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Private Pension Issues
- Archives 2006 -
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Retirement
May Be Far Off, But Check Savings Now (December 31, 2006)
Sure, retirement seems to be a lifetime away, but people forget two
things. First: To live financially comfortably after retirement, you will
need to save a lot of money. Second: Each day you go to work is a day
closer to retirement and it will arrive before you realize it.
In this article, investment firms and financial planners give advice on
how to save wisely for retirement and a guide to check how you are doing
with saving for retirement.
Think
your 401(k) is Insured Against Theft? Think Again. (December
18, 2006)
Beyond statutes against fraud and theft, few protections exist
for the 401(k) accounts that are largely replacing traditional pensions.
Currently there is little or no insurance that safeguards pensions, bank
accounts and even some investments with stockbrokers.
These loose regulations can lead to millions of dollars being
stolen from a company’s retirement account. In the case of a small auto
parts company in
Tennessee
, the benefits firm they hired to manage their account mishandled $7
million of employee savings. Due to lack of protection, employees and
retirees may only get back a small fraction of their savings.
Family
Needs to Talk Money (December 18, 2006)
Financial experts urge families to talk about long-term financial
questions to help avoid crises between the generations. This article
relates Matt Cardillo's case. In his early 30s, he asked his parents about
their retirement savings because he knew he wouldn’t be able to assist
them financially. Like often happens, his parents answered they don’t
know much about long-term-care insurance and found it too expensive. But
many children find it out too late, and have to face the costs of nursing
homes. Indeed Baby-Boomers have to take such insurance seriously:
one-third of Americans older than 65 are expected to spend at least some
time in a nursing home and medical costs continue to rise.
Equity-Indexed
Annuities: Good for Agents, not for Investors (December 10, 2006)
Facing modest retirement savings, Fern Wakulich, 84, hired a financial
adviser. Without warning her, he invested her money in an equity-indexed
annuity that paid him a sizable commission while he knew that she wouldn't
be paid until after her 92nd birthday. Indeed an equity-indexed annuity
locks up the principal for 12 years at least. If the investment is
canceled earlier, the policyholder is hit with a huge financial penalty, a
“surrender fee.'' Since many financial “advisers,“ have abused older
persons like Wakulich, some States supervise this financial product with
many strict laws. They even advise older persons to invest in a portfolio
made up of Treasury notes and stock index funds, for the same result
without any fee.
PBGC
Sets Maximum Annual Benefit for Pension Plans (December 5, 2006)
The federal agency that insures private pension plans for millions of
Americans recently set the maximum annual benefit for plans taken over
next year at $49,500 for workers who wait until 65 to retire. The figure
represents a 3.9 percent increase from $47,659, which was the 2006 maximum
annual benefit for those who wait until 65 to retire. In recent years,
many companies, especially the unionized steel and airline industries,
have dumped their pension liabilities onto the PBGC, reducing such
workers’ pensions significantly.
Investor
Priorities Will Be Influx as America Faces up to a Pensions Gap
(December 4, 2006)
By 2030, as America's baby-boomer generation enjoys its retirement, the US
economy will have to support twice the current number of retirees, with
only 18% more workers. Analysts estimate that US corporate pension plans
are underfunded by about $450 billion. And of the 360 companies in the
S&P 500 index that have pension schemes, 297 will be underfunded at
the end of this year. Experts argue that demographic shifts have made the
US pensions system "functionally bankrupt." Why has the
government allowed companies to underfund pensions? The workers have been
on the job for 40 years or more. Did the corporations expect them to die
at age 65?
Ungodly
Pensions Paid to CEOs (November 22, 2006)
Two radically different worlds exist as far as pensions are concerned. On
one hand, there are the rank-and-file workers who worry about the
contributions they paid during their working lives. On the other hand,
there are the CEOs of America's 400 largest and richest corporations who
gathered in a pension-busting movement known as “Business Roundtable.”
They declared that every worker must be responsible for his or her own
retirement accounts. Companies agreed to “spend what it takes" to
switch Social Security to private pension accounts. Will those CEOs also
renounce their corporate guaranteed pension payments?
At
One Firm, Financial Crisis Crushed 401(k)s, Insurance (November 20, 2006)
The 401k is said to be one of the most secure benefit arrangements an
employee can receive. However, this is not the case for the employees at
the Diversified Corporation Resources Inc. (DCRI), a human resources
company. Employees there have experienced the horror of not having
adequate health benefits and are left high and dry with thousand of
dollars’ worth of unpaid medical bills. Additionally, the thousands of
dollars they contribute towards their 401(k) and health insurance plans
will not be accessible to them. The Department of Labor is currently
investigating DCRI for failing to forward employee contributions to the
401(k) fund. Will the current and former employees have any chance of
recovering the money they have contributed towards this insurance?
"No," Ms. Jones, a former employee, said. "It's never
coming back."
New Law Gives More Shelter to 401(k)s (November 5, 2006)
Until now, only a spouse could roll over 401(k) money from the account of
a deceased person without paying taxes on it immediately. Beginning next
year, a son or daughter, domestic partner or even a parent will be
eligible for a similar tax benefit. Due to a recently approved provision
of the Pension Protection Act of 2006, beneficiaries are shielded from
huge tax hits and can save more money over the years. This new law benefits the rich far more than the poor.
The
Savings Game: Annuities Should be Part of your Financial Safety Net in
Retirement (November 1, 2006)
As more
U.S.
citizens worry about being able to afford retirement, some economists
believe that annuitization provides lifetime income security. Debates are
ongoing whether this is the best type of savings scheme. In a typical
immediate annuity, you pay a lump-sum premium and in return the insurance
company guarantees to pay you an income for life. However, many buyers of
annuities may lose 15 to 20 percent of the value of their premiums due to
hidden costs. Still, some independent studies claim that many retirees
would do well to annuitize some of their savings.
Spitzer
Suit Accuses Company of Abuse in Insurance for Elderly and Ill (October
27, 2006)
New
York attorney general Elliot Spitzer recently accused Conventry First, a
life settlement company, of bid-rigging and other types of fraud in
acquiring more than $3.6 billion worth of life insurance policies.
Documents released by the attorney general’s office show
Coventry
executives and outside brokers detailing agreements to minimize how much
Coventry
paid to maximize brokers’ fees.
Coventry
executives disputed the charges. “This is an industry with big ethical
problems,” said Jim Poolman,
North Dakota’s elected insurance commissioner. “This business is
filled with corrupt players. And there’s a larger question: should
someone profit from another person’s death?”
Remington Freezing Pension Plans for Non-Union Employees (October 11,
2006)
Yet another company plans to freeze pension plans starting January 2008.
