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(CNN)   Like other companies, General Electric has accumulated a significantly underfunded pension. Unlike other companies, though, that deficit has ballooned to $31 billion - $11 billion worse than the next closest company   ( money.cnn.com) divider line
    More: Scary, GE, Dow Jones Industrial Average, pension, pension shortfall, pension liabilities, Dow Jones, Dow Jones & Company, significantly underfunded pension  
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1035 clicks; posted to Business » on 18 Jan 2018 at 11:34 PM (25 weeks ago)   |   Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



44 Comments     (+0 »)
 
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2018-01-18 07:50:51 PM  
What is this "pension" you speak of?
 
2018-01-18 08:20:03 PM  
This is the problem with defined benefit plans.

With defined contribution plans, the company pays x% of payroll in. No wiggle room.

With defined benefit, you're talking about a moving target. If you get great returns, you don't have to put away as much. Lousy returns? You have to put away more...unless great returns are around the corner.

Want a stream of income that'll last through retirement? Buy a lifetime annuity. Shocked at the price? It's that high because that's what it takes to effective offer a defined benefit plan in a responsible manner.
 
2018-01-18 08:41:03 PM  
Well, if they could just get all their employees to invest in stocks or bitcoin instead, they wouldn't need a pension!
 
2018-01-18 09:32:52 PM  

gar1013: This is the problem with defined benefit plans.

With defined contribution plans, the company pays x% of payroll in. No wiggle room.

With defined benefit, you're talking about a moving target. If you get great returns, you don't have to put away as much. Lousy returns? You have to put away more...unless great returns are around the corner.

Want a stream of income that'll last through retirement? Buy a lifetime annuity. Shocked at the price? It's that high because that's what it takes to effective offer a defined benefit plan in a responsible manner.


Well, that and using pensions for golden parachute payouts.
 
2018-01-18 09:50:19 PM  

DeaH: gar1013: This is the problem with defined benefit plans.

With defined contribution plans, the company pays x% of payroll in. No wiggle room.

With defined benefit, you're talking about a moving target. If you get great returns, you don't have to put away as much. Lousy returns? You have to put away more...unless great returns are around the corner.

Want a stream of income that'll last through retirement? Buy a lifetime annuity. Shocked at the price? It's that high because that's what it takes to effective offer a defined benefit plan in a responsible manner.

Well, that and using pensions for golden parachute payouts.


That's part of the pension fund calculation. If the pension is funded for it, there's not an issue.

The issue is that company and governments consistently underfund their pensions.
 
2018-01-18 10:33:46 PM  

gar1013: DeaH: gar1013: This is the problem with defined benefit plans.

With defined contribution plans, the company pays x% of payroll in. No wiggle room.

With defined benefit, you're talking about a moving target. If you get great returns, you don't have to put away as much. Lousy returns? You have to put away more...unless great returns are around the corner.

Want a stream of income that'll last through retirement? Buy a lifetime annuity. Shocked at the price? It's that high because that's what it takes to effective offer a defined benefit plan in a responsible manner.

Well, that and using pensions for golden parachute payouts.

That's part of the pension fund calculation. If the pension is funded for it, there's not an issue.

The issue is that company and governments consistently underfund their pensions.


Those hundreds million parachutes add up, and the funds really weren't started with that in mind. Generally, the parachute payments are made at one time, instead of over time, as most pensions are paid.
 
2018-01-18 11:38:39 PM  

gar1013: This is the problem with defined benefit plans.

With defined contribution plans, the company pays x% of payroll in. No wiggle room.

With defined benefit, you're talking about a moving target. If you get great returns, you don't have to put away as much. Lousy returns? You have to put away more...unless great returns are around the corner.

Want a stream of income that'll last through retirement? Buy a lifetime annuity. Shocked at the price? It's that high because that's what it takes to effective offer a defined benefit plan in a responsible manner.


The Fed keeping interest rates at zero is the reason, not the workers.  Back in the early 1980's when CDs paid 20% Annuities were inexpensive.
 
2018-01-18 11:40:24 PM  
The same GE that was paying zero net taxes a few years ago? That GE?

Obviously they need more tax cuts!
 
2018-01-18 11:50:45 PM  
This;

"In an SEC filing last year, GE said the increase in its pension deficit is "primarily attributable to lower discount rates" as well as higher liabilities."

Is directly contradicted by this;

"Between 2010 and 2016, GE spent about $40 billion to buy back its own stock, according to FactSet."

These greedy jackwads spend $40 billion buying their own stock back to hold the price up while at the same time apparently refusing to put half that amount into fixing their pension issues.  This is corporate mismanagement at it's finest.
 
2018-01-18 11:53:48 PM  

gar1013: This is the problem with defined benefit plans.


Also people are living longer and drawing a pension for years longer than they used to.
 
2018-01-19 12:06:11 AM  

CruiserTwelve: gar1013: This is the problem with defined benefit plans.

