GE freezes pension benefits for 20k employees • Hacker News Board

Re: GE freezes pension benefits for 20k employees

#41

Post by joeyrideout » Mon, Oct 07, 2019, 2:17 PM UTC

lotsofpulp wrote: post #30

joeyrideout wrote: post #22

An important distinction to make with GE is that most of their pension plan is "defined benefit" as opposed to "defined contribution". The latter is much more common nowadays because it avoids these massive long-term obligations to the company. EDIT: Added "most of". A percentage of their employee base has already transitioned to defined contribution.

In the US, "pension" typically means a defined benefit pension.

Not any more... "The percentage of workers in the private sector whose only retirement account is a defined benefit pension plan is now 4%, down from 60% in the early 1980s. About 14% of companies offer a combination of both types." [1]

[1] https://money.cnn.com/retirement/guide/pensions_basics.money...

Re: GE freezes pension benefits for 20k employees

#42

Post by chrisseaton » Mon, Oct 07, 2019, 2:17 PM UTC

lotsofpulp wrote: post #21

eternalny1 wrote: post #15

Keep in mind this comes on the heels of the Madoff whistleblower saying GE is a fraud: https://www.barrons.com/articles/ge-insurance-fraud-madoff-w... They piled up massive losses in their insurance division (long term care) and guess who gets slammed because of it? The workers.

I doubt it, defined benefit pension plans don't make financial sense in the current climate. Who is able to predict which company will be around in 30 to 60 years in the future, and what the economic climate will be? And much of the pension fund investments are going to the same place as 401k money anyway. Why not directly invest in VTI and skip paying all the pension fund managers and staff? It's not like they have…

I wouldn’t even agree to getting a defined benefit pension these days - why wouldn’t you want to invest your own money instead of letting one company you happened to work for control your pension?

I have a defined benefit pension from a previous employer and frankly I count it as zero in my financial planning since I have no idea if it’s actually coming or not.

Re: GE freezes pension benefits for 20k employees

#43

Post by lotsofpulp » Mon, Oct 07, 2019, 2:17 PM UTC

sesuximo wrote: post #32

mschuster91 wrote: post #9

... and this is why pension schemes should be managed by the government or at least tightly regulated. Just imagine GE going bankrupt - who's gonna pay the pension, then? The government in a bailout or what?

At least in the US, what you describe is reality. Pensions are regulated heavily (you may disagree with the few legal flexibilities though). And they are at least partially insured: https://www.pbgc.gov/ Maybe the PBGC will go under? Who knows.

Non taxpayer funded defined benefit pensions are regulated.

Taxpayer funded defined benefit pensions have zero regulation. Because they have the power to tax.

And there is a bill currently worming it's way through congress to bailout PBGC (although they don't say it directly):

https://www.govtrack.us/congress/bills/116/hr397

https://burypensions.wordpress.com/2019/01/09/butch-lewis-ac...

Re: GE freezes pension benefits for 20k employees

#44

Post by rmah » Mon, Oct 07, 2019, 2:17 PM UTC

twodave wrote: post #7

Do pension funds rely on a growing population in order to sustain themselves? I wonder whether they'll see a resurgence as the baby boomers die off and the age distribution in the U.S. becomes more uniform, or if these sorts of plans are a thing of the past.

Most public (i.e. government) "pension funds" are not pension funds, they are welfare benefits programs for retired people. That is, they are not primarily funded through individual savings or investments but through current taxes. The US Social Security system, for example, works this way. While excesses are "invested" in US government treasuries, this is really just a delayed tax obligation. And while the SSA may provide you with a report about your "account" -- complete with contributions, balances and anticipated payouts -- it's mostly meaningless as your benefits are not contractually tied to past contributions. They are instead only related by regulation, but those regulations can be changed at any time.

The article is about GE's pension fund, which is separate and distinct from the US government "pension fund" (the social security system). It is also not a 401(k) or similar fund, those are tied to individuals and managed by a third party. Many larger and more established companies and organizations in the US have pension funds similar to GE. They are typically defined benefit funds, as opposed to defined contribution funds. Defined benefit means that the amount of the pension is defined up front and does not depend on investment returns during the lifetime of contributions. This obviously creates problems if returns are not as good as projected and provides a temptation for companies to put less into the fund, hoping that future company growth will make up the difference. Many companies have succumbed to this temptation, GE among them it seems.

