Traditional Pensions Gold Standard of Lifetime Employee

[luckytohaveajob]

Traditional pensions are the gold standard of lifetime employees. Airline management maintains their pensions as secured bonds which even pay in bankruptcy proceedings.

Union workers who think they are over rated because they are not in your name and won't get them don't get it.

Guaranteed benefit is what is so important. And employee groups which sacrifice guaranteed payable benefits to keep the company in business are losers. UAL/US Air/ NWA/DAL/CAL sacrificing benefit to keep a paycheck is obsurd!

And companies who never offered such are inferior and short term thinkers concerning their employee's futures creating haves and have nots when the growth stops- SWA. SWA new pilots will all be the have nots while the old timers screwing everyone over will be the have it and pull up the ladder types.

http://finance.yahoo.com/focus-reti...raditional-pensions?mod=fidelity-changingjobs

 

[Raoul Duke]

oh yes, the newly hired southwest pilots are so mistreated. . .

 

[CitationLover]

good luck they are gone, bye bye. too expensive to maintain versus a 401k.

if interest rates skyrocket pensions will swing to vastly overfunded in no time after the asset beatings they took this year. the traditional pension is just that: traditional. management has fallen out of favor with them due to it's budgeting unpredictability versus dc plans, too expensive to maintain (actuaries, auditors, attorneys, etc.), etc.

 

[Yuppyguppy]

I lost my pension...GLenn TIlton still has his. What's wrong w/ this picture.

 

[luckytohaveajob]

good luck they are gone, bye bye. too expensive to maintain versus a 401k.

because line pilots are towing management lines and believing it

 

[snow-back]

Pension plans have to be managed properly...just like a 401k. Pension plans managed and administered by competent responsible people should have no problem remaining intact. Are they more expensive than a 401k? Absolutely, but they are a much better benefit. If certain managements would have spent half the effort properly managing their pension obligations as they did managing their own "retirement" packages, thousands of employees would NOT have received retro-active pay cuts going back to their dates of hire.

 

[CitationLover]

because line pilots are towing management lines and believing it

please look at facts. when you can understand SFAS 87/132 and how it applies to the bottom line versus x% of compensation (a typical DC plan) you will understand. this isn't a management "line" it's reality. pensions are dying from ALL industries due to their increased complexities and massive overregulation versus 401k's and DC plans. don't believe me, ask your alpa r&i committee chairman.

tilton doesn't have a pension, he has an employment contract: as do all senior managers at most corporate companies. the "pension" portion of their contracts are all not funded (if they were funded they would be subjected to tax qualification rules and be deemed discriminatory). unfortunately the golden parachute mentality lives well. look at stephen wolf: made a killing at republic, made a REAL killing at united, then fooled them all again at US Airways and made a killing. It's no different than coaching in professional sports: it's hard to get in the club, but once in you'll bounce around awhile.

 

[CitationLover]

Pension plans have to be managed properly...just like a 401k. Pension plans managed and administered by competent responsible people should have no problem remaining intact. Are they more expensive than a 401k? Absolutely, but they are a much better benefit. If certain managements would have spent half the effort properly managing their pension obligations as they did managing their own "retirement" packages, thousands of employees would NOT have received retro-active pay cuts going back to their dates of hire.

Please understand how "pensions" work before stating this. Plan's, by law - 1973 ERISA, have to be created as a separate and legal entity. The plan also has documents detailing how the plan's assets are to be invested. A lot of these decisions are outside of management's everyday hands. Now management can easily control benefit improvements and freezes, etc (amendments to the plan), but the -40% return from last year and the lowering of interest rates over the last 10 years is a little past their egomaniacal control.

It is questionable what is a "better" benefit. Typically for older people, a traditional pension is much better. The younger workforce demands portability these days and a 401k fits nicely into that equation. Add to that the transfer of risk from the company to the plan participant and walla. These plan's are all administered via outsourcing companies: Fidelity, Hewitt, etc and not from your internal HR department.

