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GE freezes pension benefits for 20k employees

170 points by jrwan 7y ago

eternalny1 7y ago
Keep in mind this comes on the heels of the Madoff whistleblower saying GE is a fraud: https://www.barrons.com/articles/ge-insurance-fraud-madoff-whistleblower-report-51565915505 https://www.barrons.com/articles/ge-insurance-fraud-madoff-w... They piled up massive losses in their insurance division (long term care) and guess who gets slammed because of it? The workers.
- lotsofpulp 7y ago
  I doubt it, defined benefit pension plans don't make financial sense in the current climate. Who is able to predict which company will be around in 30 to 60 years in the future, and what the economic climate will be? And much of the pension fund investments are going to the same place as 401k money anyway. Why not directly invest in VTI and skip paying all the pension fund managers and staff? It's not like they have some secret investment return recipe, and it shows in their performance.
  - chrisseaton 7y ago
    I wouldn’t even agree to getting a defined benefit pension these days - why wouldn’t you want to invest your own money instead of letting one company you happened to work for control your pension? I have a defined benefit pension from a previous employer and frankly I count it as zero in my financial planning since I have no idea if it’s actually coming or not.
    - mikepurvis 7y ago
      Americans love having the one company they happened to work for control their healthcare, though.
      - deleted 7y ago
        [deleted]
    - SketchySeaBeast 7y ago
      It still has value, assuming you're intending on working until you retire and the company has no signs of failling - why wouldn't you want a (nearly) guaranteed income for the rest of your life? That doesn't preclude you from investing your own extra cash into investments. I understand the dynamics have changed, but my boomer parents and in-laws are both enjoying retirement with the fruits of a defined benefit pension, and both are quite comfortable.
      - lotsofpulp 7y ago
        30 years ago, if you said GE might be failing in 2019, you would have been considered crazy. There are no guarantees in life, even if the law says there are. The only reason your elders are enjoying the fruits of a defined benefit pension is because the costs of their pensions was hidden by an assumption of ever growing populations and economic growth. Additionally, why give control of your retirement funds to someone else when you can have control of your money? They're investing it in the same place as you would, and not getting any better returns.
        SketchySeaBeast 7y ago
        Because when I retire they continue pumping money into the same funds - I can't do that, my contributions stop and I enter "withdraw" mode - the company doesn't. Yes, the plan can have problems, but I'm just saying why I think people still like it, and it does have definite advantages over your own savings.
        chrisseaton 7y ago
        > when I retire they continue pumping money into the same funds Lol you hope.
        SketchySeaBeast 7y ago
        It's not without it's own faults, I get that.
      - 7y ago
    - eternalny1 7y ago
      On the flip side I know people who have completely squandered their 401k due to poor financial habits, and others who are getting a check, monthly, for life. Guess which one of those two is happier? Sure, you may say the first group was foolish, but we are talking your average American workers here not an investor-savvy class. Perhaps make it an option, if you want to gamble go for it, if you lose don't come crying for your retirement checks.
    - ghaff 7y ago
      Paying out defined benefit plans aren't totally at the whim of the company. For example, there are protections through the Pension Benefit Guaranty Corporation and you could probably arrange for your own insurance as well. Having some savings as defined benefit does give you predictability. Even if you don't have a defined benefit plan through a company, it may make sense to convert some savings into an annuity of some sort.
      - lotsofpulp 7y ago
        >For example, there are protections through the Pension Benefit Guaranty Corporation and you could probably arrange for your own insurance as well. The PBGC is just for show. They can't even guarantee the pensions of the multi employer defined pension plans that are about to fail, so there is a bill in congress to bail them out currently: https://burypensions.wordpress.com/2019/01/09/butch-lewis-act-re-introduced/ https://burypensions.wordpress.com/2019/01/09/butch-lewis-ac...
      - cannonedhamster 7y ago
        Companies just suckle up to the public teat when they make a bad business decision and it's always the employees that take it in the shorts. The executives get paid big bucks for making decisions but bear no responsibility for the results. It's all upside for them. That's a gamed system in need of being broken.
    - walshemj 7y ago
      Don't take this the wrong way but you need to take some serious advice, DB pensions are far far better than a DC. Look at the transfer values of some DB pensions they can be worth multiple millions and no way would an individual be able to build up an equivalent amount in a DC scheame
      - chrisseaton 7y ago
        > no way would an individual be able to build up an equivalent amount in a DC scheame Well if you put millions in you get millions out.
      - nguoi 7y ago
        There's no magic financial effect that makes the money going into a DB scheme worth more. The money has to come from somewhere and, in these cases, it's from companies that underestimated or ignored what the future costs would be.
        walshemj 7y ago
        You do understand that DB is a collective scheme and DC its not just you. Your DB pension is funded by those that came before you and those coming after.
        deleted 7y ago
        [deleted]
        nguoi 7y ago
        I'd love to hear how someone would intonate a statement beginning with 'you do understand' if they said it to me in meatspace.
        walshemj 7y ago
        Sorry I should have phrased that better for those whose first language isn't English. Its phrasing in that sense would be similar to "Dude your making a big mistake"
  - rileymat2 7y ago
