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Comment by chrisseaton | Hacker News Reader

> The judge gets to decide which debts are paid, meaning that pensions are very likely going to be chopped, hurting union members.

I don't understand this. What is the connection between pensions and union members?

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State worker pensions are generally product of union negotiation.

Those with pensions tend to be union members; the pension being a benefit insisted upon in negotiations between unions and their (government) employers. If a state declares bankruptcy, lists pensions as a debt, and the federal discharges the pension debt, the GOP can thumb their noses at unions in a very big way.

> Those with pensions tend to be union members

I still don't understand. Surely almost every professional has a pension, but few people are in unions.

Very few people in the United States have pensions.

Mainly pensions are available for state employees, or union members. And for that matter, state employees tend to be part of a union.

Unions are responsible for pensions, and the only people who have held onto them as the 401k has taken over.

Edit: Because I apparently can't reply to chriseaton below - 401k is defined contribution, you contribute $x which is a set amount and non-taxable. Pension is defined benefit; you receive $x, guaranteed, after x,y,z parameters are met (age, years experience, etc). They are not even slightly the same thing. Not even close.

I think a 401(k) is a pension? Almost all companies offer a 401(k) for full-time employees.

A 401(K) is not a pension. The latter is funded entirely by the employer.

Why does Wikipedia say it's a pension then?

You're being willfully obtuse here. No one in the US would call their 401k a pension.

Obviously someone who wrote this Wikipedia article would!

Pension is being used as a term of art here not how anyone uses it in standard parlance.

Because language is imprecise and depends on context - you and the GP are talking past each other. They are using the word in a conversational context and you are using it in an academic/technical sense.

From https://en.wikipedia.org/wiki/Pension:

"A pension is a fund into which a sum of money is added during an employee's employment years and from which payments are drawn to support the person's retirement from work in the form of periodic payments. A pension may be a "defined benefit plan", where a fixed sum is paid regularly to a person, or a "defined contribution plan", under which a fixed sum is invested that then becomes available at retirement age.

The common use of the term pension is to describe the payments a person receives upon retirement, usually under pre-determined legal or contractual terms. A recipient of a retirement pension is known as a pensioner or retiree."

A 401k is a savings account, not a contractual obligation, so that's why it's not a pension in common usage.

That's not the case. Pensions are not always funded entirely by employer. In quite a few cases the salary of a worker is reduced by a certain amount that is added to what is contributed towards a pension by an employer.

The difference between a pension and 401(k) type plan is that pension is a defined benefit plan and 401(k) type plan is a defined contribution plan.

Yes, you're right that a pension often involves a reduced salary for the promise of a pension at retirement age. That's a huge part of the appeal of a public sector job that pays significantly less than its counter parts in the private sector. And that's why public sector employees get extremely angry and litigious when governments try to reduce their obligations, even as agencies face dire financial straits.

Which 401(k) plans are you thinking of require paying out to a retired employee if that employee has contributed 0%?

Sorry I'm not following the question.

Not within the context of this discussion. Using your context clues > childish pedantry.

Very few professionals in the United States have pensions.

There are very few companies that offer pensions. A 401k is not a pension. A pension is recurring money that is given to you upon retirement in perpetuity. A 401k is just a means of investing your salary into the stock market pre-tax. Your employer does not even have to contribute to it although many if they offer a 401k plan offer some form of match up to x%. My last employer offered to match my contributions up to 6% my current employer offers no match. 401k and pension are very different.

> A 401k is just a means of investing your salary into the stock market pre-tax.

If you plan to spend it when you're retired then it's a pension!

ok...

Then I guess my savings account is a pension too as well as the jar of small change I keep on the kitchen counter.

It is not. In America, if someone refers to a pension they are usually referring to defined benefit retirement plans, where you work X years and get $Y as a result of some formula and $Y is not related to market performance or how much money is in the pot.

This is significant because the risk is on the employer to make up any short falls if the pension fund is not able to pay $Y because of market performance or underfunding. A 401K shifts the risk to the employee. If it's not enough to provide $Y per year, that's the former employee's problem to deal with.

When talking about pensions in the USA, people are usually referring to retirement plans where the employer says something roughly like "when you retire, we will pay 80% of your salary". or "when you retire, we will pay you X/month". The responsibility is on the employer to ensure that money is around when you retire.

Companies used to have things like this - when my dad retired he had several pensions from multiple companies that worked like this. Nowadays government usually uses them to put off paying the full cost of employees.

Pension is broadly understood to be a defined benefit. Workers contribute to the pool a certain amount every months, government/company contributes a certain amount every months for every worker and when a worker retires the worker draws a specific amount until he or she dies or in some cases until his or her heirs die. The government (via PBGC) is on the hook for the amount until the time of death. The issue with defined benefit plans is that they are as they are being "negotiated" not self-sustainable with the unrealistic return expectations and having costs not adjusted for the reality of increased life expactancy.

Currently most of non-union ( and mostly non-government union ) employees have a defined contribution plan. A worker contributes a specific amount every year, a company matches some amount of workers' contribution. At the retirement worker's draw down is limited to the amount in that account. If the account did well. the maximum amount is that can be drawn is large and if it has not done well, it is not large.

Historically, pension benefits were one of the main benefits unions fought for (and won) so that their members could have an income in their old age and retire.

Today, very few workers still have pensions, but the few that do tend to be those represented by a union. In many states, this includes government employees: teachers, firefighters, police, etc.

> Today, very few workers still have pensions

I've never seen a professional job that didn't include a pension - certainly not in the tech industry.

Are you in the USA?

Pensions are defined benefit. That is, it is specified exactly how much money you will receive in retirement.

A 401K retirement plan is not a pension. You save your own money and possibly an employer contribution, and you make your own investment decisions. The value goes up and down in accordance with what you invested in.

> A 401K retirement plan is not a pension.

Are we both talking about https://en.wikipedia.org/wiki/401(k)?

"In the United States, a 401(k) plan is the tax-qualified, defined-contribution pension"

Defined contribution (401k) is not the same as defined benefit (pension).

Here have you seen a pension in the tech industry? 401ks are ubiquitous but no modern companies offer pensions

Why are you going all up and down this thread trying to pedantically show that people are using the term "pension" slightly differently to Wikipedia's definition? It's not contributing anything to the discussion.

Well I just don’t get it. People say ‘nobody gets a pension anymore’ but a 401(k) is just a different type of pension. My defines benefit savings plans literally say ‘pension’ in the product names.

The state pensions have no risk. They get a guaranteed payout regardless of stock market performance. The difference comes out of taxpayer pockets. With a 401k if the stock market crashes you are out of lock. The taxpayers won’t chip in the difference

And everyone else has 401ks which also suffer in a crisis, but the federal government can't bail out red state 401ks without also helping blue state 401ks, so in that sense 401ks are safer than pensions.

I don't even know what it would mean to "bail out" a 401(k). By definition you, the employee, are exposed to all the market risk. If you happen to reach retirement age in a down market, you're kinda just screwed. Should've made better investment choices 15 years ago.

This is why traditional pensions were usually a better deal for most employees.

> I don't even know what it would mean to "bail out" a 401(k). By definition you, the employee, are exposed to all the market risk.

Exactly it means juicing the stock market, which the fed can do by lowering interest rates etc.

> If you happen to reach retirement age in a down market, you're kinda just screwed.

That's why you're supposed to allocate more of your money to bonds as you approach retirement.

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