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>Take the employer out of the equation once they're no longer relevant. Not exactly, if the company is willing to go so far as bankruptcy / reincorporation...
by asdf21 7y ago
>Take the employer out of the equation once they're no longer relevant.
Not exactly, if the company is willing to go so far as bankruptcy / reincorporation... how will any previous contracts with whatever insurance company last through that?
- Retric 7y agoThe idea is an employee’s pension must be fully funded before they leave and then handled by a 3rd party. At that point the company could dissolve without impacting retired workers.
- deleted 7y ago[deleted]
- philwelch 7y agoYes, that's how 401(k)s work and why most employers have switched to them.
- Retric 7y agoI am specifically referring to pensions. It’s true that 401(k)s also have this feature, however many employees prefer the defined benefit a pension provides over managing their own returns and the temptations associated with managing money. The core issue is really poor US regulation over any specific issue with pensions. PS: The swap to 401k’s in the US is mostly about cost savings. Companies can simply reduce their contributions without much if any backlash. Meanwhile, third parties profit from managing 401k’s and therefore market them heavily.
- alistairSH 7y agoThe insurance company is effectively acting as a giant escrow account on behalf of the employees/retirees. The employer pays into the account at whatever rate is required to fully fund retirements. The insurance company manages those funds. If the employer goes bankrupt, the funds are not accessible by raiders/PE firms.
- eldavido 7y agoThis already exists. It's called a 401(k).
- thatfrenchguy 7y agoExcept 401(k)s are crazy underfunded: https://www.marketwatch.com/story/this-is-the-average-401k-savings-by-age-2019-01-31 https://www.marketwatch.com/story/this-is-the-average-401k-s... (look at the median)
- alistairSH 7y agoNot sure if serious.meme A defined benefit plan is (nominally) funded by the employer with little or no input from the employee at time of investment or distribution. A 401k is funded by the employee, with the employee managing contribution level, fund investment, and eventually distributions. They're only the same, if by same you mean "retirement plans". The details are substantially different.
- eldavido 7y agoA 401k is an account, funded by a mix of employer and employee contributions, that's beyond reach of bankruptcy. That part is the same. The only bit that's different is the self-management of assets, of which many companies are happy to do, increasingly for lower and lower fees. 0.2-0.3% being common which I bet goes toe-to-toe with good pension managers. They really aren't that different.
- alistairSH 7y agoYou're neglecting the part where a defined benefit plan pays a fixed amount until you die (assuming it remains solvent, which is a problem because corporate raiders are allowed to cash them out under some circumstances). A 401k can run out - they often do.
- bluGill 7y agoNot really. A pension you get your money until you die - there is no possibility of running out. A 401k you can live longer than expected and run out of money.
- rsynnott 7y agoThe way it works at least here generally is that the pension fund is held in trust, on a per employee basis, by an insurance company (usually) employed by the company to do that. So it's (in principle) immune to bankruptcy of both the employer and third party insurance company.