GE freezes pension benefits for 20k employees
businessinsider.com
businessinsider.com
Businesses main area of expertise is not in pensions and healthcare, and they cannot provide these services as efficiently as if there were many different insurance companies on the market offering these services for sale, and instead the company paid you a fee for your services, and then you went out on the market and bought your own pension plan and health insurance.
Letting people set up private companies with competitive options I think would probably drive the best results.
Splitting employers from health insurance is one of several required changes that needs to happen before the supposed hand of capitalism can allow the market to get healthier.
I have no idea if it would work, but the status quo is so unhealthy at the very least improvement competition/choice could improve that somewhat.
There's plenty of employers that don't offer healthcare, and you are not obligated to take it if your employer does offer it. You can always buy your own health insurance.
Hello, please call
* 910 if you think your fire is not urgent, and can wait 10 minutes to come for free
* 911 if you think your fire is getting hotter, and can only way 5 minutes to come for $500
* 912 if you would like the fire department to come as soon as they possible can, and skip the queue of 910 callers for $10000
1) It is some sort of badge of honor to get a "job with benefits".
2) What if more people decide to not get healthcare? If your job gives it to you and you "only" have to pay a few hundred a month for your family, you are more likely to get it than if you payed everything out of pocket each month (even if your compensation increased). People would see all the extra money and just not get healthcare. If enough people did this, healthcare would be too expensive for the rest of us.
3) People are just reluctant to big change. And this is a big change. There would be politicians on the news claiming someone was "taking away your benefits".
Here in germany you can actually kind of get away with not paying for a while when not consuming. But coverage has to be continuous, so if you need insurance since you want to go to the doctor a few years down the line, you have to pay up for the entire period.
Just think of them as "overhead".
Spend a little on "enforcement", because rules are important. Call it audits, compliance, metrics, or whatever.
But not more than would be saved without enforcement. Because diminishing returns.
And at some tipping point, ratcheting up cost of compliance backfires, leading to more cheating.
So strive for some happy equilibrium. So that the general population (taxpayers) feel the system is reasonable, if not exactly fair, and overall friction is minimized.
(Technically speaking, it was a tax rather than a fine. That mostly mattered for legal reasons, but it did also work that way in practice. It applied to everyone, so insured people had the obligation waived, but the people paying it weren't in violation of any law or regulation.)
ACA had a solution to this, it was an extra tax for not purchasing health insurance. Because health insurance premiums are basically a tax to provide healthcare to everyone. Because US voters don't want to directly pay the government to provide healthcare to everyone.
2) Make it truly mandatory like in all developed countries.
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.
This is exactly what happened under the ACA. This is also the main reason many major health care companies like Aetna and UHG dropped out of the exchanges:
Insurers need young people to, in a basic sense, pay into the system, since they tend to be healthier and use fewer healthcare services — thus partially subsidizing the older and less healthy people that cost more to cover than they pay in.
Since the rollout of the exchanges, the number of young, healthy people signing up has not been enough to offset the sicker population, leading to millions of dollars in losses for many insurers.
https://www.businessinsider.com/millennial-uninsured-rate-ob...
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 get most of my healthcare directly from doctors and pay for visits and lab tests in cash. It works especially well when you tell them in advance you'll be paying with cash and haggle a price before walking through the door. I pay for a high deductible plan through a christian co-op for unforeseen events. This has proven to be considerably cheaper and more effective than paying for a plan through the obamacare marketplace.
Sadly, I have, and it is invariably from people who basically say those who don't work don't deserve healthcare. It is disturbing to hear people say this. They don't want to "pay" for someone else's healthcare. They don't get that they already are.
> We're at an unusual social state in this country where nobody trusts the government and nobody trusts big business. What does that leave?
Where did we go so wrong? Is it because we treat government like football games? One side has to dominate the other; all or nothing? What happened to compromise for the greater good?
[0]: the political systems, not the political parties
Curiosity, because you seem to have first hand experience and I do not- what happens when you present that they already are paying for peoples' healthcare?
