VitalAccurateThinking

Jim VAT's Pension is Gone

At work today, they announced that effective 31-Dec-06, the company pension plan would be discontinued. That is not a huge disaster as what I have at my current employer is a cash balance pension anyway. The pension will be replaced by increased contributions to the 401(k) both in matching and non-matching contributions. Since I have only been at my current employer five years and will be vested in October, this is really to my benefit.

The bigger change was to the retirement medical benefits. The new plan will cap the amount of medical premium paid by the company if you retire after 31-Dec-06 and decrease the post-retirement life insurance from 1X last salary to a lump sum of $25,000.

There are other changes, but none affect me due to my age. The people who are 45 to 55 are the ones that are getting screwed. The cap on the medical insurance premium payment is more telling than the changes to the cash balance pension change to a 401(k) contribution. Really, what the company has done is capped their exposure to rising medical costs. When they switched to cash benefit pensions in 1997, they capped their exposure to people living longer. All of these changes also eliminate their exposure to inflation-adjusted amounts.

All in all, I am not surprised. Either companies go to this sort of retirement plan or they go bankrupt like the airlines do. It really is that simple. At my age, I still have time to save and invest my way to retirement. This way, all the money will be under my control and under my name locked away from bankruptcy exposure.

Sign of the times. I say: watch out for yourself. No company is going to take care of you. The government, Social Security and Medicare certainly will not. You have been warned!

posted by Jim VAT @ 5:28 PM