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GE freezes pension benefits for 20k employees

businessinsider.com

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Re: GE freezes pension benefits for 20k employees

#21

Post by lotsofpulp »

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 some secret investment return recipe, and it shows in their performance.

Re: GE freezes pension benefits for 20k employees

#22

Post by joeyrideout »

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.

Re: GE freezes pension benefits for 20k employees

#23

Post by _ah »

Retric wrote: post #13
matthewaveryusa wrote: post #4

Earlier quoted context omitted.

Not sure if this is legal or not, but this is definitely why I think the 401k/private saving model is the best. It's a lot easier for governments/corps to change the payout of a system they run vs. clawing money away from an account you own. That being said there should be a minimum safety net for those that don't have the diligence to save by their own accord.

Personal 401k’s don’t offer much over saving directly. It has some tax advantages at the individual level, but those tax savings are just shifting money around at the societal level. The upside of public / private pensions is pooling money among a pool of survivors. Rather than saving X money to live off of at 95 while risking dying sooner you essentially save less on a bet that will live to be 95. Die early and you…

The "death contract" is a Tontine. https://en.m.wikipedia.org/wiki/Tontine

Re: GE freezes pension benefits for 20k employees

#24

Post by ishansharma »

zaphod420 wrote: post #20
bryanlarsen wrote: post #18

Earlier quoted context omitted.

Pension funds (and retirement savings in general) depend on low-risk investments returning significantly above inflation. These no longer exist, for a variety of reasons, demographics being one of many. People have been assuming that negative interest rates are a temporary thing but people are beginning to think that this may actually be the natural state of affairs. Historically, protecting your wealth cost real mon…

This is good for Bitcoin.

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

Re: GE freezes pension benefits for 20k employees

#25

Post by rootusrootus »

Clubber wrote: post #14

I inherited the desire to buy American cars to support America workers from my Uncle would was a WWII vet. He didn't like Japanese products (he was in the Pacific theatre). I've been buying American cars for the last 20+ years and currently own a GM. I think the next one I buy will be Japanese or German and it's ironic. While I spent my money on American cars to support American workers, the American companies offsho…

Are you conflating GM with GE?

Re: GE freezes pension benefits for 20k employees

#26

Post by lightedman »

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.

GE is probably a bit more than fraud given my experience with some of their LED products. I'd say they're outright liars.

The UV Blacklight they advertise at 7W - you think that's getting 7W of UVLED. Nope, instead you get a single 1W UV LED surrounded by 4 1.5W LEDs. And you pay almost $20 for this rip-off of false advertising.

Re: GE freezes pension benefits for 20k employees

#28

Post by Traster »

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.

It's worth noting here, that nothing in this new news indicates any sort of fraud, merely that GE is struggling - as everyone already knew.

Re: GE freezes pension benefits for 20k employees

#29

Post by mywittyname »

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.

Growing populations help mask the underlying issues with pensions, which are mainly, 1) they are almost always underfunded, and 2) they have unrealistic expectations for growth.

I doubt we will every see pensions come back because they become less appealing the more realistic they have to be. Of course pensions sound awesome if you're a firefighter that receives $97,000 a year for life after 25 years of service. Such a person may have received only $1.7MM in total compensation over 25 years, yet, because of how public pensions are calculated (and a bit of graft), they earn an income that would take investments worth $2.4MM to maintain. This is not including health insurance, which is likely another significant amount.

When I take the same firefighter's wages over the years, and calculate the return of a 12% of earnings contribution annually, and a 12% annual return on investments, that same person has only contributed a little over $1MM.

Meaning their sustainable pension withdraw is roughly $41,000/yr.

\* I made these numbers up in an excel spreadsheet, assuming they made $38k in 95 with a 3% raise each year, and a 10% promotion raise every 10 years, along with the typical inflated wages in the last 3 years to maximize pension benefits. So they ended making $107k/yr.

Edit: After some playing around, I've determined that pension contributions would need to be roughly 30% of wages in order to be properly funded with a 12% annual return. Using S&P500 rates of return, contributions need to be closer to 50% of wages.

Re: GE freezes pension benefits for 20k employees

#30

Post by lotsofpulp »

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.
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