If you want more affordable healthcare, you should make it cheaper, not force other people to pay overpriced bills for random strangers.
None of those countries are the size of the US. Just like in Physics, you can't expect a 1/10th scale model to behave the same as the life sized version.
The EU has 511 million people. Sure it is multiple systems, but they all work much better than ours does.
Source, lived there six years and spouse was in that system for over 25 years.
Japan, unlike the USA, has a health insurance plan for those who can’t get it through their employers (NHI, hence their system is considered universal).
Japan does also have NHI, but most are insured through their employers, as nearly everyone in Japan either works or is insured by someone in their family who works.
> Where did we go so wrong?
False premise. Merchants and governments have been widely distrusted as far back as records exist. Merchants in particular are commonly the subject of some kind of official orthodoxy noting how evil they are.
Even among people who work and have a lot of money, having healthcare based on employer causes all kinds of headaches. It makes a brief lapse between switching jobs unreasonably risky, especially before pre-existing conditions were covered. It punishes self-employment by denying people the major discounts big employers can negotiate. It punishes part-time work, because one 40 hour/week job with insurance might "pay" better than two equal-wage 30 hour/week jobs. And it makes long vacations or early retirement far less accessible; if you make in 6 months what someone else does in 12, you're not free to take those 6 months off without paying a steep premium on insurance.
And none of that is news, but it's always confused me that there's so little drive to delink healthcare from "being actively employed". Even for someone who wants to shut down Medicaid, the current system is bizarrely hostile to all kinds of high-earning people who could pay their own healthcare costs, but get punished for looking anywhere except full-time work at a big company.
Realistically, I think it's just ignored because the larger debates over cost and government care overshadow everything else. But in my more cynical moments, I can't help noticing that while the current system doesn't serve workers or entrepreneurs well, it's great at driving them to become a predictable labor supply.
The straightforward answer is to replace it with self-paid insurance plans. Even without redesigning our awful system of medical payments in the US, we could easily get rid of the “employer pays” part.
The most straightforward way is to have a universal coverage provided by the government (funded by tax revenue). Then we get rid of the whole problem of some people skipping out on coverage and free riding on the system.
The US did this until very recently. It should IMO be reinstated.
In any event, this is more or less orthogonal to the issue at hand. As far as I know, nothing stops employees with employer-sponsored healthcare from opting out.
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.
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.
I find it weird and misguided how people think that using coercion to force people into buying healthcare is somehow acceptable. To those that think it will make the cost of healthcare more expensive for the rest of us, I think that is a dubious assertion, in fact I think it will get much cheaper. The presumption that they are in contentious debate with is the necessity that different people have to get different tiers of service based on how much they pay.
It makes all the sense in the world when you compare it to any other business. You wouldn't expect for someone who paid $1M to get the same level of treatment as someone who paid $100.
People would buy insurance according to different tier levels of quality and risk profile, with their being astronomically high costs of insurance for old wealthy rich people, who in their desire to prolong life will incentivize creation of new modes of treatment to cure themselves (Which in the short run the development of which will help them, but in the long run, everyone, as after it gets discovered and scaled it will get cheaper).
People would also buy cheaper level of tiers, from which naturally the quality of treatment, and queues will get lower/longer.
You will also have people that don't buy insurance, and this should be their prerogative to do, as it would be the healthcare providers prerogative to decide whether to provide them with free treatment (they are not slaves, they are not obligated to provide a free service, and what makes the people that don't pay more important or a higher priority than those that willingly pay and fund these services).
I'm not saying that this is the BEST solution, I'm saying that this is BETTER than anything else proposed which leads to things like the "cobra effect" in which you make the initial problem way worse by the implemented solution, than by what it would have been without it.
Currently, society does not find it acceptable for someone to die from a heart attack if they cannot pay for healthcare. And people already get different levels of care.
If voters came out and changed the requirement for hospitals to provide healthcare, or let people forego healthcare, then we can perhaps treat healthcare like any other business.
