6 ms·

Did I read the 2014 annual report correctly and they had $20+ billion in profit? I think they can afford to keep the pension plan the way it is.

• bko 11y ago
  Pensions are outdated and are bad for both workers and employers. The idea that you get a guaranteed payout (defined benefit) creates conflicts when today's managers have to make decisions that affect the entire company over the next few decades. Considering that few managers believe that they will be in charge at the time the pension benefit are due, they are incentivized to push costs into the future through bloated pensions.The employee is then stuck holding the credit risk of their employer from long ago. A much better system is a defined contribution, in which the employer makes a contribution to a retirement fund for the employee. The employee then has sole proprietorship of the funds, regardless what happens to the company.
  • GFK_of_xmaspast 11y ago
    Yes but on the other hand: twenty billion united states fiat dollars worth of profit.
    • minikites 11y ago
      What's a fiat dollar?
      • logfromblammo 11y ago
        Something that only has value because you can buy things with it. Contrast with gold-backed dollar or silver-backed dollar, which have value because they may be redeemed for a fixed quantity of a commodity good.
      • herge 11y ago
        It's money you can use to pay your taxes, and who's value doesn't crash every 3 weeks.
      • GFK_of_xmaspast 11y ago
        A term used by the bitcoin and goldbug communities to mean "real money".
      • xenadu02 11y ago
        Money not subject to massive inflation and deflation as its value is not tied to the amount of gold coming out of the ground, but rather to the economy. Gold-backed current sucks. When new gold is discovered it's value swings wildly. When no gold is being discovered but the economy is going great there is a shortage of it so deflation sets in, causing loans to balloon in real terms.
  • matwood 11y ago
    > A much better system is a defined contribution, in which the employer makes a contribution to a retirement fund for the employee. I agree, but the government has so many rules around this I wonder if pensions at one point were a better value and a way to work around these arcane rules. For example, the max an employer can add to a 401k is 35k. Another is if a family clears 200k, then you're not allowed to put money into an Roth IRA without huge penalties. Never mind that $5500 is already not very much to save for retirement, but we definitely cannot let everyone do the right thing and save money.
    • kspaans 11y ago
      $5,500 per year, presumably for many years. And heaven forbid you should be so well off that you have to save for retirement with after-tax dollars and/or in taxable accounts! :P Tax-advantaged savings accounts are to reward savers who might not otherwise save. They don't mean that everyone deserves tax-free saving.
      • ChrisBland 11y ago
        While someone living in Dallas would see $200k as being very well off, think about a couple who lives in San Fran, or New York. 100k each is not truly 'well off' in those cities, so they are unfairly punished if they wanted to contribute what little money they have after living expenses to a roth.
        • ams6110 11y ago
          Yes, another reason to move to taxing consumption rather than income. However I don't care where you live, if you are earning $200K in a household you can afford to save.
          • lukeschlather 11y ago
            We have to have a variety of tax bases (consumption, income, property.) Otherwise those with income/assets in excess of $500k can easily move money around to avoid paying a similar share to people who are less well-off.
  • logfromblammo 11y ago
    Better still would be to divorce healthcare and retirement planning from employers altogether, and make it easier to move your retirement money between competitors. From an actuarial standpoint, a defined benefit plan isn't any more complicated than just buying perpetuities from any companies or governments stable enough to offer them, until your benefit obligations are met. The problems arise when current managers use the pensions as a means to game the accounting numbers or as a means to embezzle funds.
    • bko 11y ago
      401ks are fairly mobile although many people simply forget about them. The sad truth is that many people would not allocate enough to their retirement and healthcare without guided direction or a minimal effort option. But I agree with the problem of pensions but I would also add that today's managers don't want to fund them the way they should. Instead, they set aside some money and assume a very rosy growth rate that doesn't always materialize. Even with that inflated expected growth rate, pensions are often still underfunded. An employee should be free to contribute to such a perpetuity if he so chooses. Underfunded pension liabilities will likely take down several large cities over the coming years.