The Remington Arms pension will no longer increase benefit payments in
hopes of improving its cash reserves. Currently, the decision only affects
management employees. Pension negotiations with unionized employees will
begin in June 2007.
Spitzer
Aims at Another Mark: Fee Disclosure (October 10, 2006)
Amid the increasing scrutiny
regarding fees levied by 401(K) retirement savings plans, New York
State’s attorney general Eliot Spitzer, is close to reaching a
settlement agreement with
ING
Groep NV, a unit of the insurance company. Allegedly,
ING
took undisclosed fees to promote certain funds in a retirement plan for
New York
State
teachers.
The expected settlement will require that
ING
provide entirely new plain-English disclosures about total fees charged
investors. It also requires
ING
to provide new information about the payments it receives for including
other companies’ funds in its retirement plans. Without admitting or
denying wrongdoing,
ING
is expected to agree to pay $30 million to
New York
State
teachers who invested through
ING
.
In Some Deals, Executives Get a Double Payday (September 8, 2006)
In a potential leverage buyout, private-equity firms can offer
high-powered compensation to top level executives. For instance, if
management hits financial and operational targets set by the new owners,
executives can receive very attractive stock options. When the company is
recapitalized or goes public, the executives often get bonuses valued at
hundreds of millions of dollars. As a result, Spitzer
private-equity firms have notched seven of the 10 largest leveraged
buyouts of all time this year. However, shareholders sometimes revolt
against such acquisitions due to alleged preferential treatment for
executives in connection with efforts to complete a sale. Also, at a time
when companies are cutting private pensions for the majority of corporate
employees, top executives of target companies involved in such deals are
just getting richer, much richer.
Delta
gets Court Approval to End Pilot Pension Plan (September 5, 2006)
In the quest to emerge from bankruptcy, Delta Airline officials
recently terminated its pilots' defined benefit pension plan. Judge Adlai
Hardin issued his ruling allowing Delta to end the plan after DP2, a group
of about 100 retired pilots, withdrew its objection to the termination,
Delta said. The airline will pay DP2 about $500,000 for legal fees and
other expenses. More than 13,000 active and retired Delta pilots and their
beneficiaries will be affected.
After the termination, Delta officials estimated pilot retirees
will receive on average about $75,200 in annualized pension benefits. The
airline's pilots' union, representing more than 6,800 current pilots,
agreed to the move. The
termination would not affect Delta's other defined benefit pension plan,
covering about 91,000 active and retired flight attendants and ground
employees.
CRS
Report for Congress: Pension Sponsorship and Participation: Summary of
Recent Trends (August 31, 2006)
According to an updated
CRS
Congress Report, statistics have shown a steady decline in the number of
employer-sponsored retirement plans among private-sector workers between
the ages of 25 and 64. Yet,
with increased longevity rates, retirement income has become an increasing
concern to Congress and the public. According
to the report, this trend will have drastic effects on the economic
well-being of future retirees since pensions and Social Security benefits
will be paid over longer periods of time; savings will have to be
stretched over longer retirements; and Social Security benefits will have
to be financed by a working population.
(The article fails to call for greater taxation of the rich who
have benefited from recent privatization programs.)
Nevertheless the article offers a comprehensive summary of recent
pension trends.
Pensions Likely to Stay Dying Breed (August 29, 2006)
More American companies are freezing defined benefit pension plans
claiming that it costs too much to maintain them.
Since many of today’s employees are living longer, overall costs
have gone up and corporate leaders have decided to freeze pension plans
and contribute more to employee savings and investment plans such as a
401(k). For companies, there
are clear economic benefits to freezing a pension plan. Jack VanDerhei, a
professor at
Temple
University
and a research director at the Employee Benefit Research Institute, has
analyzed pension freezes and estimates a hard freeze can cut the annual
retirement payout to a worker by more than half.
While companies are finding ways to decrease costs, long-term
employees who have dedicated years of service will be most affected with
far lower pensions than they expected in retirement. Not a fair deal.
New
Law Eases Taxes On Inherited 401(k)s (August 23, 2006)
For far too long, tax headaches commonly plagued heirs of retirement
accounts due to lack of legal marital status. Prior to the new law, only
surviving spouses could transfer money inherited from a retirement plan
into an individual retirement account. Now children and any other
non-spouses can also transfer inherited funds into an IRA. This new
provision gives all heirs the ability to spread out distribution through
the years and no longer bear the huge income-tax burden. Gay-rights groups
and other organizations are celebrating the long-overdue victory.
Report: Annual 401(k) Benchmarking Survey 2005/2006 Edition (July 2006)
(PDF format, 39 p)
The survey, jointly sponsored by Deloitte Consulting LLP (Deloitte Consulting) and the International Foundation of Employee Benefit Plans and its affiliated Certified Employee Benefit Specialist (CEBS) program questioned 830 401 (K) sponsors about the plan characteristics, the rewards programs as well as about their effectiveness and the barriers they face. The findings demonstrate a rising participation level as well as faster and less restricted eligibility for the employees. Auto enrollment is also on rise while efforts to boost employee deferrals via “step-up” programs become more common. However, the survey also finds that regardless of the growth in 401(K) participation, many employees are still financially unprepared for the retirement.
Nearing
Retirement? Here's How to Ease the Transition (June 26, 2006)
Baby boomers about to retire may be thinking how to spend all the free
time they will have. They may also fear for their financial situation. In
fact, maintaining living standards may be more difficult for baby boomers
about to retire. According to a “national retirement risk index,” 43%
of US citizens will not be able to maintain the same quality of life. If
you think you are among those 43%, this article may help you ease the
transition.
As
Workers' Pensions Wither, Those for Executives Flourish (June 23, 2006)
As companies report high costs of pensions, many take measures to reduce
these costs at the expense of ordinary workers, freezing pensions or
reducing benefits. However, pension funds are often adequately funded, or
even over-funded, because of tax breaks and growth on investment. While
these pensions earn companies money, executives’ unfunded pensions
create a significant drag on earnings, reported as debt. Even so,
executive pensions are getting larger as other employees lose their
benefits. Many companies hide the reality of the high executive pension
costs in aggregate data reports and cuts to employee benefits.
Cash
for Retirement. Maintaining Standard of Living (June 21, 2006)
A new Study of the National Retirement Risk Index highlights that many
people are ill-prepared for retirement. It shows that 43% of working-age
households will not be able to maintain their current standard of living.
The author of the article suggests that those near retirement need to
determine the amount of money they will need. If it’s not sufficient,
they will likely have to consider extending their years in the workforce.