    The simple answer is that group mortality is easier to estimate and plan for than individual mortality. At 65, you do not know if you are going to live to 70 or 101, so you need to plan your 401k accordingly, pessimistic. Couple that with the fact that many many americans could not save enough to last to 101, but could last until 72. So they are left with the choice of living more poorly than they should or running out of money. Defined benefit makes way more sense, some people "win" by living longer, others lose. But there is much less stress in the meantime.
    - lotsofpulp 7y ago
      Defined benefit might make sense on a societal level, aka Social Security benefits in the US. On an employer level, it does not make sense as they have no idea if they will exist in the next 10, 20, 30 years, especially with automation and globalization changing the economic environment very quickly. Which is exactly what real life shows, as companies are jettisoning defined benefit pensions to stay competitive. On an individual level, a pension plan also doesn't make sense, as you can do what pension fund managers do via target date funds and save the money spent on paying the pension fund managers. And avoiding the corruption risk of employers underfunding and fund managers malinvesting. If you want protection that you will have income until you die, one should purchase an annuity. However, a much cheaper and better idea in my opinion, is raising a family that will support you in your old age, because it's prohibitively expensive to purchase the kind of care that comes from loving relationships in your old age.
      - rileymat2 7y ago
        At an individual level, You can invest the same way, the problem is, you don't know how long you will live. Which was my main point. There are annuities, but my research into those has come up with very high costs with lots of fees.
        lotsofpulp 7y ago
        >There are annuities, but my research into those has come up with very high costs with lots of fees. Yes, as most non taxpayer funded employers have found out, and reduced their offering of defined benefit pensions accordingly. My point is that no one has the ability to protect and afford against the kind of long term risk that you are talking about, and the best model I've seen to address it is when children and grandchildren take care of their elders.
  - walshemj 7y ago
    1 DB schemes are much better for the employee than DC 2 Pensions funds are different to investing for individuals (with small portfolios) DB schemes have very long lifetimes and have to invest for multiple generations and cant just invest in a tracker - they have to have a suitable investments in bonds and guilts for example./
  - froindt 7y ago
    I agree. It was interesting to see this all come up with union negotiations. The union's push against switching to a 401k was that it puts them at risk when the market performs poorly. Unfortunately from a company standpoint, when the market goes down, their required pension contributions go up, a real bind in cash when you need it most. There's more politics involved - like the automotive unions giving up numerous raises for better pensions, companies refusing to fully fund pensions in good years leading to them being woefully underfunded in bad, etc. Personally I'm glad to not have a pension hanging over my head. I could leave tomorrow and have the full value of my 401k. I know people who are miserable and hate their jobs, but if they leave before hitting 30 years, they get barely anything. At my company, leaving at 29 years would yield less than half the monthly payout compared to 30 years. The pension and social security is the retirement plan for those who live paycheck to paycheck. I do really wish everyone had the same access to tax advantaged accounts. The administration costs of 401k's make it more challenging for small companies to offer. All else equal, having a 401k available versus unavailable is with a few thousand dollars per year to me because of the tax deferral.
    - lotsofpulp 7y ago
      >There's more politics involved - like the automotive unions giving up numerous raises for better pensions, companies refusing to fully fund pensions in good years leading to them being woefully underfunded in bad, etc. This is the inherent agency risk in defined benefits. The people at the beginning can make off like bandits while screwing those down the line, whether intentionally or not (due to global economic environmental changes). >I do really wish everyone had the same access to tax advantaged accounts. The administration costs of 401k's make it more challenging for small companies to offer. All else equal, having a 401k available versus unavailable is with a few thousand dollars per year to me because of the tax deferral. 401k are extremely easy to administer, or at least much, much easier than defined benefit pensions. However, it would be ideal if the US government stopped giving large companies subsidies (via the 401k tax deduction), and simply gave an IRA deduction to everyone, regardless of employer or whatnot. There is no need for employers to be involved.
      - froindt 7y ago
- lightedman 7y ago
  GE is probably a bit more than fraud given my experience with some of their LED products. I'd say they're outright liars. The UV Blacklight they advertise at 7W - you think that's getting 7W of UVLED. Nope, instead you get a single 1W UV LED surrounded by 4 1.5W LEDs. And you pay almost $20 for this rip-off of false advertising.
- Traster 7y ago
  It's worth noting here, that nothing in this new news indicates any sort of fraud, merely that GE is struggling - as everyone already knew.
- rayiner 7y ago
  Yes, GE lost a bunch of money in purpose so it could screw over workers.
  - throwaway926 7y ago
    Usually companies cut compensation as a last resort, as it's damaging to morale. They don't do it for fun. Some people are obsessed to see employment relations as a zero sum game.
- seren 7y ago
  For what it is worth, the website that was launched alongside the fraud allegations has already been removed. http://web.archive.org/web/20190929121126/https://www.gefraud.com/ http://web.archive.org/web/20190929121126/https://www.gefrau... So basically, there was some media orchestration, GE stock dipped somewhat, potentially the hedge fund paying Markopolos made some benefits and there was not really any follow up (so far) from the SEC. And the website disappeared a month later. I felt that the reactions from analysts were that most long term care insurances are problematic, GE possibly a bit more but not spectacularly worse than competition, and that the "fraud" part was a bit overblown. We'll see if the SEC will open an investigation, but so far not a lot happened. Still even without being a fraud, this might be an issue in the years to come for GE to be able to generate enough cash to pay for its long term care business...