 

[CitationLover]

A small example regarding the vast differences between a DC plan and a pension plan (DB - defined benefit plan):

Once you quit from a company with a DC plan:
- You can take your money and roll it over or take a tax hit if not 59 1/2.
- You can take your money after 59 1/2 and be subject to taxation
- Either way both are lump sum distributions after which the plan owes you nothing.

Once you quite from a company with a DB plan:
- You can only take your money if not early retirement eligible if the actuarial equivalence of your monthly benefit is less than $5,000 otherwise you are entitled to an annuity starting at age 65 (60 if an airline pilot unless the plan amended its definition of normal retirement age to 65 after 65 passed two years ago). If you quit at age 30 you are responsible for informing the company for the next 30/35 years where you live.
- If retirement eligible you must elect what type of payment form you want for your annuity or a lump sum if your plan allows large lump sum cashouts. The annuity forms are all subject to various regulations (ie if married you must offer at least a 50% joint and survivor annuity, of which if you decline it, your spouse must consent and sign a notarized form). In addition there are various minimum distribution rules (MDIB) that must be checked. If the participant dies before retirement but has a surviving spouse there are insurance rules that must be met.
- In addition to all of the above all of this information must be transmitted to the plan's trustee, which will then start sending monthly paychecks until you die.

DB plans are way more expensive not due to the benefits involved, but due to the administration of the plans. In theory the benefits are equivalent in a lot of ways. Once you typically meet early retirement eligibility a DB plan becomes more expensive than a DC plan, and vice versa if not early retirement eligible.

Hope this makes sense. Any questions, call your local r&i committee.

 

[Mike man]

good luck they are gone, bye bye. too expensive to maintain versus a 401k.

True, but a company must match the 401(k) (if it is matched)...they are supposed to fund a pension, but are there any pensions that are correctly funded? Other than the pension for Congress?

 

[livin'thesim]

The horse is out of the barn, but one of the largest problems was that labor groups did not use negotiation capital to ensure that the funds were kept current.

Accounting rule changes and management's mishandling or abuse of pension fund accounts has led to massive underfunding.


A major reason behind the underfunding was based on Wall Street financial models.
The idea that equities (stocks) could be used to provide high short and long term returns gave pension fund managers (both public and private) the justification they were looking for to decrease contributions into the fund.

Labor groups failed also, since they did not properly police management's actions. If they had used their bargaining power to contractually force management to set aside realistic amounts, we would be in better shape.

If you forget to look both ways before you cross the street and a drunk driver kills you, it is his fault. But you're still dead. Labor groups need to become educated on the financial math behind pension plans if they expect to see their money when they retire. Big pools of money like pension funds are JUICY targets for unscrupulous players. Not just management either - investment bankers, hedge fund operators, etc.

Much pension money has been lost to these charlatans as well.

I'm going to tell you a huge truth about pension funds:

You cannot grow a pension fund sustainable with large stock exposures. It is just too risky. While the long-term stock market returns MAY be above the rate of return on bonds, there are gigantic periods of loss an volatility, like we are in now.

When people retire, they need their money.

Therefore, moving ahead from here, labor groups need to ensure that their fund managers are not taking excessive risk to generate returns. The fund grows through contributions and return on investment.

Pension fund investing MUST absolutely return to the old days, with safe high-quality bond management mixed very carefully with value-oriented stocks.

The problem for labor is that when events like the runup to 14,000 a couple years back, or the dotcom bubble occur, some elements in management and even some in labor want to move pension funds into those investments to juice the returns.

We are now experiencing the fallout from that.

There is an important reason why the bond market is several times larger than the stock market, and why it is actually more important. Most of the large sovereign wealth funds, who have the best investment analysis money can buy, keep the bulk of their cash in government debt. This is not because they are too stupid to invest in stocks.

