For those of you who are not laid off be ready for the next “take away.” Right now less than 10 percent of publicly traded companies have both a 401K and a company funded pension. You can bet that is not lost on the senior staff who is looking to cut wherever they can. Within a year, expect there to be an announcement of the end of the company funded pension for new employees and a max out at current level for tenured staff....
Bet on it....
5 replies (most recent on top)
I realized the impact when they did it, but was powerless to do anything about it. I mean what could we do?
by jc is correct. The old pension was a defined benefit plan that guaranteed a payout at 65 so the freeze was a HUGE cut especially for younger people. I took a 180k +/- hit. Many companies froze their pensions but Allstate chose to freeze with no option to roll the $ to the cash pension, pay out early to roll to 401k or any other option that many other large companies chose. In other words, Allstate froze the pension in a manner that impacted their employees THE MOST. Most employees did not realize how much they were getting screwed.
The cash pension is a pension in name only. It grows by less than 1% a year and they can invest the money for more. It's a slush fund for them.
Right on the money, I worked at Allstate when they froze the final pay pension. I had calculations on the lump sum payout before and after the change and because of the change in the pension plan, when I retired last month it meant a loss of over $160,000.00 for my retirement.
OP brings up a good point. I left ALL late last year, but when I was there my SVP let me peruse a PPT deck he printed out that outlined the ballooning costs of benefits after ALL acquired SquareTrade, InfoArmor, etc. They added an insane amount of new headcount while giving them full Allstate benefits even thought the benefits at these companies prior looked more like a poor startup company. They should have let the benefits at those companies remain the same as before the acquisition. I think it would be hard for a company of any size to add that much headcount in a short period, instantly increase benefit expenses, and not have to look at making cuts.
Relatively speaking, the Cash Balance pension plan isn't much of a benefit. Freezing of the Average Final Pay pension plan had a much bigger impact. Many employees' benefits were virtually reduced by six-figure amounts when projecting out 5+ years from that point.
Unfortunately, not many employees realized the level of impact. This was mostly attributed to the very convoluted way these plans were structured. Perhaps by design for this very purpose.