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

Re: GE freezes pension benefits for 20k employees

#231

Post by sokoloff » Mon, Oct 07, 2019, 9:11 PM UTC

jogjayr wrote: post #175

froindt wrote: post #101

Earlier quoted context omitted.

I agree. It was interesting to see this all come up with union negotiations. The union's push against switching to a 401k was that it puts them at risk when the market performs poorly. Unfortunately from a company standpoint, when the market goes down, their required pension contributions go up, a real bind in cash when you need it most. There's more politics involved - like the automotive unions giving up numerous r…

> The administration costs of 401k's make it more challenging for small companies to offer. It's not at all clear to me that 401Ks need to exist when we already have IRAs. Why not just increase the contribution limits on traditional IRAs to 401K levels? It gives everyone access to the same savings options, employees aren't tied to a single 401K provider that can gouge them on fees, employers don't have to administer…

I don't believe that employers can pay a "match" into IRAs. (Now, whether allowing them to do so into 401(k) is a good idea in the first place is a fair question. It's great if you're a solo employer, and serves to encourage some level of savings as an individual, but I wonder if we couldn't get some of the benefit of the second in another manner.)

Re: GE freezes pension benefits for 20k employees

#232

Post by sokoloff » Mon, Oct 07, 2019, 9:14 PM UTC

walshemj wrote: post #216

lotsofpulp wrote: post #132

Earlier quoted context omitted.

Based on some quick Googling, I don't see what is so much better about an SIPP or a group personal pension plan? SIPP offers some kind of matching from the government, but it doesn't seem significant.

Main one is Tax relief at your highest rate on income tax you get an extra 20% into your pension - if your a higher rate tax payer you can reclaim the extra tax relief. For a higher rate taxpayer you put in £60 and get £100 in your pension. You can also do salary sacrifice and reduce you income tax and NI lability

Unless your retirement tax rate will be lower than your working years rax rate, it comes out in the wash eventually.

It's quite likely that some people today will end up paying higher income tax rates in retirement than today.

Re: GE freezes pension benefits for 20k employees

#233

Post by sokoloff » Mon, Oct 07, 2019, 9:15 PM UTC

ghaff wrote: post #104

SketchySeaBeast wrote: post #70

Earlier quoted context omitted.

All that tells me is that there are no more pensions, not that the definition has changed. Employers are contributing money now, but have pushed any risk onto the employee, making it feel pretty worthless as a retirement strategy.

> Employers are contributing money now, but have pushed any risk onto the employee, making it feel pretty worthless as a retirement strategy. You seem to be arguing that saving for retirement is futile. You can invest is (almost) arbitrarily low risk to principal investments like US treasuries. I probably wouldn't advise that as the sole investment strategy for most people. But it is one way to reduce certain types o…

I think all they're arguing is that the word pension =~= "defined benefit retirement plan".

Re: GE freezes pension benefits for 20k employees

#234

Post by sokoloff » Mon, Oct 07, 2019, 9:17 PM UTC

Retric wrote: post #79

nerdponx wrote: post #31

Earlier quoted context omitted.

Personal 401k’s don’t offer much over saving directly. I beg to differ. My IRA doesn't offer a 6% match.

That’s a company 401k with matching funds. Clearly, if the company is willing to give you more money that’s a benefit, but you don’t get that opening a 401k at fidelity etc.

Unless you're employing yourself, you don't get to open a 401(k) at Fidelity yourself.

Re: GE freezes pension benefits for 20k employees

#235

Post by sokoloff » Mon, Oct 07, 2019, 9:30 PM UTC

hammock wrote: post #62

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.

"Defined contribution" is a euphemism to give a softer landing for employees that were expecting a pension. Workers should consider not using that language. The fact is the words are 50% the same but the product is 100% different.

I think it's a quite literal and clear explanation of the differences between the types of plans.

Which variable is fixed?

In a defined contribution plan, the contributions are fixed/defined and the benefits vary.

In a defined benefit plan, the benefits are defined/fixed and the contributions vary.