Union leadership is going to have to come up to speed fast on the mathematics of pension finance if they want to preserve this benefit into the future. Trusting management to control pension funds has proven to be the wrong way to do it.

I personally believe that labor groups should actually handle the pension money the same way that you or I would manage our 401k.

The money goes into an account, and the union's money managers (whom the union selects and pays their salary) manage the investments. The company just sends the cash in and the union does the rest.

This way, there can be no chance of chicanery.

 

[Whine Lover]

" Labor groups should actually handle the pension money the same way that you or I would manage our 401k." ( Right. A Direct Contirbution ( B-Plan ) as opposed to an A-Plan.)

" The money goes into an account." ( Right. MY Account. )

" The company just sends the cash in and the union does the rest." ( WRONG. )

"This way, there can be no chance of chicanery." ( WRONG.)

 

[StaySeated]

DB plans themselves are not the problem. Companies were given tremendous leeway with respect to the funding of their DB plans, and then they were required to disclose the details of why the plans were underfunded.

A DB plan is nothing more than an annuity (with regard to disbursement),and if you understand how an insurance company is required to invest their own assets (78/22) then there should never be a time when a DB is underfunded. The problem lies in the fact that our employers have not been required to fund the plans properly. The plans are not too expensive, nor are they too cumbersome. The concept itself has failed because we trusted "the company" to manage the account, when in fact we should have required the company to fund the plans properly and deposit those funds with a third party.

With all of that being said, a DC plan is basically better on every level. It is just a damn shame that so many people were devastated by the failure of their DB plan.

 

[StopNTSing]

DB plans themselves are not the problem. Companies were given tremendous leeway with respect to the funding of their DB plans, and then they were required to disclose the details of why the plans were underfunded.

A DB plan is nothing more than an annuity (with regard to disbursement),and if you understand how an insurance company is required to invest their own assets (78/22) then there should never be a time when a DB is underfunded. The problem lies in the fact that our employers have not been required to fund the plans properly. The plans are not too expensive, nor are they too cumbersome. The concept itself has failed because we trusted "the company" to manage the account, when in fact we should have required the company to fund the plans properly and deposit those funds with a third party.

With all of that being said, a DC plan is basically better on every level. It is just a damn shame that so many people were devastated by the failure of their DB plan.

An even bigger shame is the coming failure of state & federal pension plans because we trusted "the government" to manage the accounts and fund the plans properly. :bomb:

 

[livin'thesim]

Whinelover-

I think you misinterpret my post.

I am not advocating for or against pensions. What I am trying to say is that IF a DB program is desired, this is the way I think it should be done.

Personally, I prefer a 401k program myself, since I have the financial interest and time to manage my own savings.

I want to revisit the points you referenced:

" Labor groups should actually handle the pension money the same way that you or I would manage our 401k." ( Right. A Direct Contirbution ( B-Plan ) as opposed to an A-Plan.)

" The money goes into an account." ( Right. MY Account. )

If this is what you want, then sure. It is the system that we both prefer for ourselves. My point was that IF the labor group wants a DB program, recent history has proven that you can't leave management in charge of the account.

Giving the union control of the investments would be one step closer to direct employee control, which we both prefer.

" The company just sends the cash in and the union does the rest." ( WRONG. )

This is not a 'right' or 'wrong', it is a matter of preference. I suggested a method, I did not predict whether that method was the best method, just a better one than is currently in place. "Wrong" is the wrong word. Perhaps you meant "bad idea". Maybe, maybe not.

Again, this is less preferable than direct employee control with a personal account, but better than leaving it up to the revolving door of airline management.

"This way, there can be no chance of chicanery." ( WRONG.)

Hehe. I was wondering if anyone would point that out.

The full statement is that if the union controlled the investment strategy and the funds were set aside, any management chicanery would be eliminated, by virtue of who controlled the account. The potential for other chicanery is a debate outside the scope of this point.