CEO’s
Salaries Raise Voices (June 19, 2006)
(Article in French)
As the employer-based pension system fades away, scandals over CEO income
rage. In France, CEO income has always been a hot topic, while Americans
have been more likely to accept high CEO income as a side effect of the
“American dream,” acceptable though hard to justify. Lately scandals
such as the one surrounding the former CEO of Vinci - who was receiving
more money than all his employees combined - have caught the public’s
attention. M. Raymond, CEO of Exxon Mobile, received about $686 million
between 1993 and 2005 - a bit less than $150,000 per day. These figures
even Americans find hard to accept. The Business Roundtable organization
stated it was in favor of “more transparency” about CEO income for the
100 largest US companies.
The
“Global Solution,” by J. Siegel (June 13, 2006)
(Article in French)
The US will soon need substantial foreign investments and radical
outsourcing in order to continuing to live with the same economic habits
over the next several decades, concludes J. Siegel in his upcoming book,
the Global Solution. The guru author of the 1990's explains that
baby-boomers will massively sell their stock shares to fund their
retirement. The value of their assets - bonds, stocks, houses – will
dramatically sink unless the US “embraces globalization.” Critics
argue that Siegel underestimates the US and misinterprets bond-selling
patterns.
Cloud of Liability Over Pension Benefit Guaranty Corp (June 8, 2006)
The Pension Benefit Guaranty Corporation (PBGC) is actually under-funded
and its situation is likely to get worse. In fact, since the country is
switching from an employer-based private pension system to an
employee-controlled one, the PBGC receives fewer premiums from
employer-provided pensions. “The number of Fortune 100 companies
offering pensions in 2005 has dropped to 37, down from nearly 90 in
1985,” the article explains. Thus, the future looks uncertain for the
nation's safety net for employer-funded plans.
Retirement Likely Will Be a Struggle for Many (June 7, 2006)
According to research published by the Center for Retirement Research at
Boston College, almost fifty percent of the American population will not
have enough income to “live comfortably in retirement.” Most at risk
are young baby boomers, the ones born after 1955. Those who retire in less
than two years from now are relatively better off. “The generation
difference can be attributed to the decline in Social Security benefits
and employer-sponsored pension plans, and the increased reliance on 401(k)
plans,” the study explains.
Fewer
Employers Offer Pension Plans (June 6, 2006)
Since only 37 out of the 100 biggest US companies still offer
employer-based pensions, the Pension Benefit Guaranty Corporation (PBGC)
is running under-funded. That’s why the Bush Administration is willing
to increase the pension premiums employers pay the PBGC. In the article,
William Arnone of Ernst & Young’s human capital group asks "Is
it any surprise they are abandoning these (pension) plans?” In fact,
employer-based plans are caught in a vicious circle that seems to predict
the monopoly of employee-controlled pension plans such as the 401(k).
New Ad Campaign Is Launched To Save Worried Automakers Retirees (June 6,
2006)
(Article In French)
Are automobile manufacturers using the plight of retirees to market more
cars? A $1 million (700 000 €) ad campaign has been launched to draw
buyers back to made-in-America brands. The ad argues that buying foreign
brands will dramatically affect the plight of retirees. Explicitly the
campaign was launched by worried retirees to raise awareness among
customers. But there is strong suspicion that the three great American car
manufacturers Ford, General Motors and DaimlerChrysler funded the ad.
When Your Company Retirement Plan Doesn't Include Socially Responsible
Funds (June 5, 2006)
“Has this happened to you? You want to invest responsibly, but your
employer's retirement plan only offers funds that don't screen out
objectionable companies. Is there a solution?” Laurent Belsie, from The
Christian Science Monitor discusses these very topical questions in a
dialogue with Rob Thomas, founder of Social(k) and specialist in
“ethical investment.”
A
Job to Do Before Retiring (June 5, 2006)
This article describes the common situation of many retirees who worked 40
years in one of the companies who either collapsed or bankrupted, leaving
the future retirees behind. On the other hand, it ironically underlines
the situation of a few legislators who are lucky enough to enjoy a full
pension after working even only a couple of term. Except that, of course,
they voted the bill that entitled them to this higher eligibility
category. Rep. Steven Nickol, R-York, “one of only a handful of
legislators who voted against the text five years ago,” the article
explains, fights against this injustice and its cost sustained by the
Pennsylvania residents.
Claim Your Pension in the “Lost and Found” (May 2006)
The AARP gives a few tips to future retirees. Look for the Pension Benefit
Guaranty Corporation (PBGC), which can help a person claim an entitled
pension from a former employee. “It doesn’t matter when you leave the
job as long as you are vested in the pension plan,” AARP explains.
Another address to keep in mind is the Pension Right Center, another
helpful organization “dedicated solely to protecting and promoting the
pension rights of American workers, retirees, and their families.”
Japanese Cars, American Retirees (May 19, 2006)
When the automobile industry expanded fifty years ago, generous
retirement benefit checks were part of the expectation of employees and
unions of the Big Three (General Motors, Ford and Chrysler). Providing
free health care and a defined pension benefit seemed cheaper than giving
workers more salary. These benefits are now a huge burden to the companies
as the number of retirees increase. For example, GM has a future pension
liability that is more than the market value of the whole company. Having
witnessed American auto companies struggle with retirement benefits,
Japanese auto makers in the U.S chose not to deal with their pension
issues in the same way.
NWA
Pension Relief Likely, Senator Says (May 12, 2006)
Since Northwest Airlines only has a few years to make contributions to
their three pension plans that are underfunded by $3.7 billion, management
and labor leaders are making every effort to get a new law passed that
will extend the timeline to 20 years. Without an extension, Northwest says
it will be forced to end company pension plans. Employees have made some
sacrifices in an attempt to preserve their retirement plans. For example,
so far in 2006, pilots agreed to shift to a 401(k) plan and extend a 23.9
% pay cut.
Survey:
Companies Move Away From Pensions (May 3, 2006)
According to a survey by the benefits consulting firm Watson Wyatt
Worldwide, just over one third of the nation’s largest 100 companies
offered a traditional pension plan to their new employees in 2005. The
survey shows a significant decrease in the number of companies offering
pensions over the past twenty years. Instead, many large companies are
shifting towards 401(k) plans, leaving each employee to take care of their
own financial future.
Aging
in Place (April 24, 2006)
Reverse mortgages are loans for retirees that require no monthly
repayments and are given against part of a person’s home equity. These
loans may help older persons live at home longer, however, reverse
mortgages have not really caught on among retirees in the US. Although the
loans promote “aging in place”, consumers need more protection.
Reverse mortgages are currently being introduced in other countries, such
as China.
Can a Specialist Help you Retire Richer? (April 24, 2006)
As baby boomers reach retirement, they increasingly turn to pension
experts to plan their investments. The large amount of funds that boomers
which to invest is attracting unscrupulous salesmen who are selling
dubious investment plans. The state securities regulators are issuing
strong warnings to baby boomers.
