The Rush to Shut Down Pensions ( More Companies Likely to Follow IBM )

Business Week ^ | 01/09/2006 | Nanette Byrnes

[SirLinksalot]

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 ?

[TXBSAFH]

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.

[mr_hammer]

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

[Casloy]

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

[abb]

Government at all levels....

[staytrue]

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 ?

[The_Victor]

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.

[wvobiwan]

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.

[Paved Paradise]

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

[ravingnutter]

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.

[ex-snook]

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?

[Unmarked Package]

"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."

[Russ_in_NC]

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)

[gocats]

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.

[Fee]

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.

[Jackson57]

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 ...

[Maneesh]

"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.

[Alberta's Child]

That's not sad . . . it's simply a reflection on a person's igorance and/or misplaced priorities.

[nyconse]

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.