Of course the majority (if its poor and sick) is going to pick the path of least resistance - which is to vote short term to get a subsidy from the healthy and rich (instead of pursuing to long term path toward developing skills to provide valuable services so that you could get rich and afford valuable services, such as healthcare, not to mention living life in a way to minimize chance of getting sick/ill in the first place.)
But in the end this sort of "take from the rich and minority" mentality just leads to the dissolution of thevalue that they create, and unfortunately only after they are gone, to the dissolution of the principle architects of that mentality.
Your points are American only and stem from a bunch of perverse decisions made during the wage controls of WW2.
Other countries seem to be doing fine with that model, I'm not sure what it is about the US culture that prevents it from working.
2. Single payer.
3. This statement always seems like a cop-out to throw hands up in the air and do nothing. There are things you can achieve with a multitude of small steps. There are things where you can't, and you have to take a few large leaps.
To just say oh let's ignore the latter category forever, because people people don't like it, is simply giving up.
The current system drives all kinds of awful distortions independent of actual cost, and it wouldn't take much to improve. Swapping the tax exemption for a write-off would be a significant start to stop penalizing freelancers and part-time workers who have to buy their own insurance, and indirectly promote competitive not-employer-sponsored plans.
I'm not sure if this just gets ignored because the issue is so contentious that small changes aren't worth the political price, or if there's something darker there, but it sure seems like it could be a bipartisan move.
And you know what is even more efficient than market-based health insurance and pensions ? Socialist state-level monopolies. Yep, costs in Europe are about half of what they are in the US. Turns out governments are not more inefficient than companies, especially very large ones.
Most things like GPs, physiotherapists, etc. are private but the Medicare system pays for something like 60% to 100% of the bill depending on various factors. You won't usually pay more than $30 for a standard GP consult, for example.
Crazily, the private insurers (it's optional) are trying to push for tax breaks to employers if they pay for private health insurance for their employees (more like the US system but basically unheard of here), despite the fact that the private system is already heavily subsidised (big rebate on private health insurance and also tax benefits for moderate and high income earners), and despite the fact that our public system is more efficient (according to studies), so we'd actually be better off just investing that cash in the public system (because of underfunding there are waiting lists for a lot of elective surgery).
But the private insurance industry is generally struggling because they've been raising premiums and reducing service (more exclusions and bigger excesses) and our public system is good.
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.
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.
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.
I understand the dynamics have changed, but my boomer parents and in-laws are both enjoying retirement with the fruits of a defined benefit pension, and both are quite comfortable.
The only reason your elders are enjoying the fruits of a defined benefit pension is because the costs of their pensions was hidden by an assumption of ever growing populations and economic growth.
Additionally, why give control of your retirement funds to someone else when you can have control of your money? They're investing it in the same place as you would, and not getting any better returns.
Yes, the plan can have problems, but I'm just saying why I think people still like it, and it does have definite advantages over your own savings.
Lol you hope.
The article below mentions how poorly things can go, with private equity groups buying a company, things go poorly, it gets liquidated (pension gets dissolved), then the same private equity group buying it out of bankruptcy. Funny enough, with Marsh, the executive pension plan got a good payout relative to the thousands of store and warehouse employees.
The pension isn't free to offer. I'd much rather they increase my base pay or give a more generous 401k match.
https://www.washingtonpost.com/business/economy/as-a-grocery...
Guess which one of those two is happier? Sure, you may say the first group was foolish, but we are talking your average American workers here not an investor-savvy class.
Perhaps make it an option, if you want to gamble go for it, if you lose don't come crying for your retirement checks.
Having some savings as defined benefit does give you predictability. Even if you don't have a defined benefit plan through a company, it may make sense to convert some savings into an annuity of some sort.
The PBGC is just for show. They can't even guarantee the pensions of the multi employer defined pension plans that are about to fail, so there is a bill in congress to bail them out currently:
https://burypensions.wordpress.com/2019/01/09/butch-lewis-ac...
Look at the transfer values of some DB pensions they can be worth multiple millions and no way would an individual be able to build up an equivalent amount in a DC scheame
Well if you put millions in you get millions out.
Your DB pension is funded by those that came before you and those coming after.