Georgia to Pay Back Pensions for Black Police (April 19, 2006)
In Georgia, some police officers were denied their pensions from the
1950’s to the 1970’s because of their race. On April 18, 2006, the
Georgia governor signed a bill that will allow them to get their money
back. Administrators of the pension fund admitted that although a
“formal policy to ban black officers” never existed there was “some
sort of exclusion.” While it is never too late to serve justice, most of
the police officers are now dead.
Hedonic
Behavior; Drowning in Debt (April 13, 2006)
(Article in French)
The debt bubble threatens to derail many baby boomers’ retirement plans.
Although the personal debt statistics in the US haven't changed much as a
percentage of net worth or multiple of income, the financial situation has
become more difficult. Americans now have longer life expectancies, their
retiree health costs are higher and Medicare reimbursement and interest
rates lower. Last, the deterioration of traditional pension system
threatens to make the situation even worse.
Proposed Pension Bill Opens Escape Hatch for Reluctant Providers (April
13, 2006)
Congress finalized legislation designed to counter the projected pension
financial crisis. However, unions, workers rights’ advocates and
retirees criticize the bill and denounce Washington’s intention to
reduce “government and corporate liabilities (rather) than to preserve a
source of retirement security for millions of Americans.” Although the
bill is supposed to encourage employers to cover benefits for both current
and projected future pensions, opponents argue that it will instead lead
employers to “freeze plans, [and] make it less likely that new plans
will be formed,” explained Dallas Salisbury, president of the think tank
Employee Benefit Research Institute.
CEO Say Delphi Can Save Pensions (April 13, 2006)
Delphi Corp. Chief Executive Steve Miller, who rattled the auto industry
last Friday with a sweeping restructuring plan to eliminate more than
23,000 workers, defended his actions while expressing a desire to protect
pensions in a speech Monday before the Detroit Economic Club. Workers who
attended the speech doubted Miller’s sincerity and continue to worry
about their pensions. Indeed, Miller added, “it is essential that the
restructured Delphi be a robust enterprise.” Stay tuned.
Save Yourself (April 11, 2006)
Planning your retirement and starting saving plans when you are 30
years old may still sound early. However, US studies and surveys show that
some young families that earn middle to high salaries are starting to
prepare for old age on their own. Unfortunately, persons who earn low
wages have a difficult time saving as their salaries can’t cover the
relative high costs of housing, food and other essential expenditures.
In this article New York Times’ David Leonhardt analyses the
advantages and ways to save at an early age.GAA suggests raising the
minimum wage and low wage salaries as a way to encourage savings among the
poorest.
Retirement:
Great Expectations, No Preparation (April 4, 2006)
Financial forecasters predict that a large number of future retirees will
not be prepared for their retirements. Employee Benefit Research report
found that among those who are confident about retirement only 22 % are
currently saving for it and 39 % have $50,000 or less. The report points
out that many workers do not have a realistic vision of retirement; many
use their parents as examples and most of their parents have pensions and
health care benefits to rely on. The percentage of current workers who are
saving for retirement is up, the study points out, and new pension plans
in Congress may change future retirees outlook for the better.
CEO
Says Delphi Can Save Pensions (April 3, 2006)
The CEO of Delphi Corporation, Steve Miller, recently defended cutting
23,000 jobs as necessary to maintain the solvency of the company and to
maintain the company’s pension obligations. Miller is continuing to
fight an uphill public opinion battle to prove that his actions are indeed
better for the company and its workers. Those that disagree with Miller
range from the labor union members affected by his policies but also
include Gov. Jennifer Granholm of Michigan and General Motors President,
Rick Wagoner. It seems clear that Miller’s drive to win over public
support will fall flat.
House
Leader Says Pension Bill Stalled (March 30, 2006)
The highly anticipated US pension reform bill is still locked in Congress.
As the legislators begin their two week spring recess, House and Senate
negotiators continue to discuss the bill. The author claims that the
debate focuses on companies with bad credit, such as the three major auto
companies, and whether these companies should be required to “put
considerably more money into traditional pension plans once they get bad
credit.”
The Bush Administration wants troubled companies to fund their pension
programs fully before they take bankruptcy rather than unloading the
pensions on the federally-sponsored Pension Benefit Guarantee Board.
Retirees
getting caught in the income trap (March 27, 2006)
(Article in French)
“More stocks, less bonds.” US financial advisers are currently
repeating this mantra. As retirees over-invest in bonds to secure a good
short term income, they risk jeopardizing their future wealth. Although
stocks are more volatile in the short term, they generate more wealth in
the long term. Faced with high interest rates, taxes and high inflation,
boomers should consider their long term investments more seriously.
Pension Agency Seeks Outside Legal Advice on GM (March 24, 2006)
The Pension Benefit Guaranty Corporation (PBGC), a government agency that
insures corporate pensions, asked for private legal advice on GM’s
situation. Bankruptcy was suggested among the possibilities. Indeed, the
company is in deep financial trouble. As the article explains, the last
time the PBCG asked for private legal - for the United Airlines’
bankruptcy case - United ended up “terminating its pension plans.” In
fact, GM claims its pensions are over funded although two other estimates
(including one by the New York Times) reported that GM pensions were under
funded.
Buyout Feels to Them Like Being Sold Out (March 23, 2006)
GM is ready to pay its employees as much as $140,000 to leave the company,
“in some cases, without healthcare,” the article explains. Although
many employees are ready to fight the buyout, United Auto Workers offices
are busy receiving phone calls from employees accepting the offer. Indeed,
GM is hoping to shrink their labor force by 30,000 employees, to stay
competitive. There is no such a thing as the “blue-collar upper
class,” an employee asserts. The “golden GM pension” that attracted
so many workers to the company is no longer a reality. The auto industry
employs about 930,000 factory workers in the US and “strike” is a word
that some of them have had in mind for the last few months.
As Companies End Their Traditional Pensions, Workers Are Left out in the
Cold (March 2006)
In its latest bulletin, AARP published the story of Margo Bryerton, 56, a
Verizon network service manager. Ms. Bryerton explains that if she retires
at age 65, as she had planned earlier, she will lose $300 000. Verizon
announced last December that it would freeze its pension plans after June
2006. Ms. Bryerton has to think over the retirement age she had
anticipated and needs to keep contributing to her 401(k) plan but won’t
have enough time to catch up with the pension she expected. The pension
reform currently reviewed in Congress won’t help people in Ms.
Bryerton’s situation. Indeed, “the legislation could give less
protection to workers and more to the Pension Benefit Guaranty Corp,”
AARP says.
