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The Rush to Shut Down Pensions ( More Companies Likely to Follow IBM )
Business Week ^ | 01/09/2006 | Nanette Byrnes

Posted on 01/09/2006 7:59:49 AM PST by SirLinksalot

The Rush to Shut Down Pensions

When a well-funded giant like IBM joins the move to end defined-benefit plans in favor of 401(k)s, even more companies are likely follow

What a difference a year makes. Back in December, 2004, when IBM (IBM ) announced its intention to close its traditional pension plan to new employees, offering them the 401(k) plan instead, the company made it clear it did not wish to become a poster child for the broader demise of these old-fashioned retirement plans. Pensions already had been a painful public-relations black eye for Big Blue, which had been battling employees for years over changes made to the pension in the 1990s. More bad press was not what anyone wanted.

But on Jan. 5, IBM thrust itself back into the headlines with its decision to go one step beyond its earlier move and "hard close" those old plans. That means not only new IBMers, but people who have been there for decades, would no longer be accruing guaranteed benefits. Instead, they would be part of a more generous 401(k), though any pension dollars already earned would still be theirs as well.

Coming on the heels of a similar move by telecom giant Verizon (VZ ), it seems to be one more tolling of the bell for the promised pensions of old.

(Excerpt) Read more at businessweek.com ...


TOPICS: Business/Economy; Editorial
KEYWORDS: ibm; pension; pensions
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With GM and the Airlines in trouble because of Pension liabilities, and with IBM taking the lead, I think the days of company funded pensions are effectively over.

Can anyone tell me how many companies out there still maintain a pension plan and plan to keep it for future hires ?

1 posted on 01/09/2006 7:59:52 AM PST by SirLinksalot
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To: SirLinksalot

What is really sad is when people get lump sum payments at the end of a pension. I worked for a company that was bought out in the late 1990's. The new company did not do pensions and paid everyone off in a lump sum. You had the choice of rolling it over into a 401K or taking a check and paying taxes. Half took the money. Yes they did get a new truck, but what of their retirement.


2 posted on 01/09/2006 8:04:20 AM PST by TXBSAFH ("I would rather be a free man in my grave then living as a puppet or a slave." - Jimmy Cliff)
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To: SirLinksalot

The only one that comes to mind is the U.S. Congress!


3 posted on 01/09/2006 8:04:26 AM PST by mr_hammer (They have eyes, but do not see . . .)
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To: SirLinksalot

Now, if we can do the same thing with health insurance....


4 posted on 01/09/2006 8:05:39 AM PST by Casloy
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To: SirLinksalot

Government at all levels....


5 posted on 01/09/2006 8:05:41 AM PST by abb (Because News Reporting is too important to be left to the Journalists.)
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To: SirLinksalot

defined benefit pensions are the sure way to bankruptcy.

You can't get out more than you pay in.

By the way, Social Security is a defined benefit pension plan. US. Govt. are you listening ?


6 posted on 01/09/2006 8:05:43 AM PST by staytrue (MOONBAT conservatives are those who would rather lose to a liberal than support a moderate.)
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To: SirLinksalot
Corporations come and go all the time. Why anyone would want a promise for future retirement payments from an entity that can declare itself insolvent to escape paying is beyond me.
7 posted on 01/09/2006 8:07:05 AM PST by The_Victor (If all I want is a warm feeling, I should just wet my pants.)
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To: SirLinksalot

IBM has been hiring everyone but US citizens for a decade.

Honestly, the only people IBM keeps around long enough to actually EARN their pensions are execs., and most of them have no need of actual company pensions due to stock deals. Corporations have been using terminations, buy-outs, and layoffs for years to avoid paying pensions, I don't see what the big deal is.

401K for me.


8 posted on 01/09/2006 8:08:32 AM PST by wvobiwan (It's OUR Net! If you don't like it keep your stanky routers off it!)
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To: SirLinksalot

I'd rather have them do this than just screw you out of the pension at retirement!


9 posted on 01/09/2006 8:09:41 AM PST by Paved Paradise
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To: TXBSAFH
What is really sad is when people get lump sum payments at the end of a pension.

Especially for younger workers like myself that have long tenure at a company. Our company did the same as yours. I was hired within one day of another worker, we both had approximately 15 years on the job, but since he was closer to retirement age, his payout was 5 times what mine was. It sucked.

10 posted on 01/09/2006 8:14:56 AM PST by ravingnutter
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To: SirLinksalot
Just a sign in someone's great economy that major corporations can no longer afford what they could. Throw in with that downsizing health plans that corporations could also provide and the picture is becomming clearer.