Re: GE freezes pension benefits for 20k employees

#236

Post by hocuspocus » Mon, Oct 07, 2019, 9:59 PM UTC

seanmcdirmid wrote: post #204

hocuspocus wrote: post #142

Earlier quoted context omitted.

1) Employers could still cover the premium as a benefit. You'd just get to choose how and where to use the money. 2) Make it truly mandatory like in all developed countries.

In Switzerland, employers don’t cover premiums, and premiums are paid post tax anyways. The USA is weird because employer provided health insurance is paid pre tax while individual policies are paid with post tax money (unless your expenses hit 10% of income).

> In Switzerland, employers don’t cover premiums

There are a few exceptions, like Google.

> and premiums are paid post tax anyways.

But they're deductible from your income when you're filing taxes.

Re: GE freezes pension benefits for 20k employees

#237

Post by hammock » Mon, Oct 07, 2019, 10:15 PM UTC

sokoloff wrote: post #235

hammock wrote: post #62

Earlier quoted context omitted.

"Defined contribution" is a euphemism to give a softer landing for employees that were expecting a pension. Workers should consider not using that language. The fact is the words are 50% the same but the product is 100% different.

I think it's a quite literal and clear explanation of the differences between the types of plans. Which variable is fixed? In a defined contribution plan, the contributions are fixed/defined and the benefits vary. In a defined benefit plan, the benefits are defined/fixed and the contributions vary.

That's the spin coming through. In a traditional pension plan, the company pays you a defined amount for your retirement. In a "defined contribution" plan, the employee pays for their own retirement (maybe some of what they pay gets matched).

Re: GE freezes pension benefits for 20k employees

#238

Post by Retric » Mon, Oct 07, 2019, 10:16 PM UTC

sokoloff wrote: post #234

Retric wrote: post #79

Earlier quoted context omitted.

That’s a company 401k with matching funds. Clearly, if the company is willing to give you more money that’s a benefit, but you don’t get that opening a 401k at fidelity etc.

Unless you're employing yourself, you don't get to open a 401(k) at Fidelity yourself.

While true, it’s also common with 15.5 million workers filing a 1099 each year. Also, while an IRA is generally the same thing they have much lower annual contribution limits making the 401k a better option for many.

Re: GE freezes pension benefits for 20k employees

#239

Post by skybrian » Mon, Oct 07, 2019, 10:41 PM UTC

ghaff wrote: post #122

skybrian wrote: post #93

Earlier quoted context omitted.

But why is that? It seems like there should be a way to offer a simple annuity product profitably.

There are. But I think you're hearing a lot of people not liking the cost associated with significantly de-risking a future annual income stream. Annuities can certainly make sense, including ones that, for example, you can get by donating appreciated assets.

How does that work? If you're getting an annuity in return for donating something, that doesn't sound like a donation?

Re: GE freezes pension benefits for 20k employees

#240

Post by maximente » Mon, Oct 07, 2019, 10:46 PM UTC

refurb wrote: post #221

ScottFree wrote: post #151

Earlier quoted context omitted.

I have yet to meet a single person who hasn't enthusiastically agreed that we should separate healthcare from employment. The reluctance comes when nobody has any idea what we're going to replace it with. We're at an unusual social state in this country where nobody trusts the government and nobody trusts big business. What does that leave? I'm a US freelancer, so I don't get health insurance through my employer. I g…

I have yet to meet a single person who hasn't enthusiastically agreed that we should separate healthcare from employment. You should talk to some union members then. Some unions have negotiated such generous healthcare benefits that they’d either never find on the private market or could never afford. They don’t want to give those up.

a smaller and smaller minority though, and the smart strategic choice is understanding that it actually creates classes within the union (same as those w/ pensions grandfathered in vs. those that don't) which weakens the union generally. sort of like the two tiered GM setup currently under strike.

for example, new Washington DC transit workers aren't on the old health plan, which means there's basically a 50/50 split (trending upwards) for people who don't have the benefit. probably not a great strategy to lean on those should the union want to strike over that benefit.

since all that money comes out of wages anyway, it'd be more beneficial to just eliminate the variable vs. trying to salvage a legacy class of workers fortunate enough to have the benefit.