Why Are Healthy Employers Freezing Their Pensions? (March 2006)
This study reviews the major pension freezes of the last two years and
explores the impact on employees at different stages in their careers. It
also offers different explanations why employers are shutting down their
plans. First, some US companies are cutting pensions to reduce workers’
total compensation in the face of intense global competition. Second, some
employers have been forced to cut back on pensions in the face of growing
health benefits to maintain existing compensation levels. Each of these
explanations is highly documented and helps explain the current trends in
pensions.
Pension Concerns? Five Ways You Can Take Action (March 2006)
If you happen to have pension concerns; here are five tips to change your
worry into action. Among them: where to find out about your rights, how to
get in touch with the pension changes. Stay informed and get some control!
Pension Reform Politics (March 26, 2006)
This New York Times editorial targets the critical pension reform
legislation currently in Congress. It says that the reform bill offers
changes “worse than worthless.” To insure that companies contribute
enough money to their pension plans, the bill planned a 7 year phase of
transition for the firms to step up their contributions. On the other
hand, Republican Representative John Boehner suggested a “super-slow
phase-in” that is now part of the House bill. This would weaken the
reform. There is still time to make you r opinion known with your
legislators.
Inherit the Wind; There's Little Else Left (March 26, 2006)
According to most economists, baby boomers are not well prepared for their
retirement. Chances are that they will have to face the erosion of the
classic pension systems. But the baby boomers should not plan on their
parents’ inheritance to help them out. According to the article, most
retirees will not inherit much due to the increase in their parents’
life expectancy. Most people over eighty will spend a huge portion of
their savings on nursing home stays or healthcare, leaving little to their
heirs.
System Freeze for Unisys Pensions (March 23, 2006)
Unisys announced that beginning next year it will stop accruing future
benefits to its defined benefits plans and will close them to new
participants. But Unisys isn’t alone in such actions.
IBM
, General Motors and Verizon recently froze their pension plans as well.
Working For a Good Retirement (March 22, 2006)
When people work longer, they produce additional goods and services for an
economy. They also earn more income and usually save some of that income.
At the same time, they create a positive effect on Social Security
deficits by delaying their receipt of government benefits, and, quite
importantly, paying more taxes. This report offers a new vision of the
wide range of advantages of the effects from additional work, both at a
macro and at an individual level. Among them, at the macro level, the
Social Security earnings generated from just one additional year of work
are almost equal to the entire Social Security shortfall predicted for
2045.
A Plan, With Security (March 22, 2006)
This Philadelphia Inquirer editorial suggest ways that the US Social
Security system could be strengthened. It proposes a five step plan. As a
first step: increasing the wage base taxed by Social Security. Then,
dedicate a limited estate tax to Social Security and switch to a new way
of calculating cost-of-living increases. The fourth step would be to index
benefits to adjust for increasing life expectancy. And finally, add new
employees from state and local government to the Social Security system
diverting them from other plans.
Relief for Retirees on Wall Street? (March 22, 2006)
The columnist sums up the current discussions about the 2005 Pension
Protection Act in Congress with the question:
Does the proposed Pension Act intend to help primarily pensioners
or hedge fund managers? Two versions of the bill now exist, each supported
by different lobbies. Pensioners’ advocates fear that when converting
traditional pension funds into regular bond funds, stock markets will
strengthen the pressure on companies. The stock markets might well decide
who will get what pension.
GM
Offers Workers Up to $140K to Leave (March 22, 2006)
General Motors is offering over 100,000 United Auto Workers a buyout for
nearly $140,000 if they have been working for the company for at least 10
years. GM’s deal depends on workers giving up their retirement health
benefits, a cost GM says it can no longer afford. GM also has obligations
to the Delphi UAW members of UAW and plans to offer them a buyout plan
later this year. GM has contractual obligations with workers until
September 2007. After that date GM intends to close a large number of auto
factories and throw its workers out of jobs.
Chrysler
to Change Health Plan for Salaried Employees, Retirees (March 20, 2006)
Daimler Chrysler has announced tremendous changes in the health plans
affecting its 14,900 active workers and about 17,600 retirees. Beginning
next year, premiums for health benefits will be re-scaled according to
salary; top executives will receive a 100% premium. Like other carmakers,
Chrysler faces intense competition in the car market, in a time when
health costs are soaring (Chrysler had doubled its health expenditures
since 2000). Chrysler also plans to cut 6,000 administrative jobs by 2008
to increase its profits. In
many other industrialized countries, tax-supported national health care
permits all companies to operate far more cheaply and all citizens to
access health care.
Major
Changes Raise Concerns on Pension Bill (March 19, 2006)
With a strong directive from the Bush administration, Congress set out
more than a year ago to fashion legislation that would protect America’s
private pension system, tightening the rules to make sure companies set
aside enough money to make good on their promises to employees. But most
companies, either financially weakened, are pretty reluctant to obey the
directive down to the letter.
To Draw Pension, Some Must Hunt for It: Sleuthing, Challenges Help Recover
Millions (March 14, 2006)
Most workers rightly believe that when they retire they will receive their
pension benefits. However, a number of retirees are not able to claim
their benefits because their former companies were sold and the funds are
no where to be found. Missing records and a lack of resources to pursue
legal battles against employers prevent older persons and their families
from obtaining such pensions. This Boston Globe article illustrates the
story of a widow who did not give up until she claimed her husband’s
monthly pensions. A free counseling program from the University of
Massachusetts provides services for persons dealing with complex pensions
issues.
Do
the Math for Lost Pensions (March 12, 2006)
As many large US corporations shed their defined pension benefits and
switch to contribution-based 401(k) plans, many workers are going to need
to invest more. One researcher discovered that those with defined pension
benefits that have been switched to 401k’s will need to save an
additional 20 % to retire at the level they would have enjoyed with the
defined benefit. This article provides a glimpse into the limitations of
401(k)’s and options for workers to save more with new retirement plans.
Few
U.S. Seniors Working; Most People Retire by 65 (March 10, 2006)
Although US life expectancy has increased in the past few decades, the
average retirement age is now 65 years, much younger than a few decades
ago. But many of the oldest baby boomers, reaching 60 this year, have
already left the work force. Meanwhile, US private pensions have been
collapsing as companies take bankruptcy. The prescription drug plan in
Medicare (that benefits pharmaceutical company profits) is unsustainable,
the article says. For those who retire now, $1 million saved in a
retirement account is not much if they expect to live another 20 years.
GM Retirees Fight Benefit Cuts (March 7, 2006)
To the dismay of many retirees, an agreement reached last November between
General Motors Corp. (GM) and United Auto Workers (UAW) to address the
rising health care costs of employees is getting close to federal
approval. The agreement is designed to cover retiree health care costs for
the next twenty years for an extra dollar a day out-of-pocket on top of
what retirees already pay. Supporters say an extra dollar is trivial while
critics argue that this agreement is not a guarantee, nor does the
agreement acknowledge promises made by GM to cover retiree health benefits
since 1980.