Its phrasing in that sense would be similar to "Dude your making a big mistake"
At 65, you do not know if you are going to live to 70 or 101, so you need to plan your 401k accordingly, pessimistic.
Couple that with the fact that many many americans could not save enough to last to 101, but could last until 72. So they are left with the choice of living more poorly than they should or running out of money.
Defined benefit makes way more sense, some people "win" by living longer, others lose. But there is much less stress in the meantime.
On an employer level, it does not make sense as they have no idea if they will exist in the next 10, 20, 30 years, especially with automation and globalization changing the economic environment very quickly. Which is exactly what real life shows, as companies are jettisoning defined benefit pensions to stay competitive.
On an individual level, a pension plan also doesn't make sense, as you can do what pension fund managers do via target date funds and save the money spent on paying the pension fund managers. And avoiding the corruption risk of employers underfunding and fund managers malinvesting.
If you want protection that you will have income until you die, one should purchase an annuity. However, a much cheaper and better idea in my opinion, is raising a family that will support you in your old age, because it's prohibitively expensive to purchase the kind of care that comes from loving relationships in your old age.
There are annuities, but my research into those has come up with very high costs with lots of fees.
Yes, as most non taxpayer funded employers have found out, and reduced their offering of defined benefit pensions accordingly.
My point is that no one has the ability to protect and afford against the kind of long term risk that you are talking about, and the best model I've seen to address it is when children and grandchildren take care of their elders.
If your pool is the whole country then it’s very manageable sans the human problems that any large government / financial institutions run into at scale.
Pretty much every developed nation is raising retirement ages and reducing benefits to grapple with the fact that there is less wealth being created in their countries. No one can "manage" automation and labor from China/India/etc taking out a huge portion of your middle class.
Annuities can certainly make sense, including ones that, for example, you can get by donating appreciated assets.
This worked out pretty well for me [added: it's been through 2 changes in ownership but it's still available for payout] but, if instead you look on 2-5 year job tenure being far more common today, a lot of people would end up with little or no pension under typical defined benefit pension terms.
Assuming a birth costs $5k to $10k, and the kid costs $20k per year for first 5 years for daycare, and then $3k per year, ballpark $200k, not adjusted for inflation, plus tons of time spent teaching and raising them, should buy you a relationship worth much more. But you also have to be surrounded by the right people and culture, so it's super complicated to calculate.
But most successful families I know are successful because they can rely on each other to help each other out, and there are exponential benefits to knowing someone who knows someone, so as their networks expand, so do yours.
Defined contribution allows for the transfer of wealth to heirs at death, which many people find a preferable and more fair-feeling way to deal with the fruits of one's labor than to have it revert to the annuity provider (private or public).
2 Pensions funds are different to investing for individuals (with small portfolios)
DB schemes have very long lifetimes and have to invest for multiple generations and cant just invest in a tracker - they have to have a suitable investments in bonds and guilts for example./
There's more politics involved - like the automotive unions giving up numerous raises for better pensions, companies refusing to fully fund pensions in good years leading to them being woefully underfunded in bad, etc.
Personally I'm glad to not have a pension hanging over my head. I could leave tomorrow and have the full value of my 401k. I know people who are miserable and hate their jobs, but if they leave before hitting 30 years, they get barely anything. At my company, leaving at 29 years would yield less than half the monthly payout compared to 30 years. The pension and social security is the retirement plan for those who live paycheck to paycheck.
I do really wish everyone had the same access to tax advantaged accounts. The administration costs of 401k's make it more challenging for small companies to offer. All else equal, having a 401k available versus unavailable is with a few thousand dollars per year to me because of the tax deferral.
This is the inherent agency risk in defined benefits. The people at the beginning can make off like bandits while screwing those down the line, whether intentionally or not (due to global economic environmental changes).
>I do really wish everyone had the same access to tax advantaged accounts. The administration costs of 401k's make it more challenging for small companies to offer. All else equal, having a 401k available versus unavailable is with a few thousand dollars per year to me because of the tax deferral.