Also people are living longer and drawing a pension for years longer than they used to.


Well, I think a part lf the defined benefits was health insurance, which GE hasn't profited nearly enough from going wildly out of control to make up for the unforseen increases.

You know, one of the brilliant parts of defined contribution plans is the rube doesn't recognize that even maxed out, he can't contribute nearly as much as a pension program would have cost to form.
 
2018-01-19 12:10:28 AM  

Nonrepeating Rotating Binary: This;

"In an SEC filing last year, GE said the increase in its pension deficit is "primarily attributable to lower discount rates" as well as higher liabilities."

Is directly contradicted by this;

"Between 2010 and 2016, GE spent about $40 billion to buy back its own stock, according to FactSet."

These greedy jackwads spend $40 billion buying their own stock back to hold the price up while at the same time apparently refusing to put half that amount into fixing their pension issues.  This is corporate mismanagement at it's finest.


That's why employees get pensions and management takes stock options they can exercise almost immediately.
 
kab
2018-01-19 12:16:52 AM  
It's ok, firing more people will help.
 
2018-01-19 12:29:15 AM  

kab: It's ok, firing more people will help.


img.fark.netView Full Size
 
2018-01-19 12:49:51 AM  

gar1013: This is the problem with defined benefit plans.

With defined contribution plans, the company pays x% of payroll in. No wiggle room.

With defined benefit, you're talking about a moving target. If you get great returns, you don't have to put away as much. Lousy returns? You have to put away more...unless great returns are around the corner.

Want a stream of income that'll last through retirement? Buy a lifetime annuity. Shocked at the price? It's that high because that's what it takes to effective offer a defined benefit plan in a responsible manner.


It's only a problem when management intentionally makes it one.

Because honoring contracts is for the peasantry.
 
2018-01-19 12:55:41 AM  

Fukuzawa: gar1013: This is the problem with defined benefit plans.

With defined contribution plans, the company pays x% of payroll in. No wiggle room.

With defined benefit, you're talking about a moving target. If you get great returns, you don't have to put away as much. Lousy returns? You have to put away more...unless great returns are around the corner.

Want a stream of income that'll last through retirement? Buy a lifetime annuity. Shocked at the price? It's that high because that's what it takes to effective offer a defined benefit plan in a responsible manner.

It's only a problem when management intentionally makes it one.

Because honoring contracts is for the peasantry.


That's the problem with a "promise" that needs to be held for 40 years.  It rarely is held.  Doesn't matter if it's a government or a corporation.

Say what you want about 401k plans - it's in my control.
 
2018-01-19 01:11:44 AM  
gingerjet:
Say what you want about 401k plans - it's in my control.

That's what they want you to believe.

/ Muwahahahahaha!
 
2018-01-19 01:48:13 AM  
♫  GE, We bring good things to life ♫

/ not necessarily your life
// unless you're a CE(pick a letter) on the way out
 
2018-01-19 02:12:02 AM  
Let's make every company prepay their pensions like the USPS is forced to.

Level playing field, and all that.
 
2018-01-19 03:22:25 AM  

the_innkeeper: Let's make every company prepay their pensions like the USPS is forced to.

Level playing field, and all that.


Considering that was done in an attempt to destroy the US Post--- ah, I see what you did there.
 
2018-01-19 03:39:11 AM  
Don't you have to be able to afford to retire to get a pension?
 
2018-01-19 04:56:47 AM  

gunsmack: ♫  GE, We bring good things to life ♫

/ not necessarily your life
// unless you're a CE(pick a letter) on the way out


I agree, but it's C(pick letter)O.
 
2018-01-19 06:37:15 AM  

gar1013: This is the problem with defined benefit plans.

With defined contribution plans, the company pays x% of payroll in. No wiggle room.

With defined benefit, you're talking about a moving target. If you get great returns, you don't have to put away as much. Lousy returns? You have to put away more...unless great returns are around the corner.

Want a stream of income that'll last through retirement? Buy a lifetime annuity. Shocked at the price? It's that high because that's what it takes to effective offer a defined benefit plan in a responsible manner.


Great.  So you must really be pushing for a significant increase in wages and a federal law mandating company 401k programs and employee contributions at 7%, with up to 10% of annual wage match by employers and good free advice twice a year?  The law should ban early withdrawal  for anything except disability, and the money should be protected from bankruptcy or debt collections.  Because that is what you need to replace pensions.  Instead many companies don't offer any decent retirement plan, or a 401k without a match.  But this isn't a conversation about creating a dignified retirement system for America.  It's another example on how the wealthy have systematically destroyed the safety net for most Americans to take that cash for themselves.  I know two elderly people, one that is still working now who lost their Polaroid pension.  The management spent down the fund as fees for bankruptcy proceedings.  These are the folks behind the pensions = bad argument.
 