  - guardiangod 7y ago
    >the website that was launched alongside the fraud allegations has already been removed. Maybe the SEC is starting the case and asked the tipsters to remove all relevant documents online to prevent prejury?
- sailfast 7y ago
  For what it's worth, shareholders are also getting slammed, but they can always sell to get away. Not always an option for folks that are employed at the organization.
- harryh 7y ago
  It's not just the workers, GE shareholders have gotten slammed as well. GE's stock is down about 70% in the last 3 years. This is what happens when a business underperforms.
dannykwells 7y ago
Can someone explain what this means, and how its not illegal? Arent pensions a contract?
- JoeAltmaier 7y ago
  Pensions are very strange. IBM abolished its pension program some decade ago, replaced with a 401K funded to 25% or some such. Saved IBM billions; pissed off a generation of employees. So no, not really a contract.
  - MuffinFlavored 7y ago
    > replaced with a 401K funded to 25% or some such. 25% employer contribution match? That seems very high. I've never worked at a company with higher than 5% match.
    - JoeAltmaier 7y ago
      No, funded to up to 25% of pay. The pension terms were much much better than that. I don't know what kind of match they had.
    - pixel16 7y ago
      Microsoft does a 50% unlimited match up to the irs cap FYI.
      - MuffinFlavored 7y ago
        IRS cap is $19k/yr, meaning Microsoft does up at $9.5k/yr. That is about in line with what I have seen. Most companies will give you about $5k - $8k/yr. What is a common yearly bonus/raise like at Microsoft, including stock options/grants?
    - grogers 7y ago
      Don't know how to verify what it was, but their current match is 100% up to 5% of pay, plus a free 1% of pay. It's good compared to most tech companies but not outrageously good.
twodave 7y ago
Do pension funds rely on a growing population in order to sustain themselves? I wonder whether they'll see a resurgence as the baby boomers die off and the age distribution in the U.S. becomes more uniform, or if these sorts of plans are a thing of the past.
- anonuser123456 7y ago
  In the corporate world, probably not. Pensions obligations just look like debt on the balance sheet... but they have high administrative overhead. Further, there is the risk that life expectancy will continue to grow... thus making those liabilities much larger. In government... I don't think pensions ever went out of fashion. Why bother when you can always just print more money?
  - voxic11 7y ago
    Not all governments can just print more money, which is why many state and local pension programs are in major trouble.
    - anonuser123456 7y ago
      Good point. I'll amend my statement with "or raise taxes!"
      - mywittyname 7y ago
        Or, more accurately: issue more traffic citations.
  - hiram112 7y ago
    > In government... I don't think pensions ever went out of fashion. There are a lot of different pension schemes out there as the feds, states, and localities do not use uniform plans. What I've seen, though, is that there are now "two tiers" - one for older employees and another for younger ones. You can guess which plan is more generous... A lot of localities and states see the writing on the wall - that their perpetual 9% growth rates and population increases won't keep up, and are thus moving new employees into 401K plans, no different than the rest of us in the private sector. Honestly, I don't think I'd be able to tolerate being a teacher or state employee, and knowing that my manager, 20 years older than me, has a retirement worth 3x as much, and it will be funded by increasingly shorting me on salary and benefits (along with tax increases) as the pension liabilities become harder to pay. Look at certain cities like Chicago and Baltimore and states like New Jersey for a current example.
mschuster91 7y ago
... and this is why pension schemes should be managed by the government or at least tightly regulated. Just imagine GE going bankrupt - who's gonna pay the pension, then? The government in a bailout or what?
- deleted 7y ago
  [deleted]
- sesuximo 7y ago
  At least in the US, what you describe is reality. Pensions are regulated heavily (you may disagree with the few legal flexibilities though). And they are at least partially insured: https://www.pbgc.gov/ https://www.pbgc.gov/ Maybe the PBGC will go under? Who knows.
  - lotsofpulp 7y ago
    Non taxpayer funded defined benefit pensions are regulated. Taxpayer funded defined benefit pensions have zero regulation. Because they have the power to tax. And there is a bill currently worming it's way through congress to bailout PBGC (although they don't say it directly): https://www.govtrack.us/congress/bills/116/hr397 https://www.govtrack.us/congress/bills/116/hr397 https://burypensions.wordpress.com/2019/01/09/butch-lewis-act-re-introduced/ https://burypensions.wordpress.com/2019/01/09/butch-lewis-ac...
- helpPeople 7y ago
  Do people not understand this is how pensions work. If your company isn't there when you retire, you don't get a pension. I find it incredibly risky to rely on pensions. I don't quite understand why employees are so excited about non cash benefits.
  - lotsofpulp 7y ago
    >I don't quite understand why employees are so excited about non cash benefits. They might not be aware that automation has done away with the role of pension fund managers. In the old days, you couldn't just go out and buy a total stock market or bond market ETF. Nowadays, you don't even have to think about asset allocation with target date funds. And since all investments are going towards the fewer and fewer remaining companies, a bailout for one is a bailout for all.
dfischer 7y ago
More signs of debt crisis and global liquidity risk. Now wait until California capitulates...
- dfischer 7y ago
  Lol downvoted? Why?
anonuser123456 7y ago