      • toomuchtodo 11y ago
        > Underfunded pension liabilities will likely take down several large cities over the coming years. No, they won't. As usual, the federal government will step in as the insurer of last resort, just as they do with the pension guarantee corp [1]. It's almost like HN gets off on people's retirement compensation being cut. Don't blame the people who were promised benefits, blame the politicians who did so, and the apathetic voters who allowed it. If your returns forecasts were wrong because of lack of growth, guess what, you get to make up the difference. That's how business works. [1] http://www.pbgc.gov/ http://www.pbgc.gov/
        • coldcode 11y ago
          As far as I remember pension guarantee corp is underfunded it likely would fold with one large failure.
  • mikeash 11y ago
    I agree with you, but your point seems to be irrelevant. Verizon isn't proposing to replace the workers' pension plans with a defined contribution of equal value, they're just cutting the pensions.
  • gherkin0 11y ago
    If I'm understanding you correctly, it seems like those conflicts could be mitigated by better regulations around company pension contributions. Plus, you could probably align the c-level manager's incentives by regulating that their pensions have less priority than those of regular employees, so if pension cuts have to be made, they'll feel the hit harder and faster. Power should come with responsibility. Defined contribution is not "a much better system" for employees. It just moves risk from the company onto them. IIRC, there's not actually much "employer credit risk" to employees because pensions have to participate in a mandatory government insurance program.
    • ASinclair 11y ago
      Defined contribution plans are better positioned for today's employment reality in which people switch jobs much more frequently. Pensions give employers more power to keep employees when it would otherwise be beneficial for them to leave for better pay.
      • eli_gottlieb 11y ago
        It should really be up to the workers whether they enjoy how golden the handcuffs are.
    • harryh 11y ago
      C-level managers aren't retiring on their pensions.
    • spacecowboy_lon 11y ago
      Pay of the problem with DB Sachems is a few years ago accountants pushed though changes that overstate the liabilities. In the uk you have to account for pension liabilities as if tomorrow 100% of your scheme members became liabilities which is only likely to happen if there is a zombie Apocalypse. One has to ask who benefits from this dodgy change to acounting rules.
  • spacecowboy_lon 11y ago
    Its only better for the company
  • st3v3r 11y ago
    Otherwise known as putting all of the risk entirely on the employee. Which is in no way whatsoever good for the worker.
• rayiner 11y ago
  The labor dispute primarily (only?) involves workers in the wireline division. That division made about $1 billion in operating income (before taxes), on almost $40 billion in revenue. The division's operating profit margin is a razor-thin 2.7%.
  • refurb 11y ago
    I'm glad someone pointed this out. It's not the absolute dollars of profit that matter, but the percent margin. If I make $1B in profit off of $2B in sales, I'm much better off than $1B in profit off of $1T in sales.
    • rlucas 11y ago
      Not necessarily. If the 2B in sales is highly volatile, and/or requires a lot of equity investment, you might rationally prefer the 1T in sales if the latter is highly stable (utility) and highly leveraged (tiny amount of equity). Otherwise: agreed that these things are rarely reduceable to a single scalar (amount of profit).
  • Ilverin 11y ago
    2.7% profit is not really razor-thin. According to economists, over the "long term", profits tend to 0%. Wireline technologies are quite old, it seems the long term is here.
    • deleted 11y ago
      [deleted]
    • whatok 11y ago
      Zero profit theory is based on having heavy competition which utilities do not have. 2.7% is absolutely razor-thin for something that is so capex heavy and with a heavy pension burden.
      • rlucas 11y ago
        Not weighing in on whether the 1B in profit is "a lot" but a financial analyst would also want to look at return on equity, because a business like VZ likely "should" be highly leveraged (financing its long lived assets not with equity but with cheap long term debt). It is common that small absolute earnings as a percent of revenue look much more attractive when considered as against how much it yields the owners (equity). Also, a business like that is going to have a metric crap-ton of noncash items, plus interest and taxes. So looking at free cash flow or ebitda are pretty enlightening in such cases. Finally, there are comps so looking at this in isolation tells us nothing about idiosyncratic (management) performance rather than industry conditions. My point is that a drive-by financial analysis of the net income margin of VZ is not at all instructive, and can't be used one way or another to justify/attack the propriety of labor grievances.