401k are extremely easy to administer, or at least much, much easier than defined benefit pensions. However, it would be ideal if the US government stopped giving large companies subsidies (via the 401k tax deduction), and simply gave an IRA deduction to everyone, regardless of employer or whatnot. There is no need for employers to be involved.
Definitely so! They require filing the Form 5500 annually with severe penalties for not doing so, and if safe harbor criteria aren't met, I believe an actuary may be required. I helped setup a small business 401k a few years ago and found Human Interest to be about the cheapest option overall at {employer: $120/month + $4/user/month} + {employee: 0.5% AUM management fee + fund expense ratios (good funds available, coming in around 0.07%.)}.
The direct employer cost is still $1,500/year for 2 employees before any match. Simple IRA's are an option, but have much lower contribution limits.
>However it would be ideal if the US government stopped giving large companies subsidies (via the 401k tax deduction)
Do you mean the administrative expenses and employer contributions being tax deductible, or a more specific nuance to the tax code?
The intent of the 401k safe harbor rules is to ensure they don't only benefit the highest compensated employees. For someone earning 30k/year, saving for the future is a legitimately tough proposition. I haven't fully fleshed out how I'd best handle ensuring all groups can reasonably be able to retire.
If the government wants to then incentivize retirement or healthcare savings via tax deductions, it should offer that to everyone, regardless of employer or where the income came from. However, I'm also against using tax deductions as it allows for price obfuscation.
I would be okay with government providing incentives such as matching contributions. That would allow for clear accounting of government expenditures.
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 anything.
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.
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...
Maybe the SEC is starting the case and asked the tipsters to remove all relevant documents online to prevent prejury?
This is what happens when a business underperforms.
EDIT: Added "most of". A percentage of their employee base has already transitioned to defined contribution.
[1] https://money.cnn.com/retirement/guide/pensions_basics.money...
SIPPs are beyond my lifestyle.
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
It's quite likely that some people today will end up paying higher income tax rates in retirement than today.
And you can use drawdown to manage your income from the pension and you would of course make use of income from your ISA.
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 of risk. (And most defined benefit plans have the same risk with respect to inflation.)
You don't even have to know much about the system to understand how this works.
Defined benefit - Your pension is X, determined by rank, years of service, etc.
Defined contribution - While the above conditions may still apply, the bottom line of how well you do is determined by how much you put in on a regular basis.
Not hard to imagine why most companies made the switch or simply stopped offering traditional pensions - they're really expensive over the long term.
In UK and Ireland, though, most retirement plans are called "pensions", even defined contribution.
The first time I told my mom about pensions after moving, she said "oh my god you get a PENSION?!??" like it referred to the paycheck for life her parents got from the paper mill.
It's just semantics.
It's always surprising to me to see those huge companies stopping payments and the story ending there
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.
So no, not really a contract.
25% employer contribution match? That seems very high. I've never worked at a company with higher than 5% match.
I don't know what kind of match they had.
What is a common yearly bonus/raise like at Microsoft, including stock options/grants?
They really are the worst.
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 don’t care about losing that bet. Of course this means less money for people to inherit.
Sadly for individuals it’s illegal to set contracts up to do this as they create incentives to kill people which have resulted in past murders. Annuity‘s can offer some of the benefits, but are forced to make less risky investments.
I beg to differ. My IRA doesn't offer a 6% match.
The idea that these encourage murders only came after they were banned, and used in plot devices that required a small number of people. (e.g the Fighting Hellfish)
There is plenty of discussion about brining them back as financial instrument.
https://www.npr.org/2015/11/27/457392597/live-long-and-prosp...
https://www.npr.org/2017/10/26/560152250/a-case-for-tontines...
Employees are very lucky if employers contribute 50% of their contributions (which would would be a max possible of $9500 match this year). And usually it’s significantly less.
In 2019 employers are allowed to contribute up to $36000. No company I have heard of provides anyway near that. The 401k has unfortunately allowed employers to care very little about employees retirement.
If you say the denizens of the companies I’ve worked at are all very lucky, I won’t disagree, but it’s surprising to hear this is uncommon.