Most (if not all) pensions do not contractually guarantee future contributions or cost of living adjustments. You can't claw back existing obligations, or promised future obligations. Pension systems are just a big scam on everyone.
Clubber 7y ago
I inherited the desire to buy American cars to support America workers from my Uncle would was a WWII vet. He didn't like Japanese products (he was in the Pacific theatre). I've been buying American cars for the last 20+ years and currently own a GM. I think the next one I buy will be Japanese or German and it's ironic. While I spent my money on American cars to support American workers, the American companies offshore their manufacturing / assembly to Mexico while foreign companies who sell cars in the US use domestic labor for manufacture / assembly. So it seems like if you want to support American workers, you should buy foreign cars that manufacture / assemble in the US. That's certainly unintuitive.
- rootusrootus 7y ago
  Are you conflating GM with GE?
  - entropea 7y ago
    I read it that way too, at first, mostly because of GM's recent strike & health benefit cut headlines.
    - RIMR 7y ago
      That's pretty incredible that you read this article so fast that you managed to misread the ~30 instances of "GE" and "General Electric" as "GM" and "General Motors", and never noticed the giant "GE" logo at the top of the article, or the "General Electric" stock ticker on the sidebar. It's almost like you only read the headline and nothing else, because the article itself screams "General Electric" in a way that nobody who actually visited the page would ever have been confused.
  - Clubber 7y ago
    Yes. I guess it's because GM is in the news too.
rlonstein 7y ago
Appropriate... https://www.youtube.com/watch?v=zOXtWxhlsUg https://www.youtube.com/watch?v=zOXtWxhlsUg
joeyrideout 7y ago
An important distinction to make with GE is that most of their pension plan is "defined benefit" as opposed to "defined contribution". The latter is much more common nowadays because it avoids these massive long-term obligations to the company. EDIT: Added "most of". A percentage of their employee base has already transitioned to defined contribution.
- lotsofpulp 7y ago
  In the US, "pension" typically means a defined benefit pension.
  - joeyrideout 7y ago
    Not any more... "The percentage of workers in the private sector whose only retirement account is a defined benefit pension plan is now 4%, down from 60% in the early 1980s. About 14% of companies offer a combination of both types." [1] [1] https://money.cnn.com/retirement/guide/pensions_basics.moneymag/index7.htm https://money.cnn.com/retirement/guide/pensions_basics.money...
    - lotsofpulp 7y ago
      I mean that in common vernacular, when someone says "pension", they are referring to a defined benefit pension. Otherwise, in the US, we use 401k, IRA, "retirement funds", or other words.
      - walshemj 7y ago
        And a 401k and IRAs is are very poor "pension" plan compared two other countries.
        lotsofpulp 7y ago
        I'm not sure what you're claiming. It's possible to design a very lucrative and costly defined benefit pension, but in the US, no employer is offering it other than governments, and even the governments are beginning to croak under the stress of unsustainable benefits, so new employees are not eligible for them.
kpmcc 7y ago
And while they cut pension benefits, this is what the CEO makes: https://www.cnbc.com/2018/10/05/new-ge-ceo-larry-culp-inks-stock-heavy-contract-worth-up-to-300-million-if-shares-soar.html https://www.cnbc.com/2018/10/05/new-ge-ceo-larry-culp-inks-s...
- spo81rty 7y ago
  It says his compensation is largely tied to company stock performance. He is not guaranteed all of that money. He and the company have to perform.
  - eternalny1 7y ago
    And shares rose on the news of the pension cuts. It's not hard to play this game, if your incentive is to make the stock price go up. Slash and burn.
  - rwmj 7y ago
    Stock is up 3% on this news, and no doubt will be up on future news of cuts to headcount, benefits, etc. So there's a conflict of interest here.
    - eternalban 7y ago
      I believe the "conflict" is called class warfare.
    - nomel 7y ago
      Conflict of interest? Isn’t the interest of a business survival and profit?
      - RIMR 7y ago
        Those are examples of business interests, but if any business that doesn't care about the physical and financial wellbeing of its workers is a business we are better off without. "We made a profit" is never an excuse for unethical/immoral business dealings.
entropea 7y ago
Didn't they just get a massive tax cut?
zarro 7y ago
I really think that the sooner we can separate out pensions and healthcare from employers, the better. Businesses main area of expertise is not in pensions and healthcare, and they cannot provide these services as efficiently as if there were many different insurance companies on the market offering these services for sale, and instead the company paid you a fee for your services, and then you went out on the market and bought your own pension plan and health insurance.
- orian 7y ago
  You mean like in good, old Europe? No way!
  - geogra4 7y ago
    Well, the european model sees these as natural monopolies and just provides them at the state level
  - zarro 7y ago
    I'm not sure that the European version of outsourcing that responsibility to the government is the way to go for the same reason. Letting people set up private companies with competitive options I think would probably drive the best results.
    - throwaway2048 7y ago
      Why?
    - mankyd 7y ago
      Isn't that what American health insurance companies are?
      - Someone1234 7y ago
        Kinda yes. But it isn't competitive when you cannot even pick your own health insurance company nor see prices for medical care (or see what is in/out of network). Splitting employers from health insurance is one of several required changes that needs to happen before the supposed hand of capitalism can allow the market to get healthier. I have no idea if it would work, but the status quo is so unhealthy at the very least improvement competition/choice could improve that somewhat.
deleted 7y ago
[deleted]
La-ang 7y ago
Lol. I remember Chomsky saying GE is not about manufacturing much as it ought to be, but rather about moving money in very complicated ways.Who foresees its collapse in the next 5 years?
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170 points by jrwan 7y ago

