Sunday, October 30, 2005

The End of Pensions

Published: October 30, 2005


When I caught up with Robert S. Miller, the chief executive of Delphi Corporation, last summer, he was still pitching the fantasy that his company, a huge auto-parts maker, would be able to cut a deal with its workers and avoid filing for bankruptcy protection. But he acknowledged that Delphi faced one perhaps insuperable hurdle - not the current conditions in the auto business so much as the legacy of the pension promises that Delphi committed to many decades ago, when it was part of General Motors. This was the same fear that had obsessed Alfred P. Sloan Jr., the storied president of G.M., who warned way back in the 1940's that pensions and like benefits would be "extravagant beyond reason." But under pressure from the United Auto Workers union, he granted them. And as future auto executives would discover, pension obligations are - outside of bankruptcy, anyway - virtually impossible to unload. Unlike wages or health benefits, pension benefits cannot be cut. Unlike other contracts, which might be renegotiated as business conditions change, pension commitments are forever. And given the exigencies of the labor market, they tend to be steadily improved upon, at least when times are good.


Full Story

Be sure to look at the front cover of Time magazine for this
week. The cover story is entitled "The Great Retirement Ripoff".

BTW, while the salaries of the middle class slipped this year,
due to inflation and poor raises, CEO Magazine just reported
that the average CEO raise this year was over 30%.
This years raises at LANL were a joke. 2.n percent. Yeah DOE and NNSA thinks we are overpaid. I agree that is perhaps true when it comes to managers. In my view none of them deserved a raise. DOE/NNSA authorizes a certain percentage of total salaries for increases. I very much doubt that they dictate how to distribute them. What would have been the right thing to do is to take the 2.78% pot and distribute it to the lower paid workers. This would have probably resulted in ~ a 6-8% increases for the people that need it the most. But, once again UC and management shaft the rest of us.
Another thought is that I think the salaries are going to be sub-standard for years to come. Someone probably received a big raise for cutting costs by instituting low salary increases. Perhaps they even received an award. Eventually we will be so far behind that some brilliant person will come up with a ten year plan to bring us back from the brink. Then that person will get an award again....
Here is a post for the recent "the end of pensions" post on 10/30/2005
08:09:00 AM. You can use my name: Doug Post in the post.
I am a recent retiree from LANL.


The position of much of American Industry on pensions is a bit disingenuous.
The system is supposed to work like this: If a company promises to pay a
pension, it is supposed to figure out using real actuarial tables and
realistic and conservative assumptions for the rate of return of invested
funds how much money they need to deposit in the fund each pay period to
cover the promised pensions. It's not hard at all to calculate how much
money is needed each pay period. Any insurance company that issues
annuities, and most of them do, can tell you the level of contributions
needed to adequately fund a pension fund. The claim in the article "The
latest Financial Debacle" is that industry agreed to pay pensions that were
exorbitant. However, the real problem is that industry didn't meet their
fiducial responsibilities and the US government has let them get away with
it. The tax code and pension laws have allowed industry to assume that funds
deposited into pension funds pay a rate of return much larger than is
realistic. Industry has taken advantage of this to put profits into higher
earnings and CEO salaries rather than to adequately fund their pension
funds. Industry has thus been able to avoid meeting their obligations to
their pension funds. If one assumes that funds put into a pension fund
account will show a rate of return of 8 or 10% each year when the real rate
of return is much less, then it's no surprise that the pension funds are
under funded.

UC, on the other hand, did the right thing. They met their fiducial
responsibilities to their employees. They were conservative and put aside
adequate funds to cover their pension commitments. Industry didn't. Congress
needs to fix the pension system so that it uses realistic and honest
accounting. Punishing UC and LANL employees for the malfeasance of US
industry in pension funds is unfair.

Douglass E. Post
So many things are unfair - raises, pensions, I have to pay more for health insurance than others at LANL for the same coverage, etc. - that's life. Allow me to suggest most would do well to assume it will always be unfair, and plan accordingly.

Even sadder, it appears as though private pensions are small potatoes compared to the impending public pension nightmare, including Social Security. Of course these public entities have taxing authority to prolong the inevitable. When the reckoning finally arrives, be assured it will be unfair.

Indeed, UC's pension stewardship has apparently been extraordinary. Given that, does anyone in the UCRP really believe that California will ever contribute to the Defined Benefit portion of the plan in the future?
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