5 ms·

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.
- xienze 7y ago
  And six or so years ago IBM changed their 401k match to only provide the matching funds if you were still employed on December 15th instead of every pay period. They really are the worst.
- deleted 7y ago
  [deleted]
matthewaveryusa 7y ago
Not sure if this is legal or not, but this is definitely why I think the 401k/private saving model is the best. It's a lot easier for governments/corps to change the payout of a system they run vs. clawing money away from an account you own. That being said there should be a minimum safety net for those that don't have the diligence to save by their own accord.
- Retric 7y ago
  Personal 401k’s don’t offer much over saving directly. It has some tax advantages at the individual level, but those tax savings are just shifting money around at the societal level. The upside of public / private pensions is pooling money among a pool of survivors. Rather than saving X money to live off of at 95 while risking dying sooner you essentially save less on a bet that will live to be 95. Die early and you don’t care about losing that bet. Of course this means less money for people to inherit. Sadly for individuals it’s illegal to set contracts up to do this as they create incentives to kill people which have resulted in past murders. Annuity‘s can offer some of the benefits, but are forced to make less risky investments.
  - _ah 7y ago
    The "death contract" is a Tontine. https://en.m.wikipedia.org/wiki/Tontine https://en.m.wikipedia.org/wiki/Tontine
    - deleted 7y ago
      [deleted]
  - nerdponx 7y ago
    Personal 401k’s don’t offer much over saving directly. I beg to differ. My IRA doesn't offer a 6% match.
    - Retric 7y ago
      That’s a company 401k with matching funds. Clearly, if the company is willing to give you more money that’s a benefit, but you don’t get that opening a 401k at fidelity etc.
JOnAgain 7y ago
People currently accumulating benefits will stop accumulating. It’s a pay cut. Plan was closed in 2012, so these are longtime employees. People currently collecting pensions are not affected. Ex employees in the pension are being cashed out with lump sums. Source: https://www.wsj.com/articles/erie-hit-rock-bottom-the-former-factory-hub-thinks-it-has-a-way-out-11570440601 https://www.wsj.com/articles/erie-hit-rock-bottom-the-former...
citilife 7y ago
There's typically a minimum limit set out by a set of laws. So if you have $100k yearly pension, they may have to pay at least $25k. Reality is, 401k is much better for all parties as company and employee can part ways at any time. Employee has more control over their funds, but risk they will lose it all (not companies problem).

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.
xienze 7y ago
And six or so years ago IBM changed their 401k match to only provide the matching funds if you were still employed on December 15th instead of every pay period. They really are the worst.
deleted 7y ago
[deleted]

matthewaveryusa 7y ago

Not sure if this is legal or not, but this is definitely why I think the 401k/private saving model is the best. It's a lot easier for governments/corps to change the payout of a system they run vs. clawing money away from an account you own. That being said there should be a minimum safety net for those that don't have the diligence to save by their own accord.

Retric 7y ago
Personal 401k’s don’t offer much over saving directly. It has some tax advantages at the individual level, but those tax savings are just shifting money around at the societal level. The upside of public / private pensions is pooling money among a pool of survivors. Rather than saving X money to live off of at 95 while risking dying sooner you essentially save less on a bet that will live to be 95. Die early and you don’t care about losing that bet. Of course this means less money for people to inherit. Sadly for individuals it’s illegal to set contracts up to do this as they create incentives to kill people which have resulted in past murders. Annuity‘s can offer some of the benefits, but are forced to make less risky investments.
- _ah 7y ago
  The "death contract" is a Tontine. https://en.m.wikipedia.org/wiki/Tontine https://en.m.wikipedia.org/wiki/Tontine
  - deleted 7y ago
    [deleted]
- nerdponx 7y ago
  Personal 401k’s don’t offer much over saving directly. I beg to differ. My IRA doesn't offer a 6% match.
  - Retric 7y ago
    That’s a company 401k with matching funds. Clearly, if the company is willing to give you more money that’s a benefit, but you don’t get that opening a 401k at fidelity etc.

JOnAgain 7y ago

People currently accumulating benefits will stop accumulating. It’s a pay cut. Plan was closed in 2012, so these are longtime employees. People currently collecting pensions are not affected. Ex employees in the pension are being cashed out with lump sums. Source: https://www.wsj.com/articles/erie-hit-rock-bottom-the-former-factory-hub-thinks-it-has-a-way-out-11570440601 https://www.wsj.com/articles/erie-hit-rock-bottom-the-former...

citilife 7y ago

There's typically a minimum limit set out by a set of laws. So if you have $100k yearly pension, they may have to pay at least $25k. Reality is, 401k is much better for all parties as company and employee can part ways at any time. Employee has more control over their funds, but risk they will lose it all (not companies problem).