State
Employees’ Pensions Might Carry Big Price Tags (March 6, 2006)
Pension benefits for Pennsylvania lawmakers, active state employees, and
teachers increased in 2001. When the pension change takes place in full
force in 2012, taxpayers may have to pay billions to support this new
scheme. There is discussion about changing the defined-benefit system to a
defined-contribution plan which many large corporations have done.
Currently the state employee’s system uses 4% of its payroll costs to
fund pensions but by the year 2012, it could grow to 23.5%. State workers
expect these pension and health care benefits but other fear that the
State faces unaffordable costs. A collision course!
Chicago Fed's Moskow Warns of Public Headaches (February 28, 2006)
Michael Moskow, president of the Chicago Federal Reserve Bank, stated that
declining populations and a growing proportion of older persons pressures
the public pension systems throughout the region. "As a result, state
and local pensions in the Midwest are much like the legacy costs that
domestic automakers face," he said, according to the prepared text of
his speech. "They are a financial burden that may hurt the
competitiveness of these states and cities in the future." Moskow
wants the public pension systems that currently cover 90% of public
employees in the region to dump these obligations as have the private
firms. These public pensions represent deferred wages and the State has
guaranteed them. Will the poor investment and planning of public officials
condemn public workers in the Midwest to poverty in old age?
SAVER
Summit Attendees Urged to Address 'Often Overlooked' Issues (February 28,
2006)
"People are often surprised to learn that 58 percent of the American
workforce will depend solely on Social Security or their own personal
savings to fund their retirement," says Larry Mitchell from the
American Corn Growers Association, one of the delegates to the SAVER
summit. SAVER urges the US Government to create incentive measures to
persuade workers to save money for their retirement if they don't
participate in employer-based retirement plans. It's not just about
saving, say the summit attendees; it is also about knowing how to save.
Increasingly,
the Home Is Paying for Retirement (February 24, 2006)
Reverse mortgages, a way to borrow against the value of your home, are a
growing trend among seniors trying shore up losses from pension plans and
the stock market. Many seniors are turning to their homes to pay for their
retirement. The reverse mortgage is a loan from the mortgage company,
usually a portion of the value of the home, which is paid back with
interest when the owner sells or dies. A new Federal survey found that
over 95% of those Americans in the 55 to 64 age bracket only have 1.5
times their median annual earnings saved, meaning many might borrow on
their homes. Experts say that retirees should have savings amounting to
five times their annual income to finance their retirement years.
Playing
With Pension Reform (February 23, 2006)
Many US companies are abandoning their traditional employer-provided
pension funds. Rather than hanging their hands in shame at such actions,
executives of bankrupt US national airlines are lobbying Congress for
exemptions from funding their pensions. If adopted, this policy could
rapidly spread to other employers and the workers would be big losers.
Another plan would make it easier for companies to hide their pension
troubles. Will this Congress stand firmly behind the workers who have lost
much of their deferred retirement wages? Or will it cave in to the wishes
of the corporations that bankroll their political campaigns?
Public
Pensions Press State Budgets (February 23, 2006)
The Standard and Poor Corp. warns that the public-employee pensions are
starting to cause state budgets to run dry. The state pension plans fell
short $284 billion in 2004. Due to various reasons, funding levels fell
and there is a good chance that it will fall some more. With the declining
pension fund assets and the rising liability which in turn will result in
the contribution of more money, the state and local government will need
to set aside some funds to pay for their retirees' health benefits.
The Earnings Suspense File: Social Security's "Secret Stash"
(February 22, 2006)
As the technology age marches on, identity theft continues. Misused or
stolen Social Security Numbers and their subsequent earnings go into the
Social Security Administration's Earning Suspense File. This account holds
almost $520 billion and continues to increase to the tune of $6 billion
each year. As critics and supporters of Social Security debate the newest
proposals to fix its faults, the Earning Suspense File continues to exist
quietly with little oversight.
Put
More Stock in Retirement (February 21, 2006)
With more and more aging baby boomers looking forward to retirement, many
are re-focusing their energies on their retirement strategies. One part of
most retirement strategies is investing a certain amount of money in
stocks, analysts say around 30 % of your portfolio. Money Magazine urges
retirees to consider a higher percentage-start off with 40 to 60 percent
in stocks. The advantage of having a portion of your retirement invested
in stocks is that the higher returns of stocks allow you to maintain your
savings at a higher level. The goal for retirees should be to find the
correct balance of stocks and savings to have a comfortable retirement.
Boehner's
election seen as boosting pension reform (February 21, 2006)
As House Majority Leader John Boehner settles into his new leadership
position this spring, pension reform continues to be one of his top
priorities. Many analysts consider pension reform to be one of
Boehner's top priorities. Boehner's approach is to, "to walk a fine
line between those who want suffocating pension rules and those favoring
the status quo, which has led to huge pension underfunding." Hopefully
Boehner and his fellow legislators can strike a fair deal for all parties
concerned.
Automatic
IRAs -- a Quick Fix for Workers Without Pensions? (February 19, 2006)
Baby Boomers face a startling reality in 2005: Many of the defined pension
plans they relied on might not be around when they retire. The trend of
companies ditching or converting their pension plans to programs that
provide less security caught on in the business world during 2005. Even
more worrisome are reports that some 71 million Americans will be relying
solely on Social Security as they enter retirement. One solution, offered
by John and J. Mark Iwry of the Brookings Institute, is to create
automatic IRA's. The details of the plan are very simple because companies
already withhold wages for taxes and this would just be another deduction
from the workers check.
Bush
Seeks to End Retirement Penalty for Part-Time Service (February 13, 2006)
As part of his proposed Federal Retirement Improvement Act, President Bush
wants to spend over $85 million on federal retiree initiatives over the
next 10 years. They include removing penalties on annuities for federal
workers who transition from full to part time work status and increasing
the amount workers can contribute to their Thrift Savings Plan from cash
bonuses.
Bush Seeks Upgrade of Retirement Benefits Processing (February 10, 2006)
President Bush's new 2007 budget proposal includes almost 27 million
dollars to modernize the federal retirement system. The money that Bush
has proposed to spend on modernizing the system will attempt to improve
the speed and accuracy in processing claims. Additionally the funds will
go toward transferring paper files to electronic records. The Office of
Personnel Management that manages the system believes that the funding
will allow them to calculate benefits for new retirees in five days or
less. Wait and see!
Pension Peril: Securing Income for life (February 9, 2006)
In the Ice Age of defined pension benefits, it's important for workers to
have a plan to make up the losses in retirement income that they will
suffer due to the switch to a 401 (k). This article details how a worker
can try to reduce those losses by adopting different investment ideas. It
also takes into account important elements: marital status, sex and your
employer.