Keep in mind this comes on the heels of the Madoff whistleblower saying GE is a fraud: https://www.barrons.com/articles/ge-insurance-fraud-madoff-whistleblower-report-51565915505 https://www.barrons.com/articles/ge-insurance-fraud-madoff-w... They piled up massive losses in their insurance division (long term care) and guess who gets slammed because of it? The workers.

lotsofpulp 7y ago
I doubt it, defined benefit pension plans don't make financial sense in the current climate. Who is able to predict which company will be around in 30 to 60 years in the future, and what the economic climate will be? And much of the pension fund investments are going to the same place as 401k money anyway. Why not directly invest in VTI and skip paying all the pension fund managers and staff? It's not like they have some secret investment return recipe, and it shows in their performance.
- chrisseaton 7y ago
  I wouldn’t even agree to getting a defined benefit pension these days - why wouldn’t you want to invest your own money instead of letting one company you happened to work for control your pension? I have a defined benefit pension from a previous employer and frankly I count it as zero in my financial planning since I have no idea if it’s actually coming or not.
  - mikepurvis 7y ago
    Americans love having the one company they happened to work for control their healthcare, though.
    - deleted 7y ago
      [deleted]
  - SketchySeaBeast 7y ago
    It still has value, assuming you're intending on working until you retire and the company has no signs of failling - why wouldn't you want a (nearly) guaranteed income for the rest of your life? That doesn't preclude you from investing your own extra cash into investments. I understand the dynamics have changed, but my boomer parents and in-laws are both enjoying retirement with the fruits of a defined benefit pension, and both are quite comfortable.
    - lotsofpulp 7y ago
      30 years ago, if you said GE might be failing in 2019, you would have been considered crazy. There are no guarantees in life, even if the law says there are. The only reason your elders are enjoying the fruits of a defined benefit pension is because the costs of their pensions was hidden by an assumption of ever growing populations and economic growth. Additionally, why give control of your retirement funds to someone else when you can have control of your money? They're investing it in the same place as you would, and not getting any better returns.
      - SketchySeaBeast 7y ago
        Because when I retire they continue pumping money into the same funds - I can't do that, my contributions stop and I enter "withdraw" mode - the company doesn't. Yes, the plan can have problems, but I'm just saying why I think people still like it, and it does have definite advantages over your own savings.
        chrisseaton 7y ago
        > when I retire they continue pumping money into the same funds Lol you hope.
        SketchySeaBeast 7y ago
        It's not without it's own faults, I get that.
    - 7y ago
  - eternalny1 7y ago
    On the flip side I know people who have completely squandered their 401k due to poor financial habits, and others who are getting a check, monthly, for life. Guess which one of those two is happier? Sure, you may say the first group was foolish, but we are talking your average American workers here not an investor-savvy class. Perhaps make it an option, if you want to gamble go for it, if you lose don't come crying for your retirement checks.
  - ghaff 7y ago
    Paying out defined benefit plans aren't totally at the whim of the company. For example, there are protections through the Pension Benefit Guaranty Corporation and you could probably arrange for your own insurance as well. Having some savings as defined benefit does give you predictability. Even if you don't have a defined benefit plan through a company, it may make sense to convert some savings into an annuity of some sort.
    - lotsofpulp 7y ago
      >For example, there are protections through the Pension Benefit Guaranty Corporation and you could probably arrange for your own insurance as well. The PBGC is just for show. They can't even guarantee the pensions of the multi employer defined pension plans that are about to fail, so there is a bill in congress to bail them out currently: https://burypensions.wordpress.com/2019/01/09/butch-lewis-act-re-introduced/ https://burypensions.wordpress.com/2019/01/09/butch-lewis-ac...
    - cannonedhamster 7y ago
      Companies just suckle up to the public teat when they make a bad business decision and it's always the employees that take it in the shorts. The executives get paid big bucks for making decisions but bear no responsibility for the results. It's all upside for them. That's a gamed system in need of being broken.
  - walshemj 7y ago
    Don't take this the wrong way but you need to take some serious advice, DB pensions are far far better than a DC. Look at the transfer values of some DB pensions they can be worth multiple millions and no way would an individual be able to build up an equivalent amount in a DC scheame
    - chrisseaton 7y ago
      > no way would an individual be able to build up an equivalent amount in a DC scheame Well if you put millions in you get millions out.
    - nguoi 7y ago
      There's no magic financial effect that makes the money going into a DB scheme worth more. The money has to come from somewhere and, in these cases, it's from companies that underestimated or ignored what the future costs would be.
      - walshemj 7y ago
        You do understand that DB is a collective scheme and DC its not just you. Your DB pension is funded by those that came before you and those coming after.
        deleted 7y ago
        [deleted]
        nguoi 7y ago
        I'd love to hear how someone would intonate a statement beginning with 'you do understand' if they said it to me in meatspace.
        walshemj 7y ago
        Sorry I should have phrased that better for those whose first language isn't English. Its phrasing in that sense would be similar to "Dude your making a big mistake"
- rileymat2 7y ago
  The simple answer is that group mortality is easier to estimate and plan for than individual mortality. At 65, you do not know if you are going to live to 70 or 101, so you need to plan your 401k accordingly, pessimistic. Couple that with the fact that many many americans could not save enough to last to 101, but could last until 72. So they are left with the choice of living more poorly than they should or running out of money. Defined benefit makes way more sense, some people "win" by living longer, others lose. But there is much less stress in the meantime.
  - lotsofpulp 7y ago
