Through it all, the MBAs, the corporate raiders, the bankers would say (and still say) they're just improving the efficiency of these companies.
If it gets wiped out, what happens to those people? Getting by on social help, food stamps and super basic healthcare through rest of their lives?
And "super basic healthcare" might actually be overstating the case.
(Although I just looked, and apparently Maersk's move was specific to a UK division; perhaps this is another case where UK law sits halfway between the US and Europe? https://www.telegraph.co.uk/finance/personalfinance/2831055/...)
It's certainly not common, and rules were immediately changed to prevent this from happening again.
The employer doesn't have access to it unless it's the pension of the single owner of the company. In that case: it's your money, and you can fuck it up if you like. But allowing other people to fuck up your pension is considered to be a terrible idea.
There are a lot of reasons for that switch: it saves on the administrative headaches of having pensions from several companies, it encourages private retirement savings (because it's "matching"), it saves companies money (because many people don't contribute), and it lets companies keep predictable finances (because it's an investment paid up front, not a lifetime or fixed-dollar obligation). But on the employee side, a lot of the reason people with bargaining power accept it is that they trust 401k funds to stay safe (except from stock market crashes), and don't trust companies to fulfill pension obligations.
The downside, as with healthcare and many other things in the US, is that when "good" jobs circumvent the problem, it takes away most of the social pressure to actually solve it for everyone.
It's still not perfect; stock market drops and sudden increases in life expectancy can mean a pension fund won't be fully able to cover its obligations. This happened after the 2008 recession, so new laws demand that the funds need to aim for more leeway in their funding.
Of course that means that with a good economy, the fund may end up with a lot of money it's not obligated to pay. For this reason there's a movement to give people a larger share of this risk, both on the beneficial end (when the economy grows more than expected), and effect of economic downturns (which is going to suck for people who retire during an economic downturn).
This is actually what my pension does: I have a special kind of pension fund for self-employed freelancers where I seem to own the money in the fund and carry its risks, whereas normally it's the pension that owns the money and the risk. I'm not entirely sure how that works tax-wise, because it is still tax-deductible as far as I know. But if the investments do well, I get more money, and nobody's bankruptcy can cost me my money, which might still be a theoretical (though not actual) risk for a standard pension fund.
If you remember that the "best" leaders from a stock investor (or greedy owner) perspective are psychopaths (lack empathy), and these people actually look really great on paper (lower costs, no/little immediate impact on profits), it's not surprising.
Not exactly, if the company is willing to go so far as bankruptcy / reincorporation... how will any previous contracts with whatever insurance company last through that?
It’s true that 401(k)s also have this feature, however many employees prefer the defined benefit a pension provides over managing their own returns and the temptations associated with managing money. The core issue is really poor US regulation over any specific issue with pensions.
PS: The swap to 401k’s in the US is mostly about cost savings. Companies can simply reduce their contributions without much if any backlash. Meanwhile, third parties profit from managing 401k’s and therefore market them heavily.
The employer pays into the account at whatever rate is required to fully fund retirements. The insurance company manages those funds. If the employer goes bankrupt, the funds are not accessible by raiders/PE firms.
A defined benefit plan is (nominally) funded by the employer with little or no input from the employee at time of investment or distribution.
A 401k is funded by the employee, with the employee managing contribution level, fund investment, and eventually distributions.
They're only the same, if by same you mean "retirement plans". The details are substantially different.
The only bit that's different is the self-management of assets, of which many companies are happy to do, increasingly for lower and lower fees. 0.2-0.3% being common which I bet goes toe-to-toe with good pension managers.
They really aren't that different.
If the insurer can earn 6%, and takes 1% of that, then if an employer wants to offer an employee a $50k/year pension, they need to pay in $1M before the employee's retirement to fully fund it. Over an expected 40-year career, if that employee was basically making $50k/year in take-home pay the whole time, adjusted for inflation, the pension cost would add $25k/year.
Actually, the cost to fund it would be a bit less, as the pension usually ends when the pensioner and their spouse die, so not a true perpetuity. The insurer calculates the expected time from retirement to death, and discounts the up-front cost by the current value of all those payments that won't be made after the beneficiaries die. This works out better the more pensioners can be averaged out in a big pool, which is why big insurers have an advantage in offering these sorts of financial products.
But no matter how you slice it, defined-benefit plans, if fully funded by incremental contributions with each paycheck, add significantly to labor costs, especially when the insurers can't get good investment returns. The lower the return, the more the plan costs. And the higher the return, the more the insurer tends to take for itself.
The 401(k) reduces the pension cost to the employer by capping it at a lower percentage of employee take-home pay, and furthermore dumping all the market risk onto them.
Completely different. Defined benefit has always been better for the laborer, insofar as the company can keep its promises. Defined contribution is better in cases where the employer is untrustworthy or the employee can invest wisely such that they can get the same returns as the insurer, but without taking a cut off the top--as one might get with no-fee, broad-market index funds.
But anyway, that's the name of the game. Take on a lot of debt, stuff that debt into your pension, go bankrupt, company is restructured without pension debt. There is also the Pension Benefit Guarantee Corporation, so this corporate debt is shift to the tax payer.
It's corruption that knows no bounds in the USA. Both major political parties are guilty, we have to dismantle the federal monster, it's the only way forward.