1,000 salaried Ford workers retire after pension warning from automaker

[GON]

Interesting article and something I would not have generally thought as happening- reduced lump sum pensions payout because of rising interest rates.

If I read the article correctly, a Ford employee that is entitled to a pension, and is taking a lump sum payout, will see a significant reduction in the lump sum payout in 2023 over 2022, because of the potential earnings in interest income.

1,000 salaried Ford workers retire after pension warning from automaker

www.msn.com

 

[Dave Hess]

I read this article yesterday and I would have also took the money and retired ASAP.

 

[tnt_motorsports]

it seems like companies are doing almost anything they can to get out from under defined benefit pension plans. It is alarming to me that many public service organizations aren't following the lead of private industry. Just look at the state of Illinois, they are a prime example of needing a change. Unfortunately, I'm not sure there is a path forward on some of these pension plans...

just my $0.02

 

[bullwinkle]

Interesting article and something I would not have generally thought as happening- reduced lump sum pensions payout because of rising interest rates.

If I read the article correctly, a Ford employee that is entitled to a pension, and is taking a lump sum payout, will see a significant reduction in the lump sum payout in 2023 over 2022, because of the potential earnings in interest income.

1,000 salaried Ford workers retire after pension warning from automaker

www.msn.com

I would have taken it! Unfortunately, IRL I have to hope my 201K gets back to being a 401K before I use it... 🙃

 

[SubieRubyRoo]

it seems like companies are doing almost anything they can to get out from under defined benefit pension plans. It is alarming to me that many public service organizations aren't following the lead of private industry. Just look at the state of Illinois, they are a prime example of needing a change. Unfortunately, I'm not sure there is a path forward on some of these pension plans...

just my $0.02

Pensions have been mismanaged; fiduciaries have broken their duties and should be held accountable. Older pensions should freeze at their current rates and no longer adjust for inflation; new employees should be promised either lower pension rates or take the difference in a pay cut in order to fully fund current benefits. The average taxpayer, who likely does not have a pension of their own, should not be forced to subsidize the pension plan of any private company, period.

Yes, this will SUCK; yes, I too lost a pension because the benefits were mismanaged, so I understand. I had two separate pensions canceled and yanked from under me, and I still have to work. But the angry people will then force employers AND politicians to be accountable for their actions, and will put tons of pressure on government to hold inflation as low as possible.

It’s a simple fact that it is nearly impossible to promise ever-increasing benefits from a time-limited financial input of meager amounts; especially when employers are cutting headcounts via automation & simplification. It’s a Ponzi scheme. I’d much rather see all pensions go away and let the people manage their own money; have employers do a 10% minimum match instead of a pension. Let the people take some dang responsibility in their financial future!

 

[Greasymechtech]

You paid for it

In Victory for Teamster Retirees, Central States Pension Fund Awarded $36 Billion

(WASHINGTON) – Nearly 350,000 Teamster retirees are celebrating today over an announcement that the Central States Pension Fund (CSPF) will be granted $36 bil

teamster.org

 

[SC Maintenance]

I read this article yesterday and I would have also took the money and retired ASAP.

I worked at a fortune 500 company that did this exact same thing 20 years ago. Many of the "retirees" were back working there the next day as contractors.

 

[MalibuRam65]

Take the money and Run it’s getting bad out there and might get worst protect your finances as best as you can .

 

[BAJA_05]

My company did away with there pension plan back in 2007 and long before I got hired there. Right now, if you put 6% in they match you dollar for dollar another 9.2% which is outstanding in my book. Had an Aunt and Uncle who both had 40 years in there companies when they retired to have both there pensions go bankrupt with mismanaged funds. All the years they paid there union dues to retire and only collect there pensions less then 5 years each.

 

[JTK]

My company did away with there pension plan back in 2007 and long before I got hired there. Right now, if you put 6% in they match you dollar for dollar another 9.2% which is outstanding in my book.

Similar situation for me. My company did away with the defined monthly pension around 2004. Those like myself who were hired before that date kept it. Last time I had a chat about it with upper management, there were only a few hundred of us left in the company with and that was probably 2yrs ago. Our company match to our 401K is decent, but not as good as yours.

 

[64bawagon]

it seems like companies are doing almost anything they can to get out from under defined benefit pension plans. It is alarming to me that many public service organizations aren't following the lead of private industry. Just look at the state of Illinois, they are a prime example of needing a change. Unfortunately, I'm not sure there is a path forward on some of these pension plans...

just my $0.02

Illinois is an exception, most public service pensions have made drastic moves away from defined benefit systems.
Dont lose sight that many of these are overseen by politicians, and we all know how much they can be trusted with money.