    Defined benefit might make sense on a societal level, aka Social Security benefits in the US. On an employer level, it does not make sense as they have no idea if they will exist in the next 10, 20, 30 years, especially with automation and globalization changing the economic environment very quickly. Which is exactly what real life shows, as companies are jettisoning defined benefit pensions to stay competitive. On an individual level, a pension plan also doesn't make sense, as you can do what pension fund managers do via target date funds and save the money spent on paying the pension fund managers. And avoiding the corruption risk of employers underfunding and fund managers malinvesting. If you want protection that you will have income until you die, one should purchase an annuity. However, a much cheaper and better idea in my opinion, is raising a family that will support you in your old age, because it's prohibitively expensive to purchase the kind of care that comes from loving relationships in your old age.
    - rileymat2 7y ago
      At an individual level, You can invest the same way, the problem is, you don't know how long you will live. Which was my main point. There are annuities, but my research into those has come up with very high costs with lots of fees.
      - lotsofpulp 7y ago
        >There are annuities, but my research into those has come up with very high costs with lots of fees. Yes, as most non taxpayer funded employers have found out, and reduced their offering of defined benefit pensions accordingly. My point is that no one has the ability to protect and afford against the kind of long term risk that you are talking about, and the best model I've seen to address it is when children and grandchildren take care of their elders.
- walshemj 7y ago
  1 DB schemes are much better for the employee than DC 2 Pensions funds are different to investing for individuals (with small portfolios) DB schemes have very long lifetimes and have to invest for multiple generations and cant just invest in a tracker - they have to have a suitable investments in bonds and guilts for example./
- froindt 7y ago
  I agree. It was interesting to see this all come up with union negotiations. The union's push against switching to a 401k was that it puts them at risk when the market performs poorly. Unfortunately from a company standpoint, when the market goes down, their required pension contributions go up, a real bind in cash when you need it most. There's more politics involved - like the automotive unions giving up numerous raises for better pensions, companies refusing to fully fund pensions in good years leading to them being woefully underfunded in bad, etc. Personally I'm glad to not have a pension hanging over my head. I could leave tomorrow and have the full value of my 401k. I know people who are miserable and hate their jobs, but if they leave before hitting 30 years, they get barely anything. At my company, leaving at 29 years would yield less than half the monthly payout compared to 30 years. The pension and social security is the retirement plan for those who live paycheck to paycheck. I do really wish everyone had the same access to tax advantaged accounts. The administration costs of 401k's make it more challenging for small companies to offer. All else equal, having a 401k available versus unavailable is with a few thousand dollars per year to me because of the tax deferral.
  - lotsofpulp 7y ago
    >There's more politics involved - like the automotive unions giving up numerous raises for better pensions, companies refusing to fully fund pensions in good years leading to them being woefully underfunded in bad, etc. This is the inherent agency risk in defined benefits. The people at the beginning can make off like bandits while screwing those down the line, whether intentionally or not (due to global economic environmental changes). >I do really wish everyone had the same access to tax advantaged accounts. The administration costs of 401k's make it more challenging for small companies to offer. All else equal, having a 401k available versus unavailable is with a few thousand dollars per year to me because of the tax deferral. 401k are extremely easy to administer, or at least much, much easier than defined benefit pensions. However, it would be ideal if the US government stopped giving large companies subsidies (via the 401k tax deduction), and simply gave an IRA deduction to everyone, regardless of employer or whatnot. There is no need for employers to be involved.
    - froindt 7y ago
lightedman 7y ago
GE is probably a bit more than fraud given my experience with some of their LED products. I'd say they're outright liars. The UV Blacklight they advertise at 7W - you think that's getting 7W of UVLED. Nope, instead you get a single 1W UV LED surrounded by 4 1.5W LEDs. And you pay almost $20 for this rip-off of false advertising.
Traster 7y ago
It's worth noting here, that nothing in this new news indicates any sort of fraud, merely that GE is struggling - as everyone already knew.
rayiner 7y ago
Yes, GE lost a bunch of money in purpose so it could screw over workers.
- throwaway926 7y ago
  Usually companies cut compensation as a last resort, as it's damaging to morale. They don't do it for fun. Some people are obsessed to see employment relations as a zero sum game.
seren 7y ago
For what it is worth, the website that was launched alongside the fraud allegations has already been removed. http://web.archive.org/web/20190929121126/https://www.gefraud.com/ http://web.archive.org/web/20190929121126/https://www.gefrau... So basically, there was some media orchestration, GE stock dipped somewhat, potentially the hedge fund paying Markopolos made some benefits and there was not really any follow up (so far) from the SEC. And the website disappeared a month later. I felt that the reactions from analysts were that most long term care insurances are problematic, GE possibly a bit more but not spectacularly worse than competition, and that the "fraud" part was a bit overblown. We'll see if the SEC will open an investigation, but so far not a lot happened. Still even without being a fraud, this might be an issue in the years to come for GE to be able to generate enough cash to pay for its long term care business...
- guardiangod 7y ago
  >the website that was launched alongside the fraud allegations has already been removed. Maybe the SEC is starting the case and asked the tipsters to remove all relevant documents online to prevent prejury?
sailfast 7y ago
For what it's worth, shareholders are also getting slammed, but they can always sell to get away. Not always an option for folks that are employed at the organization.
harryh 7y ago
It's not just the workers, GE shareholders have gotten slammed as well. GE's stock is down about 70% in the last 3 years. This is what happens when a business underperforms.

