GE's pension freeze.

[ColdNoMore]

Not good news for future (and current) retiree's.

The pressure, of course, is to bolster its stock price and thus primarily benefits the stockholders and those executives whose annual salary is based on the stock price...and hurts long time dedicated employees :(

GE pension's (poke here) (http://finance.yahoo.com/news/pensions-ge-401-k-retirement-decline-161154581.html)

The news that General Electric (GE) was freezing its pension for 20,000 workers this week and offering buyouts to 100,000 former employees sent the company’s beleaguered stock up slightly, but dealt the two fierce blows to two great American institutions.

The first: GE itself. An American staple and iconic industrial company that has employed hundreds of thousands — if not millions — of Americans over the years and paid benefits loyally to its workforce showed yet another flicker, like the incandescent bulbs it famously made.

The second: the American pension.

It’s no secret the private-sector pension is on its last breaths. Over the past 20 years, the percentage of Fortune 500 companies that offer a traditional pension plan has fallen from 59% to 16%, according to Willis Towers Watson. Pension plan freezes have been on the rise as well.

For the entire workforce, only 4% of today’s workforce has access to a traditional defined benefit pension plan, according to the Bureau of Labor Statistics.

[Altavia]

Sadly they are not alone and in some ways this is a consequence of the tax law changes. As you say, the stockholders expect it.

Also true the younger generation now taking over companies who without the benefit have little sympathy taking it away from those who established and grew the organization before them.

i strongly advise friends not to wait to maximize their retirement benefit. Retire as soon as you can. Life is full of twists and turns, enjoy the time you have left as soon as possible.

[JoelJohnson]

Many think that a company's pension is guaranteed, they point to the "fact" that it is "fully" funded. But, it is only as solid as the company itself (or whoever backed it). Sometimes a pension put in trust to a large company that is in "good shape", but any company can get into trouble (List of bank failures in the United States (2008–present) - Wikipedia (https://en.wikipedia.org/wiki/List_of_bank_failures_in_the_United_States_(2008%E 2%80%93present)#2008)) and the pension go with them.

[tophcfa]

Many think that a company's pension is guaranteed, they point to the "fact" that it is "fully" funded. But, it is only as solid as the company itself (or whoever backed it). Sometimes a pension put in trust to a large company that is in "good shape", but any company can get into trouble (List of bank failures in the United States (2008–present) - Wikipedia (https://en.wikipedia.org/wiki/List_of_bank_failures_in_the_United_States_(2008%E 2%80%93present)#2008)) and the pension go with them.

Saying a pension is fully funded can be very misleading. A pensions funding status is based on an actuarial formula that has assumptions about both the future investment returns of the assets backing the pension liabilities as well as what the value of the plans liabilities are. Underfunded plans are required by pension law to add funds to the plans assets to help bring them toward full funding status. I don't recall exactly when, but several years ago the guidelines outlining these key assumptions were relaxed, making underfunded plans seemingly look to be more fully funded without any funding infusion. Kind of a smoke and mirrors game.

Since interest rates are so low, pension plans tend to be heavily invested in stocks, making them very vulnerable to swings in the stock market. A large correction in the equity market would leave most plans funding status in serious jeopardy. Simple math, the value of the plans assets would plummet while the liabilities wouldn't change.

[gatorbill1]

No company can afford to continue to fund something that will bankrupt them. I guarantee you GE shareholders have lost a lot more money than pensioners.

[Chi-Town]

No company can afford to continue to fund something that will bankrupt them. I guarantee you GE shareholders have lost a lot more money than pensioners.No doubt that shareholders who rode the stock down took a hit, but pensioners lose their comfort level in retirement by no fault of their own.


Sent from my SM-N910V using Tapatalk

[tophcfa]

No doubt that shareholders who rode the stock down took a hit, but pensioners lose their comfort level in retirement by no fault of their own.


