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 ...
Can anyone tell me how many companies out there still maintain a pension plan and plan to keep it for future hires ?
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.
The only one that comes to mind is the U.S. Congress!
Now, if we can do the same thing with health insurance....
Government at all levels....
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 ?
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.
I'd rather have them do this than just screw you out of the pension at retirement!
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.
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?
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."
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.
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.
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 ...
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.
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