dannykwells 7y ago

Can someone explain what this means, and how its not illegal? Arent pensions a contract?

JoeAltmaier 7y ago
Pensions are very strange. IBM abolished its pension program some decade ago, replaced with a 401K funded to 25% or some such. Saved IBM billions; pissed off a generation of employees. So no, not really a contract.
- MuffinFlavored 7y ago
  > replaced with a 401K funded to 25% or some such. 25% employer contribution match? That seems very high. I've never worked at a company with higher than 5% match.
  - JoeAltmaier 7y ago
    No, funded to up to 25% of pay. The pension terms were much much better than that. I don't know what kind of match they had.
  - pixel16 7y ago
    Microsoft does a 50% unlimited match up to the irs cap FYI.
    - MuffinFlavored 7y ago
      IRS cap is $19k/yr, meaning Microsoft does up at $9.5k/yr. That is about in line with what I have seen. Most companies will give you about $5k - $8k/yr. What is a common yearly bonus/raise like at Microsoft, including stock options/grants?
  - grogers 7y ago
    Don't know how to verify what it was, but their current match is 100% up to 5% of pay, plus a free 1% of pay. It's good compared to most tech companies but not outrageously good.

twodave 7y ago

Do pension funds rely on a growing population in order to sustain themselves? I wonder whether they'll see a resurgence as the baby boomers die off and the age distribution in the U.S. becomes more uniform, or if these sorts of plans are a thing of the past.

anonuser123456 7y ago
In the corporate world, probably not. Pensions obligations just look like debt on the balance sheet... but they have high administrative overhead. Further, there is the risk that life expectancy will continue to grow... thus making those liabilities much larger. In government... I don't think pensions ever went out of fashion. Why bother when you can always just print more money?
- voxic11 7y ago
  Not all governments can just print more money, which is why many state and local pension programs are in major trouble.
  - anonuser123456 7y ago
    Good point. I'll amend my statement with "or raise taxes!"
    - mywittyname 7y ago
      Or, more accurately: issue more traffic citations.
- hiram112 7y ago
  > In government... I don't think pensions ever went out of fashion. There are a lot of different pension schemes out there as the feds, states, and localities do not use uniform plans. What I've seen, though, is that there are now "two tiers" - one for older employees and another for younger ones. You can guess which plan is more generous... A lot of localities and states see the writing on the wall - that their perpetual 9% growth rates and population increases won't keep up, and are thus moving new employees into 401K plans, no different than the rest of us in the private sector. Honestly, I don't think I'd be able to tolerate being a teacher or state employee, and knowing that my manager, 20 years older than me, has a retirement worth 3x as much, and it will be funded by increasingly shorting me on salary and benefits (along with tax increases) as the pension liabilities become harder to pay. Look at certain cities like Chicago and Baltimore and states like New Jersey for a current example.

mschuster91 7y ago

... and this is why pension schemes should be managed by the government or at least tightly regulated. Just imagine GE going bankrupt - who's gonna pay the pension, then? The government in a bailout or what?

deleted 7y ago
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sesuximo 7y ago
At least in the US, what you describe is reality. Pensions are regulated heavily (you may disagree with the few legal flexibilities though). And they are at least partially insured: https://www.pbgc.gov/ https://www.pbgc.gov/ Maybe the PBGC will go under? Who knows.
- lotsofpulp 7y ago
  Non taxpayer funded defined benefit pensions are regulated. Taxpayer funded defined benefit pensions have zero regulation. Because they have the power to tax. And there is a bill currently worming it's way through congress to bailout PBGC (although they don't say it directly): https://www.govtrack.us/congress/bills/116/hr397 https://www.govtrack.us/congress/bills/116/hr397 https://burypensions.wordpress.com/2019/01/09/butch-lewis-act-re-introduced/ https://burypensions.wordpress.com/2019/01/09/butch-lewis-ac...
helpPeople 7y ago
Do people not understand this is how pensions work. If your company isn't there when you retire, you don't get a pension. I find it incredibly risky to rely on pensions. I don't quite understand why employees are so excited about non cash benefits.
- lotsofpulp 7y ago
  >I don't quite understand why employees are so excited about non cash benefits. They might not be aware that automation has done away with the role of pension fund managers. In the old days, you couldn't just go out and buy a total stock market or bond market ETF. Nowadays, you don't even have to think about asset allocation with target date funds. And since all investments are going towards the fewer and fewer remaining companies, a bailout for one is a bailout for all.

dfischer 7y ago

More signs of debt crisis and global liquidity risk. Now wait until California capitulates...

dfischer 7y ago
Lol downvoted? Why?

anonuser123456 7y ago

Most (if not all) pensions do not contractually guarantee future contributions or cost of living adjustments. You can't claw back existing obligations, or promised future obligations. Pension systems are just a big scam on everyone.