Sent from my SM-N910V using Tapatalk

Freezing a pension plan doesen't relieve a company of the obligation to pay pensioners all retirement benefits earned up to the freeze date. It simply eliminates accural of additional plan benefits from the freeze date going forward. My companies plan was frozen three years before I retired. I worked there for 25 years but only earned pension benefits for the first 22 years. I feel very fortunate to have worked for a company that still had a defined benefit plan in place for most of my career. Unfortunately, Defined benefit plans (at least for private companies) will soon to go the way of the dinosaur. A companies success or failure should be based on their ability to compete in the businesses it specializes in. Taking on huge liabilities that fluctuate with market returns is not consistent with sound business practices. I guess that is why many public entities still have defined benefit plans, since they can put taxpayer money at risk as opposed to shareholders.

[billethkid]

Current GE retirees collecting pensions are not affected (at this time).

It is the current employees, who may still contribute and will continue to get some % from the company, however their current deposits will no longer grow in value.

I suggest any ex GE employees who have funds in the pension plan no longer growing in value....to take a lump sum and get out and invest the money where it can be maximized.

[Marathon Man]

Freezing a pension plan doesen't relieve a company of the obligation to pay pensioners all retirement benefits earned up to the freeze date. It simply eliminates accural of additional plan benefits from the freeze date going forward. My companies plan was frozen three years before I retired. I worked there for 25 years but only earned pension benefits for the first 22 years. I feel very fortunate to have worked for a company that still had a defined benefit plan in place for most of my career. Unfortunately, Defined benefit plans (at least for private companies) will soon to go the way of the dinosaur. A companies success or failure should be based on their ability to compete in the businesses it specializes in. Taking on huge liabilities that fluctuate with market returns is not consistent with sound business practices. I guess that is why many public entities still have defined benefit plans, since they can put taxpayer money at risk as opposed to shareholders.

My story is very similar. Pensions froze after I was there for 24 years. I chose to see it as an opportunity. I was no longer held there by the "golden handcuffs". I left and took a job at a company that eliminated pensions several years before. Never looked back. Four years later - retirement.

Pensions are going away. Insurance benefits after retirement - gone. It's just how things are now.

[ColdNoMore]

Here are 14 companies still offering defined benefit pensions (with a few caveats)... (direct deposit here) (http://finance.yahoo.com/news/14-companies-still-offer-pensions-100000381.html)

As of 2017, only 16 percent of Fortune 500 companies offered a traditionally defined benefit pension plan to its new hires, according to a Willis Towers Watson report. That’s a dramatic drop from the 59 percent of that same group of employers that offered pensions in 1998.

Pension plans are retirement plans that employers maintain and contribute money for employees who will later receive fixed payouts when they retire. Although more and more companies are opting to offer employees a 401k plan instead — which is much more cost-effective for the employer — there are still some jobs that come with a pension.


-ExxonMobil

-Coca-Cola

-BB&T

-NextEra Energy

-NuStar Energy

-PG&E

-Southern Company

-3M

-General Mills

-UPS

-Accenture

-Johnson & Johnson

-Aflac

-Lockheed Martin

[valuemkt]

Taking a lump sum is more often than not a poor financial decision. A very few people come out ahead - purchasing an annuity with the money results in a lower monthly payment; there are immediate tax considerations; A High percentage of people blow through the money on foolish spending or foolish investments (yes, I'm sure YOU wouldnt be that person). Even if the company went belly up, unless you were at the high executive rank, your monthly pension would be fully guaranteed by the Pension Benefit Guaranty Corp (PBGC) - as unlikely to be terminated as Social Security or Medicare .. Ride it out and consider that pension and social security as part of your fixed income allocation, and play as you wish with the rest.. h

[Northwoods]

[QUOTE=ColdNoMore;1688203]Not good news for future (and current) retiree's.

The pressure, of course, is to bolster its stock price and thus primarily benefits the stockholders and those executives whose annual salary is based on the stock price...and hurts long time dedicated employees :(

This move has no impact on current GE retirees. GE hasn't offered a pension to new employees since 2012 (I believe). So yes... it does impact current GE employees that are on the pension plan. But GE is now contributing more to their 401K... so they are doing something to compensate employees.
Have you watched GE stock price? They barely are keeping their head above water. GE has done many things to cut costs (including cuts to executive benefits). I'm sure ALL current GE employees and retirees want GE to stay in business so that they are around to pay out pension benefits!