 

[14Accent]

Although I work in the automotive field, I've never had the benefit of a pension. Heck, I didn't even have an IRA before 2010 when I was hired by my current employer. From the beginning, I contributed 3% which matched my employer contribution (small company). Over the years, I bumped my share to 6%, then 8, and finally 10% which is where it sits today. In all honesty, I don't have much in there as I have had to pull money out over the years (buying my first house, pandemic related costs, etc) however I view my current retirement account as a backup to my one true holding: my house.

Currently, my place is valued at ~$270k by the county, meaning $300k on the market. I paid $143,815 in 2014 and my mortgage balance today is just over $100k. My house was always my guaranteed ROI.

 

[BMWTurboDzl]

Defined benefit plans are inherently unsustainable. They're essentially a legalized pyramid scheme and consequently can only be "sustained" by the public sector due to the never dwindling number of taxpayers.

 

[64bawagon]

You are wrong, they are sustainable if they are funded in the manner the actuaries lay out. The problem is that the politicians see a pile of money and raid it every chance they get. Social security is a prime example.
Another good example was NJ back when Chris Krispycreme was Governor. He whined all over the media about the teachers pension system and what a mess it was and how it was unsustainable. The truth of the matter was that the system had been negotiated over many years and the numbers were well known. The actuaries set the funding models and then the state of NJ ignored them. At the time Kristie was making these statements the state of NJ had not made ANY contribution to the system for over 10 yrs. A huge lie of omission.

 

[StumblingElk]

This isn't so much a failing of Ford as a reflection of our 'strongest economy ever'

"The higher the interest rate environment, the lower the lump sum payout. Companies use a very specific set of interest rates published by the Internal Revenue Service, which reflects corporate bonds, as part of the calculation. The rates are known as the IRS Minimum Present Value Segment Rates.

"Technically, you're taking a net present value of the monthly pension and coming up with a lump sum that is needed to produce that same monthly income," he said.

When interest rates climb higher, the theory is that you're more easily able to replicate that pension payout with reduced lump sum. If you could, for example, get 3% on your money you'd need a bigger lump sum than if you could get 5% on your money.

"You need, in theory, less money to produce the same monthly income," Wyman said."

 

[StumblingElk]

it seems like companies are doing almost anything they can to get out from under defined benefit pension plans. It is alarming to me that many public service organizations aren't following the lead of private industry. Just look at the state of Illinois, they are a prime example of needing a change. Unfortunately, I'm not sure there is a path forward on some of these pension plans...

just my $0.02

This isn't what is happening, though. Read my reply above for more context but basically, these incredibly low interest rates we have had for many years have skewed the lump sum option whereas now, the high interest rates skew that sum in the other direction.

The lump sum is also just an option. Employees could chose to take monthly payments instead if they wanted.

 

[JTK]

What kind of blows my mind is, Ford can afford to shed 1000 employees and still function?

That alone says a lot.

We loose one tech or manager with my employer and it's a hardship.

 

[BMWTurboDzl]

You are wrong, they are sustainable if they are funded in the manner the actuaries lay out. The problem is that the politicians see a pile of money and raid it every chance they get. Social security is a prime example.
Another good example was NJ back when Chris Krispycreme was Governor. He whined all over the media about the teachers pension system and what a mess it was and how it was unsustainable. The truth of the matter was that the system had been negotiated over many years and the numbers were well known. The actuaries set the funding models and then the state of NJ ignored them. At the time Kristie was making these statements the state of NJ had not made ANY contribution to the system for over 10 yrs. A huge lie of omission.

Nope. The math never works out because the actuaries are making assumptions based upon guaranteed payments, inflows and rates of return. Inflows are subject to future profitability which is impossible to predict. This is where private pensions get into trouble. They promise more than they can deliver in a highly competitive business environment. The public sector typically doesn't face the same problems because it lacks competition. The public sector can tax but even then they are constrained due to changes in the economy. Typically they underfund because even for them the math doesn't work but due to their status they can stretch it out for a long time hoping for a federal bailout and when it comes to the Federal Govt there are no fiscal constraints.

Companies saw the writing on the wall decades ago hence the transition to defined contribution plans.

 

[Vil_Riker]

Pension funds were mismanaged starting early 90-s. This is when financial consultants convinced companies to change their approach as they felt that companies were too conservative. So the pension monies were directed to the equities markets and the risks were subsequently increased.

A few years later these same financial consultants started peddling defined contribution programs as the cure - it's easy on the organization because it has nearly zero involvement by management. Until then 401k type loopholes were there as a tax management tools for high roth individuals. Now they have become the financial security for the old folk. You are no longer a pensioner, you are now a retiree and mpost of these retirees are in deep financial trouble and living in abject poverty.

 

[Vil_Riker]

What kind of blows my mind is, Ford can afford to shed 1000 employees and still function?

That alone says a lot.

We loose one tech or manager with my employer and it's a hardship.

Usually you cover it with more overtime or hire "temp" workers who don't qualify for health or retirement benefits.