Step Dad = Lucky Bastard!

[DailyDi]

For the last few months my Step Dad has been quietly plotting his retirement from the city. Today he gets called into a meeting and is told that they need people to retire early to lower long-term salary costs. To get him to sign they offer:

1. Continuation of his health insurance

2. Full Pension

3. Cash bonus that for him will be in the $20K+ range.

So he gets to do what he wanted to anyway, and they pay him off to make it happen! lol

[square_duck]

I guess this is all well and good from a recipient point of view, but I really just don't get the point of the pension system, or paying people after they retire. They aren't being productive for the company and are really still a cost and expense. So whats the difference if he is there working or not? As far as I can see it is the pension system that killed many companies in this last recession. Paying people who arent working, AND paying your current payroll just doesn't make sense, and has proven to be a HUGE burden on companies and city and governments as well. Why not just hand the employee the balance of what they are due and walk away, and leave them to manage their funds for themselves and not carry the extra financial burden? If you work, you get paid, if you retire, you don't. This early retirement is all well and good, but don't keep paying people NOT to work. the pension system is long out of date and extremely costly and inefficient. Teach people to manage their own funds and take control of their own retirement and cut the costs.

Like I said, I just don't get it, all the while companies and city an county governments are crying about budget overages and not being able to pay for XYZ program, and all the while they pay out H*U*G*E amounts in pensions and former employee wages. It maybe fine for your dad and all, but for his company it really isn't. what happens if the "cost cutting" (which it really isn't) doesn't work and the company goes under anyways?? Kiss his "pension" good bye!

He would be better off managing the funds by himself, and under his direction and control rather than having "his money" handled by someone else , and his financial future not under his direction. Like I said, it's this kind of unsustainable financial burden that has killed many companies,and Governments, yet they keep doing it

I don't get it.

I hope your dad enjoys it while he has it and is socking a good amount of it away, just in case his 'former' employer goes under, taking his retirement with it.

Sorry to be so down, but it really doesn't make any business sense what so ever to have this kind of system anymore, it clearly doesn't work, but no one wants to do anything about it.

[curiositykilledthecat]

Good for him, bad for rest of tax payers.

[PArms]

Ducky, I couldn't agree more! If the company is going to dish out all that money to begin with, I'd just assume take a larger check home with me each pay period while working and young enough to enjoy it. Who's to say I actually live to see retirement anyway. My grandfather passed away 5 months after he retired.

[DailyDi]

He's got 29 years in with the city... and that's after he maxed out of the military after 20 years. He's earned his rewards.

As for why they are paying it: Paying him 30 weeks worth of pay, instead of 3 years, plus a huge savings on benefits he would have earned. Money is coming from a recently discovered retirement fund that hasn't had an eligible employee since 1939.

[diaperpt]

While I won't argue the point of whether you should use an early retirement system or not, there is financial logic. In some cases, workers with longevity are on a higher pay grade than those just starting out. Say someone is getting 65,000 per year and can be replaced by someone who will start at only 25,000 per year. Taking 20,000 out of the 45,000 savings still leaves a saving of 25,000 - of course these are arbitrary figures, but this is the idea.

There is also the situation where they can't/won't lay off, but don't plan on replacing the worker. In that case it pays them to encourage someone to leave.

Of course, we'd ALL like the money upfront when you can enjoy it. There are a lot of people though that for whatever reason just can't afford to retire. With the right package for those people, it can be a win-win for them and the company.

For DD's step-dad, it sounds like he's certainly earned it. It's a trade-off of staying for maybe a little more money against leaving a little early. It breaks just right for some, at just the wrong time for others (as such a package isn't usually offered over a long span of years), and is a real trade-off for many others.

I can't imagine ANY organization, public or private, that would ever make such an offer simply for the benefit of its workers!!

[DailyDi]

pt got it exactly! This is a one-time deal for a small group of eligible employees who are getting a lot of longevity pay (20+ years) some positions will be filled with new (and cheaper) people; others will be phased out.

His pension is a benefit he earned and paid into for 29 years, not a "golden parachute" or Union-demanded entitlement. He's earned less than his peers in other industries in order to secure his retirement.

[abrichiebc]

You have to stop and think about pensions. You will not receive one if you work 20 years at minimum wage at the local wine and dine, or the corner 7-11. Most pensions are set up and administered by unions. The union hires a management to run the pension and invest the funds that are directly payed and contributed by the employee. Depending on the number of years of service, the amount contributed over the years of service will determine how much a month the employee will be paid.