EDIT: Or perhaps your percentages are (unusually, for US conversations about 401k contributions) referring to total outlay, by which standard a 100% match is a company covering 50% of the total outlay? But in that case the limit is no where near $9500, perhaps you were missing a 1 in front? The max employee contribution to a 401k was $18,500 in 2018...
EDIT: Sorry just reread your comment, yes that’s another way companies will structure it x% match up to y% of your salary. The x and y differ wildly. Also some will add a up to z total match. Which kind of formula works out best for you highly depends on your salary. But the average employer contribution for someone maxing out their personal contribution is $3000.
Not sure if it made outside just the Houston news cycle at the time but as an employee of a competitor I heard from friends at Enron that their employer froze all sales of their stock in employee 401ks before going under. Lou Pai managed to cash out as part of a divorce settlement as documented here https://www.chron.com/business/enron/article/Ex-Enron-exec-P... but most employees were not able to divest themselves and protect their retirement.
The 401k plans I’ve seen all had an option to invest the money in a diverse fund. Either a target date retirement fund that auto allocated to a mix of stocks and bonds, or to other funds such as an S&P 500 index.
Freezing employee stock sales is fairly normal as I understand it. I get emails all the time from my publicly traded employer stating I cannot trade in their stock during certain times (due to the risk of insider trading).
That said, I looked it up and it seems like the claim at the time was there was an “administrative change” to the plan during that period, so not what I speculated it might be.
>In the simplest terms, contributions made by HCE’s can’t be excessive when compared to those of non-HCE’s. For example, if the average plan contribution by non-HCE’s is 4%, then the most an HCE can contribute is 6%.
Not that I hear much complaining about the compensation, they're rolling in after-tax dollars and RSUs.
Plan was closed in 2012, so these are longtime employees.
People currently collecting pensions are not affected.
Ex employees in the pension are being cashed out with lump sums.
Source: https://www.wsj.com/articles/erie-hit-rock-bottom-the-former...
Reality is, 401k is much better for all parties as company and employee can part ways at any time. Employee has more control over their funds, but risk they will lose it all (not companies problem).
In government... I don't think pensions ever went out of fashion. Why bother when you can always just print more money?
There are a lot of different pension schemes out there as the feds, states, and localities do not use uniform plans. What I've seen, though, is that there are now "two tiers" - one for older employees and another for younger ones. You can guess which plan is more generous...
A lot of localities and states see the writing on the wall - that their perpetual 9% growth rates and population increases won't keep up, and are thus moving new employees into 401K plans, no different than the rest of us in the private sector.
Honestly, I don't think I'd be able to tolerate being a teacher or state employee, and knowing that my manager, 20 years older than me, has a retirement worth 3x as much, and it will be funded by increasingly shorting me on salary and benefits (along with tax increases) as the pension liabilities become harder to pay. Look at certain cities like Chicago and Baltimore and states like New Jersey for a current example.
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 money: banks had to hire guards to protect the gold in their vault. Fractional reserve banking flipped this so that the banks started paying interest.
But now the world is awash in capital so low risk investments now return interest less than the inflation rate. Even the nominal rate is now sometimes below 0. (https://news.ycombinator.com/item?id=20696343)
There is no longer such a thing as a "safe investment". The only way to grow your money is to take risks with it, and the level of risk required to get returns significantly above inflation is growing.
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.
Why? Just because the other options have downsides, what makes Bitcoin good? There was a rush in 2018 - are you assuming it's going to happen again? Bitcoin seems to be super unstable, more so than anything else I'm aware of - why would I want my retirement savings to be able to fluctuate that much every year? What stops a new cypotcoin from coming along and being dubbed superior, removing the value of Bitcoin overnight?
Lots of new coins claim to be the next bitcoin, but the truth is, bitcoin is the next bitcoin. Look up the user aantonop on YouTube for why this is the case.
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.
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.
https://www.cnbc.com/2018/10/05/new-ge-ceo-larry-culp-inks-s...