Clubber 7y ago

I inherited the desire to buy American cars to support America workers from my Uncle would was a WWII vet. He didn't like Japanese products (he was in the Pacific theatre). I've been buying American cars for the last 20+ years and currently own a GM. I think the next one I buy will be Japanese or German and it's ironic. While I spent my money on American cars to support American workers, the American companies offshore their manufacturing / assembly to Mexico while foreign companies who sell cars in the US use domestic labor for manufacture / assembly. So it seems like if you want to support American workers, you should buy foreign cars that manufacture / assemble in the US. That's certainly unintuitive.

rootusrootus 7y ago
Are you conflating GM with GE?
- entropea 7y ago
  I read it that way too, at first, mostly because of GM's recent strike & health benefit cut headlines.
  - RIMR 7y ago
    That's pretty incredible that you read this article so fast that you managed to misread the ~30 instances of "GE" and "General Electric" as "GM" and "General Motors", and never noticed the giant "GE" logo at the top of the article, or the "General Electric" stock ticker on the sidebar. It's almost like you only read the headline and nothing else, because the article itself screams "General Electric" in a way that nobody who actually visited the page would ever have been confused.
- Clubber 7y ago
  Yes. I guess it's because GM is in the news too.

rlonstein 7y ago

Appropriate... https://www.youtube.com/watch?v=zOXtWxhlsUg https://www.youtube.com/watch?v=zOXtWxhlsUg

joeyrideout 7y ago

An important distinction to make with GE is that most of their pension plan is "defined benefit" as opposed to "defined contribution". The latter is much more common nowadays because it avoids these massive long-term obligations to the company. EDIT: Added "most of". A percentage of their employee base has already transitioned to defined contribution.

lotsofpulp 7y ago
In the US, "pension" typically means a defined benefit pension.
- joeyrideout 7y ago
  Not any more... "The percentage of workers in the private sector whose only retirement account is a defined benefit pension plan is now 4%, down from 60% in the early 1980s. About 14% of companies offer a combination of both types." [1] [1] https://money.cnn.com/retirement/guide/pensions_basics.moneymag/index7.htm https://money.cnn.com/retirement/guide/pensions_basics.money...
  - lotsofpulp 7y ago
    I mean that in common vernacular, when someone says "pension", they are referring to a defined benefit pension. Otherwise, in the US, we use 401k, IRA, "retirement funds", or other words.
    - walshemj 7y ago
      And a 401k and IRAs is are very poor "pension" plan compared two other countries.
      - lotsofpulp 7y ago
        I'm not sure what you're claiming. It's possible to design a very lucrative and costly defined benefit pension, but in the US, no employer is offering it other than governments, and even the governments are beginning to croak under the stress of unsustainable benefits, so new employees are not eligible for them.

kpmcc 7y ago

And while they cut pension benefits, this is what the CEO makes: https://www.cnbc.com/2018/10/05/new-ge-ceo-larry-culp-inks-stock-heavy-contract-worth-up-to-300-million-if-shares-soar.html https://www.cnbc.com/2018/10/05/new-ge-ceo-larry-culp-inks-s...

spo81rty 7y ago
It says his compensation is largely tied to company stock performance. He is not guaranteed all of that money. He and the company have to perform.
- eternalny1 7y ago
  And shares rose on the news of the pension cuts. It's not hard to play this game, if your incentive is to make the stock price go up. Slash and burn.
- rwmj 7y ago
  Stock is up 3% on this news, and no doubt will be up on future news of cuts to headcount, benefits, etc. So there's a conflict of interest here.
  - eternalban 7y ago
    I believe the "conflict" is called class warfare.
  - nomel 7y ago
    Conflict of interest? Isn’t the interest of a business survival and profit?
    - RIMR 7y ago
      Those are examples of business interests, but if any business that doesn't care about the physical and financial wellbeing of its workers is a business we are better off without. "We made a profit" is never an excuse for unethical/immoral business dealings.

entropea 7y ago

Didn't they just get a massive tax cut?

zarro 7y ago

I really think that the sooner we can separate out pensions and healthcare from employers, the better. Businesses main area of expertise is not in pensions and healthcare, and they cannot provide these services as efficiently as if there were many different insurance companies on the market offering these services for sale, and instead the company paid you a fee for your services, and then you went out on the market and bought your own pension plan and health insurance.

orian 7y ago
You mean like in good, old Europe? No way!
- geogra4 7y ago
  Well, the european model sees these as natural monopolies and just provides them at the state level
- zarro 7y ago
  I'm not sure that the European version of outsourcing that responsibility to the government is the way to go for the same reason. Letting people set up private companies with competitive options I think would probably drive the best results.
  - throwaway2048 7y ago
    Why?
  - mankyd 7y ago
    Isn't that what American health insurance companies are?
    - Someone1234 7y ago
      Kinda yes. But it isn't competitive when you cannot even pick your own health insurance company nor see prices for medical care (or see what is in/out of network). Splitting employers from health insurance is one of several required changes that needs to happen before the supposed hand of capitalism can allow the market to get healthier. I have no idea if it would work, but the status quo is so unhealthy at the very least improvement competition/choice could improve that somewhat.

deleted 7y ago

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La-ang 7y ago

Lol. I remember Chomsky saying GE is not about manufacturing much as it ought to be, but rather about moving money in very complicated ways.Who foresees its collapse in the next 5 years?

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