Without even looking at the details of the GE plan, I strongly suspect there will be multiple lawsuits over this action. On the other hand, it's a bit surprising that GE could unilaterally take this action without the buy-in from various unions, so maybe they pre-negotiated it ahead of time.

Re: GE freezes pension benefits for 20k employees

#45

Post by spo81rty » Mon, Oct 07, 2019, 2:17 PM UTC

kpmcc wrote: post #27

And while they cut pension benefits, this is what the CEO makes: https://www.cnbc.com/2018/10/05/new-ge-ceo-larry-culp-inks-s...

It says his compensation is largely tied to company stock performance. He is not guaranteed all of that money. He and the company have to perform.

Re: GE freezes pension benefits for 20k employees

#46

Post by rayiner » Mon, Oct 07, 2019, 2:17 PM UTC

eternalny1 wrote: post #15

Keep in mind this comes on the heels of the Madoff whistleblower saying GE is a fraud: https://www.barrons.com/articles/ge-insurance-fraud-madoff-w... They piled up massive losses in their insurance division (long term care) and guess who gets slammed because of it? The workers.

Yes, GE lost a bunch of money in purpose so it could screw over workers.

Re: GE freezes pension benefits for 20k employees

#47

Post by zaphod420 » Mon, Oct 07, 2019, 2:18 PM UTC

ishansharma wrote: post #24

zaphod420 wrote: post #20

Earlier quoted context omitted.

This is good for Bitcoin.

Can you explain further? I’m curious how Bitcoin benefits from it?

The comment I replied to said "There is no longer such a thing as a "safe investment". The only way to grow your money is to take risks with it".

Bitcoin is seen as a risky investment by most people. To those of us that understand what it actually is and how it works, it's the best kind of money/store of value ever invented.

The only other options I see for storing wealth are things like precious metals, real estate, or stocks and bonds.

I think precious metals are kind of useless as money and over hyped as a store of value. Asteroid mining could flood the market in the future.

Real estate is a lame investment. People need homes. When people buy up real estate to park wealth, it drives up the cost of homes for new home buyers.

Stocks are a maybe, but I would only buy stocks like apple and tesla. I don't really like most corporations.

Bonds are a joke, with negative interest rates.

In the grand scheme of things, Bitcoin looks like the most sane place to store wealth.

Re: GE freezes pension benefits for 20k employees

#48

Post by seren » Mon, Oct 07, 2019, 2:18 PM UTC

eternalny1 wrote: post #15

Keep in mind this comes on the heels of the Madoff whistleblower saying GE is a fraud: https://www.barrons.com/articles/ge-insurance-fraud-madoff-w... They piled up massive losses in their insurance division (long term care) and guess who gets slammed because of it? The workers.

For what it is worth, the website that was launched alongside the fraud allegations has already been removed.

http://web.archive.org/web/20190929121126/https://www.gefrau...

So basically, there was some media orchestration, GE stock dipped somewhat, potentially the hedge fund paying Markopolos made some benefits and there was not really any follow up (so far) from the SEC. And the website disappeared a month later.

I felt that the reactions from analysts were that most long term care insurances are problematic, GE possibly a bit more but not spectacularly worse than competition, and that the "fraud" part was a bit overblown.

We'll see if the SEC will open an investigation, but so far not a lot happened.

Still even without being a fraud, this might be an issue in the years to come for GE to be able to generate enough cash to pay for its long term care business...

Re: GE freezes pension benefits for 20k employees

#49

Post by [deleted] » Mon, Oct 07, 2019, 2:18 PM UTC

JoeAltmaier wrote: post #3

dannykwells wrote: post #2

Can someone explain what this means, and how its not illegal? Arent pensions a contract?

Pensions are very strange. IBM abolished its pension program some decade ago, replaced with a 401K funded to 25% or some such. Saved IBM billions; pissed off a generation of employees. So no, not really a contract.

[deleted]

Re: GE freezes pension benefits for 20k employees

#50

Post by bryanlarsen » Mon, Oct 07, 2019, 2:18 PM UTC

ishansharma wrote: post #24

zaphod420 wrote: post #20

Earlier quoted context omitted.

This is good for Bitcoin.

Can you explain further? I’m curious how Bitcoin benefits from it?

People are taking crazy risks with their money to get a significant return from it. One of those crazy risks is investing in Bitcoin.