Benefits Go the Way of Pensions (February 9, 2006)
General Motors was often called "Generous Motors" because of
their excellent benefits package. But with pricier health-costs and
stricter accounting rules that make companies report their earnings more
honestly, it makes it more difficult for companies to live up to their
social or union contracts with retirees. Today GM has capped its
contribution to healthcare plans for nonunion retirees and does not even
offer retirement health insurance for those hired after January 1, 1993.
Companies that still do offer health insurance are trimming plans in many
ways to cut costs by requiring higher premiums, or increasing co-pays and
deductibles.
GM's
Decision to Cut Pensions Accelerates Broad Corporate Shift (February 8,
2006)
GM has stopped offering retiree health coverage to salaried workers hired
after
January 1, 1993
, and capped health-care spending for the year 2006 which will save the
company $900 million a year. They will also revise pension benefits to
"reduce the financial retiree responsibility." Many other firms
are following in GM's footsteps including Nissan Motor Co., International
Business Machines, Verizon Communications, and Circuit City stores. Among
companies with more than 200 employees, only one-third offer retiree
health benefits. Experts say that the reason for these changes to pension
schemes is not solely the fault of the company. The pension systems were
created years ago when health-care was cheaper and human life-spans were
not as long as they are today. Will the companies get behind a universal
health care program for the US to protect their retirees? Or just continue
to complain that their retirees are living too long?
GM
Plans to Slash Dividend, Sets Other Cost- Cutting Moves (February 7, 2006)
In efforts to win a future for the company, GM has decided to make more
changes to compete with other auto manufacturers. Not only are executive
salaries cut, so are the health benefits for salaried retirees in order to
reduce GM's yearly cash payouts. The board is also reevaluating and
changing the pension plans for salaried US workers. By 2007 GM hopes to
cap contributions to salaried retiree health-care which is predicted to
reduce its liability by $4.8 billion and cut GM's annual
retiree-health-care expenses by $900 million a year. A
defined-contribution or cash balance plan might be on the agenda to
compensate for these cuts.
Elderly
Iowans May Get Tax Cuts (February 6, 2006)
The elderly of Iowa may be in for some good news.. The Republican House
voted unanimously for a $280 million tax cut for the elderly along with a
five year phase out of the state tax on Social Security and pension
income. At issue is whether or not the State can make this tax cut and
also increase school funding up to 6%. Both measures have great support.
US
Moves to Seize Pension Fund in Dispute with Renco (February 3, 2006)
The Remco case addresses a number of important pension issues
regarding the responsibility of corporate parent companies to their
bankrupt satellite companies. In a complicated legal case the Pension
Benefit Guaranty Corporation, the United States Federal insurer, filed a
motion in bankruptcy court to seize the pension fund of WCI steel in a
dispute with its corporate parent, Renco Group. The
US
government filed the motion in an attempt to require the Renco Group, the
corporate parent of WCI steel, to fulfill the now bankrupt WCI's
obligations. In a stipulation
filed in bankruptcy court in Ohio, Renco Group acknowledged its cash
assets would cover the 2,000 workers of WCI steel.
Feds
Take Over
Rhodes
' Pensions (February 2, 2006)
The United States federal insurer, The Pension Benefit Guaranty Corp,
announced recently that it had taken over the pensions of almost 2,000
former employees of the bankrupt Rhodes Inc. Rhodes Inc. operated at chain
of retail furniture stores and was based in Atlanta. PCBG announced that
it would become the trustee of
Rhodes
after the company announced that it had sold all its substantial assets.
It found no purchaser to assume responsibility for the pension
fund.
Pension
Board to Trim UAL Stake But Still to Pay Most Legacy Costs (February 1,
2006)
The Pension Benefit Guaranty Corp has announced it will soon sell about
half of its 20% stake in
UAL
Corp (which is the parent of United Airlines). After reorganizing, the
UAL
will start trading its shares in the stock market on Thursday. With some
stock sales and other funds the agency is receiving from its shareholders,
the agency will have recovered more than 70% of each dollar that they had
lost. A plan is still being worked out so that the agency will not have to
dump the shares into the open market all at once which would risk a
potential price drop. PBGC will continue to pay most of
UAL
workers and retirees a full pension but some will be taking major cuts
also because PBGC caps its maximum payouts.
Northwest
Gets OK to Freeze Pilot Pensions" (February 1, 2006)
The last major airline to provide defined pension benefit plans to
its workers shed its responsibility in bankruptcy court today. As
Northwest Air continues to restructure its company in bankruptcy court,
the switch to a defined contribution plans was the next step in attempting
to decrease overhead. The announcement comes after a January 12 agreement
with the Pilots union that agreed to switch to a contribution plan to save
their jobs. "Freezing
the plan is the lesser of two really bad evils," said David Field,
Americas
editor of Airline Business, "including abandoning the plan like
several of NWA's competitors have done."
Does
Working Longer Make People Healthier and Happier? (February 2006)
With an increase in life expectancy, the declining role of Social Security
benefits, the gradual transition to 401 (k) plans, and the low levels of
personal savings, will the older population survive financially if they
retire at age 60? Read this report to see the analysis done on the
physical and psychological state of working older people.
Congress
Is Split on 401(k) Advisors (January 31, 2006)
With the freezing and termination of company pensions, the primary
retirement source for millions of Americans is the 401(k) plan. The Senate
has decided that it will continue to ban direct advice from firms to
employees to avoid employers favoring their own funds. However the Senate
does urge companies to hire a separate neutral party to advise employees
where to invest their money in hopes that there will be less legal
problems. This new bill will state that "if companies hire advisors
who are independent and qualified, and who are properly monitored,
sponsors can't be held liable for the quality of the investment
advice." AARP is opposed to this arrangement citing the flood of
recent corporate scandals.
AARP
Gives Free Aid to Elderly Taxpayers (January 30, 2006)
The AARP offers the country's largest free tax counseling and preparation
for tax paying seniors. Mostly older women seek help because their now
deceased husbands took care of the finances. Often the widows don't know
how to file taxes. The volunteers will do a paper return as well as file
an electronic form. Among the volunteers, Diane Flook is a 21 year old
senior at Corning, New York, studying income tax preparation. She enjoys
working with older persons and offering them help. Not only can she see
that they depend on her but she also sees their joy in interacting with
younger people.
The
Golden Years: Travels, Hobbies and a New Job, Too (January 29, 2006)
Many Americans look forward to retirement as their golden years:
relaxation, travel and more time with the family. But it seems that every
day another corporation is freezing its pension plans and replacing it
with a less secure retirement package. One alternative for many retirees
is to head back to work to subsidize their now un-secure retirement. A
study compiled by the Labor Bureau found that one-fourth of workers in the
65-74 age bracket are working compared to one-sixth two decades earlier.