Private industries are offloading costs to the federal government in failed pension plans. The federal government can't even pay for its own current expenditures so expect more and more interest costing unbalanced budgets. Government is also grabbing more than its fair share of job hiring and financing through contracts. Who is to the rescue of private industry?

11 posted on 01/09/2006 8:16:17 AM PST by ex-snook (God of the Universe, God of Creation, God of Love, thank you for life.)
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To: SirLinksalot
"Can anyone tell me how many companies out there still maintain a pension plan and plan to keep it for future hires ?"

From the referenced article:

"According to human resources consultant Watson Wyatt Worldwide, 638 of the 1,000 largest companies had defined-benefit, or traditional, pension plans in 2001. Of those, only 5%, or 34 plans, were frozen to new entrants. By September, 2005, only 627 were offering the plans, and 13% of those, or 82 plans, had been put in the deep freeze."

12 posted on 01/09/2006 8:18:12 AM PST by Unmarked Package
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To: wvobiwan
Perhaps I was naive but I have been working at IBM for 25 years. I am relying on that pension plan. Fortunately for me, I also took out the maximum I could in the offered 401K so I have a backup plan but I still feel as if I've been Royally Flushed. I don't understand all the specifics behind the new plan but what I can tell you is in the last 10 years of service, years 20 to 30, is where the majority of the pension benefit is accumulated; meaning that's where the benefit increases to it's maximum level of yearly payout (39% of your base salary for the last 5 years) and it does so exponentially till it reaches the maximum payout. Bottom line, with 25 years in the company, IBM got my maximum commitment with a promise that they have now broken.

Coming into the company now one can easily plan for their own retirement and make the correct choices, but after putting all those years of service in it's a little to late for me. I'm waiting to see just how much benefit dollars they say I've accumulated to move into a 401K+ program. Thank GOD I did plan ahead and put extra money aside (It was suppose to be a bonus nest egg for retirement, not the primary source of retirement funds)
13 posted on 01/09/2006 8:24:53 AM PST by Russ_in_NC
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To: ex-snook

Private companies continue to reduce employee expenses while increasing the salaries of their CEO and other top level executives. I don't have a problem with top level managers making a good salary but if they continue to escalate nothing will be left for the worker. twenty years ago a CEO typical;;y made 100% of the workers salary, now they are making 1,000% over the average salary of the average worker. Maybe instead of cutting health care and retirement benefits companies should look at cutting bloated salaries and bonuses of the top level executives.


14 posted on 01/09/2006 8:25:40 AM PST by gocats
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To: staytrue

No, legally Social Security is defined by the USSC as a "legislated entitlement" and Congress was givened the maximum latitude to alter or innovate. This ruling came after several individuals sued the government for increasing the retirement age claiming that Social Security was a contract between the people and government. The USSC studied the Social Security Act and concluded that it was not a contract but a legislated entitlement.


15 posted on 01/09/2006 8:28:55 AM PST by Fee (`+Great powers never let minor allies dictate who, where and when they must fight.)
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Comment #16 Removed by Moderator

To: Russ_in_NC

Russ, I'm also an employee, with 8 years, so my pension hasn't built nearly as much as yours. I can understand your frustration with our company. PM me if you get a chance and we can exchange info ...


17 posted on 01/09/2006 8:44:19 AM PST by Jackson57
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To: Casloy
"Now, if we can do the same thing with health insurance...."

I agree a 100% with you on this. Health care needs to be changed to 401 K style plans where the employee is more responsible for their own funds. HSA's and some high deductible plans are moves in this direction. People need to know how much they are paying each time they go to a doctor and they might be more judicious about visits and take better care of their health. Retired employees with huge health care costs are like an albatross over company's heads and just like with pensions they will have to shift the onus on to the employees if the companies are to survive beyond 10 years. We are just in the beginning stages of a radical restructuring of employee benefits.
18 posted on 01/09/2006 8:48:40 AM PST by Maneesh
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To: TXBSAFH
That's not sad . . . it's simply a reflection on a person's igorance and/or misplaced priorities.
19 posted on 01/09/2006 8:56:13 AM PST by Alberta's Child (Said the night wind to the little lamb . . . "Do you see what I see?")
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To: Maneesh

What you are talking about is essentially a paycut...Also, idividuals don't have buying power to get such a plan as you advocate. Also, as soon as you are ill...such plans jack the prices up to unbelievable levels in order to force you to defaul so they don't have to pay for your care. At that point, you are uninsurable. Your prescription for healthcare would lead to national healthcare almost immediately. Do you ever consider real life situations in your ultra conservative bubble- not meaning to be unkind or rude, but...I can not understand how you can advocate such a thing.


20 posted on 01/09/2006 9:00:27 AM PST by nyconse
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