It's not hard to play this game, if your incentive is to make the stock price go up.
Slash and burn.
"We made a profit" is never an excuse for unethical/immoral business dealings.
I think this is a very simplistic view.
I don't know enough about this particular case with GE, but sometimes layoffs are absolutely required for a business to continue existing, especially when the economic cycle dips a bit low. This is almost an absolute for smaller businesses.
For these cases, what do you suggest? Close the doors, laying off all workers, or lay off some, allowing the rest of the workers to continue their employment?
Something like "Sorry, you're all out of work because we don't want to lay off some of you" seems a bit self destructive, with a much more negative result.
What? According to google finance, the stock closed $8.57 last Friday, opened $8.55 today, reached an intra-day high of $8.65, and closed at $8.56. There's no way you can say that it was up 3%.
Less supply of your stock plus a deep pocketed purchaser? It's bonus time!
For those who want the stats from the SEC[0]:
(1) a base salary of $2,500,000 per year.
(2) a target annual bonus opportunity at 150% of base salary ($3,750,000).
(3) annual equity awards in the form of performance share units (“PSUs”)
that will have grant date fair values of $15,000,000, beginning in 2019.
(4) a one-time inducement award of PSUs that will pay out [...] as a number of
GE shares ranging from 2.5 million to 7.5 million shares, based on a GE stock
price appreciation target ranging from 50% to 150% using the highest average
closing price over 30 consecutive trading days during the four-year period from
October 1, 2018 to September 30, 2022, with no payout for stock price appreciation
of less than 50% (This could net him $47,000,000 - $233,000,000!).
(5) cash severance in an amount equal to two times the sum of Mr. Culp’s base salary
and target annual bonus opportunity, in the event that his employment is terminated
by the Company without cause or by Mr. Culp for good reason.
CEO pay seems like a constant red herring. If we care about inequality, we are probably better off focusing our attention on our tax system (this story [1] is also on the front page of HN at the moment) which has a much bigger impact than CEO pay.
[1] with the potential to hit $250MM.
Just imagine GE going bankrupt - who's gonna pay the pension, then? The government in a bailout or what?
And they are at least partially insured:
Maybe the PBGC will go under? Who knows.
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...
If your company isn't there when you retire, you don't get a pension.
I find it incredibly risky to rely on pensions. I don't quite understand why employees are so excited about non cash benefits.
They might not be aware that automation has done away with the role of pension fund managers. In the old days, you couldn't just go out and buy a total stock market or bond market ETF. Nowadays, you don't even have to think about asset allocation with target date funds. And since all investments are going towards the fewer and fewer remaining companies, a bailout for one is a bailout for all.
httpss://en.m.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corporation
https://www.ai-cio.com/news/multiemployer-pension-lifeboat-s...
The idea that someone could lose their retirement and depend on social security or nothing at all simply because the company one has dedicated his life to goes bankrupt is just... horrible.
Unless one happens to work for a religious organization, in which case, yes, I agree, we should remove the religious exemption from needing to contribute to the common insurance fund for defined benefit plans.
What exactly about this idea is horrible? Of course it sounds like socialism but what's the concrete things that are "bad"?
There’s a government supported backstop for pension funds if the company goes out of business.
https://en.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corpo...
It's mostly for show, and at the end of the day, if the pensioners have enough political clout (like those of GM in 2008/2009), then they will get bailed out for real by Congress.
In the UK pensions are independent of the company due mostly to some scandals in the past Robert Maxwell for example.
>If your company isn't there when you retire, you don't get a pension.
It depends. My pension has gone through a couple of different acquisitions but it still exists.
Employers are excited about non-cash benefits because it cuts risk by reducing their overall obligation to their employees.
Ultimately however you have to trust some third party - to some degree - not to waste or misuse your money.
Pension systems are just a big scam on everyone.
So it seems like if you want to support American workers, you should buy foreign cars that manufacture / assemble in the US. That's certainly unintuitive.
It's almost like you only read the headline and nothing else, because the article itself screams "General Electric" in a way that nobody who actually visited the page would ever have been confused.