Pensions are not payed to retired employess of a company by tax payers. The pension is contributions through paycheque deductions from the employee and investments by the company. So do not expect a pension if you do not work for a unionized company.

[anondl]

Good for your Dad!

There was a time when even private companies had pension plans. Thanks to foreign competition and greedy CEOs, they are no more.

Anondl

[LonLon]

The pension plan of the private sector is now known as a 401-K, still requires employees to pay into it and some one else to manage the money.

Not alwasy a good deal, as many a 401-K is tied to the stock markets and we know how much that goes up and down every month.

[Bettypooh]

Pensions are good It's having money when you aren't as able (if able at all) to earn enough to get by on anymore Corporate greed and the overvaluing of management is why there are so few left now The reason so many pension funds go broke isn't the fault of the pension system, but of the managers of those pensions investing the money in an unsafe manner then counting on it to never incur a loss Notice who made the mistake- management Pensions that are at least partially vested in the company of the pensioner give the employees an incentive to make the best long-term decisions for the company which is exactly opposite of what CEO's are trying to accomplish Notice who made the mistake- management

Pay and pensions should be based on what is actually produced and management produces nothing- it's just a necessary function much like the building's janitor If management's and CEO's rewards were tied directly in to long-term profits everyone would benefit, but since it is management who gets to make that decision they choose to get the money ASAP and everybody else loses Notice who made the mistake- management

I knew a man who had lived wisely and had 3 pensions; one military, one State, and one small private pension where he took early retirement His foresight and 50 year effort paid off handsomely so he and his wife could live out their dream of seeing the world at a leisurely pace. He was working at his 4th job part-time when I met him waiting for his wife to recover from some surgery so they could begin their dream trip If CEO's and management thought like he did everyone would win and then they might be worth more than janitor's pay. It's short-term greed that kills companies- not long-term pensions

That's my not-so-humble opinion so take it or leave it; I really don't care

Bettypooh

[diaperpt]

Further, during boom periods companies would offer fantastic pensions to attract workers. And then, yes, they weren't managed well.

As a teacher in CT, I have a state pension plan - but up til just a couple years ago the state didn't have to fully fund it so that eventually it would have collapsed and the state would simply shrug their shoulders and walk away. Now a law passed to make sure it's fully funded, but in these economic times whether that will hold up is another issue.

Meanwhile, teachers in CT don't have social security taken out of their pay for teaching. I've accumulated my quarters in other ways and am forced to pay in now as self-employed. I'd heard for years that even so I'd never be able to draw any social security. It seems I'll draw some, but not the entire amount I'd be entitled to because somehow this is a 'windfall'!

The person who commented on non-union jobs not having pensions available is only partly correct. Again, many businesses provided pensions for their white-collar workers even though not unionized. I'm surprised that no one has mentioned the huge corporate CEO's who rake it such obscene amounts. I just read something the other day about a CEO who was going to get an obscene severance package because her company had been taken over by another - the next day the headline said she was going to get the package whether or not she left the company!!

I'd just like to point out how common it is for us 'little people' to fight and bicker over someone like DD's step-dad getting an early retirement package. We'll argue (often with a political tone, reflecting our own political affiliation - and maybe the vague social philosophy that goes with it) - even to bitter anger. Meanwhile, the mega-wealthy are laughing all the way to the bank. Is it just human nature that we only look at those closest to us and whine?

Is it so absurd to think that rather than associate ourselves with the politics that have been set up at the very top of our society, we who don't have the mega-millions might set aside the politics that set us to fighting?? Why can't we look up, see the crap that is being pertetrated on us, band together and do something to stop it?

While this has just hijacked DD's innocent thread, (and yes, I do apologize), it seems this is a pretty appropriate beginning to our U.S. Labor Day weekend.

Again, there is nothing wrong - that I see - with DD's step-father taking this package. What is so horribly wrong is that so many others have to scrape a living together (working hard, not sitting on their butts - in or out of diapers btw) and don't have any such opportunities. The wrong isn't between those and people like DD's step-dad but between all of us and the mega- rich.

Why can't we see that and stop fighting among ourselves?? At the same time, I'm sorry but I don't see much hope for that happening...

squawvox

(formerly diaperpt, name changed to suit darkfinn who doesn't like people who's screen names include 'diaper')

oh, I'm so sorry! I ran on so much!! didn't mean to...I'm in a mood this morning!

[amp501]

I won't lie. Part of the reason I want to join the military is for the retirement benefits. 30 years of service and I retire at 55 with 75% pay + pension, yes please!

