women live longer than men, marry older men, and have less personal savings than men..Many of you love your SWR strategy, but many of the women left behind when you die won't be able to handle this after a few bumps in the market at age 83.

DB plans provided guaranteed retirement income for many who couldn't generate it themselves..Now they will have to hire professional help at a cost (to their income) or flub it up themselves.

I, for one, will miss DB plans as very few appreciate longevity risk and the value of risk-pooling.

 

[astromeria]

I imagine, companies without DBPs have more generous 401(k) matching. 

I wish! No pension here and best (and only-) 401k match I ever had was 1.5%. But at my last software startup the stock options turned out to be worth quite a bit--but at my level (individual contributor) not enough shares to be worth as much as most pensions, if you assume a 3-4% SWR. On the other hand, at the smallish companies where I worked, there was little bureaucracy and lots of creativity (hmmm, and frequent long hours!).

Say, if I'm gonna be taxed to shore up someone else's pension, howsabout they get taxed to make up for my stock options that died on the vine? 

 

[justin]

Say, if I'm gonna be taxed to shore up someone else's pension, howsabout they get taxed to make up for my stock options that died on the vine?

Too bad you can't take a capital loss write-off!

 

[dumpster56]

It really is all about the bottom line.

With long term rates the way they are now big corp can take a windfall on paper by getting rid of a later commitment.

Dump the pension freeze the pension call it what you want it is a means to prop up the stockholders shares in a company.

I really wonder when this comes back to bite these companies in the arse.

I mean if I was a young guy I would have VERY LITTLE ALLEGENCE TO MY COMPANY!

I would be the whore and find the best paying place year after year!

I am good at what I do.