Instead of taking that Caribbean cruise, many retirees have to work to
support their "retirement."
Pension
Worry Piles Pressure on American Consumers (January 28, 2006)
As the first baby boomers reach retirement age this year, the safety of
their pension plans worries them. With major corporations shedding defined
pension plans and switching to 401(k) contribution systems, the security
that many corporate workers once had seems to be vanishing. A study from
the Pension Benefit Guaranty Corporation, the federal insurer, found that
1 in 10 defined pension plans has now been frozen. Sadly, corporations are
switching to 401 (k) contribution plans that will require a much greater
savings (about 12%) to match the lost pensions. And, 401 (k)'s contain a
lot more risk for workers to manage during their employed years.
Congress
Seeks to Rein in Special Executive Pensions (January 25, 2006)
Congress is working on a new bill to block top executives from receiving
fat retirement packages when the company and its employees are financially
unstable. This bill will forbid companies from setting aside special
pension benefits for the corporate brass if pensions for other employees
cannot be properly funded. Why should there be a double standard? Those
who do not abide by this new law will face tax penalties. This bill is
expected to be sent to President Bush before mid-April for the final
approval. Officials are keeping in mind an unintentional drawback that
this bill could cause companies and all employees, i.e., it could mean
terminating the defined-benefit plan altogether.
More
Companies Drop Pensions (January 24, 2006)
In today's society, we can't rely on income support in old age to support
us. With bankrupt airline companies and even healthy companies cutting
away pensions for their employees, the new generation is swiftly moving
towards a "self-funded" retirement. Workers need to become
educated with their 401(k)'s and other sources to saving for retirement.
Experts offer some good advice in investing in one's 401(k) savings and
suggest other readings for more detailed information on how to go about
investing in the most beneficial way. In many ways, companies have robbed
their workers of their deferred wages set aside in retirement funds. But
no company executives are going to jail for this hold-up.
Tension
Over Pensions: Can They be Saved? (January 23, 2006)
With the continuing trend of companies freezing and/or terminating their
pension schemes and replacing them with a contribution to each
individual's 401(k) plans, what will happen to the nation's retirees? With
the social security pension value decreasing, Medicare premiums and
retirement age rising, the bottom third of pensioners will be poor. In
order to save up for an adequate retirement income, workers need to
contribute 12% of their pay over their entire career. Edward Wolff, an
economist at New York University, suggests reducing the risk of poverty
with a national "portable" plan so that employees can take their
savings from job to job.
Many
Americans Are Unprepared For the Costs of Aging, Poll Shows (January 23,
2006)
A recent survey of almost 3,000 people shows that 39% of US senior
citizens don't expect to be prepared financially for potential long-term
care. The great majority has not made any saving or long-term plan as a
preparation for their care in old age. More, two out of five US adults
plan to receive the help they might need from their siblings. "This
indicates an element of denial," says Anne Aldrich, senior vice
president at Harris Interactive.
With
Pensions Waning, Workers Save. Is It Enough? (January 19, 2006)
As companies freeze or terminate their pension programs, experts encourage
workers to start saving for their retirement funds. Many young workers are
not saving. Among the few that are, they are making poor choices. Experts
suggest investing in a "life-cycle fund." These funds hold
mutual fund assets containing a number of stocks and bonds matched to the
worker's age. Today workers don't have to participate in retirement saving
plans. But experts say investments should be mandatory due to the very low
savings rate in the US where 65% have lifetime savings of less than
$50,000.
Changing
Paradigm for Pensions (January 19, 2006)
As large companies across the US drop their pensions, public pensions have
come under attack. While New York State's public schools are in
"excellent financial shape," many want to replace the defined
benefit pension system with private savings plans that require little or
no contributions from the employer. Many educators traded low wages for
their retirement security. Experts say that women, small school districts,
and math and science classrooms will be affected most if pensions are
discontinued. And it will be hard to attract new teachers. Already New
York States does not have an adequate number of teachers. About 30 percent
of K-12 teachers will retire over the next 10 years. Thankfully for
employees of New York State only, there is a clause in the state
constitution that says, once a pension is implemented, it cannot be
reduced. The main question for future employees remains: Is a secure
retirement a vanishing dream?
401(k)s
Won't Stop the Impoverishment of Retirees (January 18, 2006)
As powerful companies end defined pension plans, many major corporations
pretend that they've found an alternative for their workers. The most
popular: a 401(k) plans. This Labor Research Association article discusses
some of the major problems with 401(k) plans for workers. Most
discouraging to workers is LRA's conclusion that 401(k) plans are much
more risky and less secure than defined pension benefits.
CEOs
Cut Pensions, Pad Their Own (January 18, 2006)
Recently
IBM
and Alcoa announced that they could no longer offer pensions to new hires
and would freeze all other defined pension plans. Both companies planned
instead to divert money to 401(k) plans that are less generous than the
defined pension plans. While each company cuts pension costs to benefit
their shareholders, the management and CEO's are giving themselves a pat
on the back with large increases in their pay packages. This article
illustrates how CEO's continue to pad their packages while cutting the
average workers' retirement plans. Call that fair?
Pensions
for Civil Servants Race Higher: Haves vs. Have-Nots as Private Plans Die
(January 18, 2006)
The federal, state and local governments have continued to improve public
pensions, long considered the most secure and reliable. As major private
companies freeze defined pension plans and sometimes cut them all
together, the public system continues to increase the security of their
plans. One study found that average benefits for state and local workers
grew by almost 37% from 2000-2004. While these plans make it easier for
public servants to retire, some worry that about growing inequity between
the public and private sector retirees.
Retired
Black Cops Pressure Georgia for Pension Equity (January 16, 2006)
Howard Baugh, 81 years old, is a retired black police officer of Atlanta,
Georgia. He grew up next door to Martin Luther King, Jr. and recalls times
spent with King's family. Baugh is in the process of fighting the State of
Georgia for the same pension benefits as his white co-workers of that era.
Because the white officers were able to join the state-backed supplemental
retirement fund, they now receive $700 more than what Baugh receives each
month. When Baugh and other fellow black officers did apply, they received
letters of acceptance but soon after a second letter revoking their
statement stating that they are not taking any more applicants at the time
or even just blatantly stating that they were an "all white
organization."
When
the Nest Egg Cracks: Financial Consequence of Health Problems, Marital
Status Changes, and Job Layoffs at Older Ages (January 2006)
Read this research study from the Center for Retirement Research at Boston
College which examines the different issues that endanger financial
security for older people. Poor health, losing the ability to take care of
oneself, and losing a spouse are a few issues that are examined closely.
Citizens and the government need to prepare for these possibilities.
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