A sobering article, but worth reading anyways…Fortune magazine reports many corporations may change defined benefit (non-401k) pension calculation methods to reduce costs. A January 2003 survey by Deloitte Touche estimates as many as 40% of major pension plan sponsors are considering cutting their benefits offered under traditional plans.
Those at greatest risk? Non-union corporate “long-timers” whose retirement benefits could be slashed by as much as 50%.
Those who will benefit? Younger workers, who’ll accumulate pension benefits more quickly and won’t be penalized by job-hopping.
Sadly, only 9% of companies implementing change are doing the right thing by offering their employees the option to stick with their old plan (FedEx being one).
The following excerpt sums up the motivation for the pension changes:
“It’s the retired-in-place syndrome. You have employees who are 48 years old, they hate their job, they hate the company, but they know they’ll cross a magic threshold at 50 or 55.” And that threshold is just becoming too expensive to keep in place, say benefit consultants. “We can’t afford as a society to continue to pay people to leave a company at age 55,” contends Larry Sher, a principal at benefits consulting firm Buck Consultants in New York City. “It can’t be sustained.”
Deloitte’s Hilko offers, however, what may be the single most important message for the millions of baby-boomers lucky enough to still be counting on a lush pension in retirement: “Don’t take for granted what you have today.”
Potential safety net: a stock market resurgence to help correct some of the pension imbalances.
Upshot: there is no “benevolent zookeeper” — be proactive.