[fideliuscharm]

I guess this is all well and good from a recipient point of view, but I really just don't get the point of the pension system, or paying people after they retire. They aren't being productive for the company and are really still a cost and expense. So whats the difference if he is there working or not?

The point of a pension system is 2 fold, one to entice employees to stay with an employer. and two, to ensure that people put enough money away to be able to survive without being a burden on society after they are no longer able/want to work due to age.

As far as I can see it is the pension system that killed many companies in this last recession. Paying people who arent working, AND paying your current payroll just doesn't make sense, and has proven to be a HUGE burden on companies and city and governments as well. Why not just hand the employee the balance of what they are due and walk away, and leave them to manage their funds for themselves and not carry the extra financial burden? If you work, you get paid, if you retire, you don't. This early retirement is all well and good, but don't keep paying people NOT to work. the pension system is long out of date and extremely costly and inefficient. Teach people to manage their own funds and take control of their own retirement and cut the costs.

The pension doesnt cost the employer any more than they commit to match employee contributions - most pension programs are run by 3rd party investment brokerages, who inturn invest the monies and the resultant costs are covered via that. Now if you're arguing that companies shouldn't be matching employee pension contributions - well thats entirely debateable and a whole other subject but not one that you've made a clear distinction of.

Like I said, I just don't get it, all the while companies and city an county governments are crying about budget overages and not being able to pay for XYZ program, and all the while they pay out H*U*G*E amounts in pensions and former employee wages. It maybe fine for your dad and all, but for his company it really isn't. what happens if the "cost cutting" (which it really isn't) doesn't work and the company goes under anyways?? Kiss his "pension" good bye!

The point is one of contractual obligation, and people being greedy not wanting to lose their slice of the promised pie.

In the example given it is cutting a capital cost - if he retires early - the job is either made obsolete and thus no longer needed, or they re-hire someone younger at an entry level wage. if you said a difference of $60,000.00 (which is about the difference between municpal workers entry level and retiring wages at 30 years hereabouts, over 3 years thats a difference of $180,000.00 So as an incentive, they offer him a $20k buyout, and continue to top up his benefits and pension for the remaining 3? years? whats that gonna cost, max another 20-40k... so you're talking a savings of $120,000 over three years, now multiply that by 10 employees, assuming all 10 are replaced.... you've just found another million for the bottom line. how is that not cutting the operating costs?

As for the pension being 'kissed goodbye' thats only possible if the company itself is in control of the pension from its own coffers, and hereabouts very few are as i said most are managed by a 3rd party. the company will file, and yes, no additional money will be placed into the pension fund, but that doesnt mean the pension disappears. We have legislation for that exact reason.

He would be better off managing the funds by himself, and under his direction and control rather than having "his money" handled by someone else , and his financial future not under his direction. Like I said, it's this kind of unsustainable financial burden that has killed many companies,and Governments, yet they keep doing it

Wrong, wrong wrong. 100% categorically wrong. when you pool your money with everyone else in a pension fund, it gives you a bigger income to work with from an investment standpoint - if the market takes a down turn in one aspect, you have a big enough fund that it is balanced that the corresponding upswing elsewhere will balance it out. Whereas you invest the money on your own, your portfolio is so much smaller by several orders of magnitude that a loss has a much more immediate and drastic effect.

Also, by pooling it all together, it increases the efficiency.

how is having a 3rd party handle his pension an 'Unsustainable financial burden' to his company, or the government? explain that if you please as it really makes no sense. as for why they keep doing it, duh because it works?!?

[fideliuscharm]

Further - regarding new hires - the company can also negotiate different pension terms. so instead of say matching pension contributions 1:1 they make new contracts set to a rate that is more reflecting of the current times ie 1:2 or less even.

[sarah_ab]

i'm a custodian and i have a 401-k.. which is basically a pension under a different name... i don't work in a unionized job.. i work for a small private catholic university...

[diaperpt]

i'm a custodian and i have a 401-k.. which is basically a pension under a different name... i don't work in a unionized job.. i work for a small private catholic university...

sarah, you're one of the people I'm talking about that don't have a heck of a lot. I'd like to think that because it's a religioius school you work for that they'd at least care about you, but that certainly isn't necessarily true. You may have that 401-k, but you won't be getting any kind of neat early retirement bonus out of a small catholic university... I can feel for you yet still be happy for DD's step-dad!

[sarah_ab]

ehh its alright i'm leaving the job in t-minus three working days and counting.. i was just saying that not just union jobs give 401-k's... i mean i worked at home depot as a part time employee and was eligible for a retirement plan as well....