2018-01-19 07:40:38 AM  

gar1013: This is the problem with defined benefit plans.

With defined contribution plans, the company pays x% of payroll in. No wiggle room.

With defined benefit, you're talking about a moving target. If you get great returns, you don't have to put away as much. Lousy returns? You have to put away more...unless great returns are around the corner.

Want a stream of income that'll last through retirement? Buy a lifetime annuity. Shocked at the price? It's that high because that's what it takes to effective offer a defined benefit plan in a responsible manner.


All you're doing is shifting this return uncertainty and/or cost of annuity to the retiree. The risk still exists.

If the stock market is really such a sure thing over the long term, then businesses should be falling all over themselves to provide defined benefits and reap the long-term gains while the sucker retiree "misses out." Even if businesses don't want the short-term volatility, they would be getting great offers from Wall Street left and right to enter annuity-like contracts that stabilize their pension funds.  It's telling that one way or another, businesses are unanimously dumping this risk on employees, and not because employees are demanding it.  Most of us can agree that investing broadly in the market is the smartest way to go, but only among our available options. If solid pensions still existed then that would be the smartest option.

If utterly favoring the corporation over the employee is your economic philosophy then OK, but call it what it is.
 
2018-01-19 07:43:38 AM  

Nonrepeating Rotating Binary: This;

"In an SEC filing last year, GE said the increase in its pension deficit is "primarily attributable to lower discount rates" as well as higher liabilities."

Is directly contradicted by this;

"Between 2010 and 2016, GE spent about $40 billion to buy back its own stock, according to FactSet."

These greedy jackwads spend $40 billion buying their own stock back to hold the price up while at the same time apparently refusing to put half that amount into fixing their pension issues.  This is corporate mismanagement at it's finest.


Yep.  Had surplus...

"GE's pension shortfall is even more glaring when you consider that the company was sitting on a pension surplus of $14.6 billion in 2001, when Immelt replaced Jack Welch as CEO."

anditsgone.gif
 
2018-01-19 07:46:16 AM  
States and companies need to switch to a more sustainable option.  If only such a model existed...

http://etf.wi.gov/

http://etf.wi.gov/publications/et7100​.​pdf

http://www.swib.state.wi.us/
 
2018-01-19 07:47:38 AM  
gar1013:

Want a stream of income that'll last through retirement? Buy a lifetime annuity. Shocked at the price? It's that high because that's what it takes to effective offer a defined benefit plan in a responsible manner.

No it doesn't cost that much.
Insurance companies take people's money. Pay them a small amount driven by fear that if Grandpa Joe and Jane don't get an annuity they will run out of money and starve to death while homeless.
Meanwhile they pocket an abnormal profit using other people's money because nobody takes the time to do the math of what is actually happening.

Rich people get screwed with hedge funds.
Middle class get screwed with mutual funds.
Retirees get screwed with annuities.
 
2018-01-19 08:01:06 AM  

TedCruz'sCrazyDad: gar1013: This is the problem with defined benefit plans.

With defined contribution plans, the company pays x% of payroll in. No wiggle room.

With defined benefit, you're talking about a moving target. If you get great returns, you don't have to put away as much. Lousy returns? You have to put away more...unless great returns are around the corner.

Want a stream of income that'll last through retirement? Buy a lifetime annuity. Shocked at the price? It's that high because that's what it takes to effective offer a defined benefit plan in a responsible manner.

The Fed keeping interest rates at zero is the reason, not the workers.  Back in the early 1980's when CDs paid 20% Annuities were inexpensive.


When did I blame workers?

Defined benefit plans don't make a lot of sense. If they are done correctly, they are all but unaffordable if you want to be competitive.
 
2018-01-19 08:02:24 AM  

Nonrepeating Rotating Binary: This;

"In an SEC filing last year, GE said the increase in its pension deficit is "primarily attributable to lower discount rates" as well as higher liabilities."

Is directly contradicted by this;

"Between 2010 and 2016, GE spent about $40 billion to buy back its own stock, according to FactSet."

These greedy jackwads spend $40 billion buying their own stock back to hold the price up while at the same time apparently refusing to put half that amount into fixing their pension issues.  This is corporate mismanagement at it's finest.


Stock buybacks aren't about greed.

It's about not having any good ideas.

I'm fine with greed, it's not coming up with good ideas that I find more offensive.
 
2018-01-19 08:05:48 AM  

Fukuzawa: gar1013: This is the problem with defined benefit plans.

With defined contribution plans, the company pays x% of payroll in. No wiggle room.

With defined benefit, you're talking about a moving target. If you get great returns, you don't have to put away as much. Lousy returns? You have to put away more...unless great returns are around the corner.

Want a stream of income that'll last through retirement? Buy a lifetime annuity. Shocked at the price? It's that high because that's what it takes to effective offer a defined benefit plan in a responsible manner.

It's only a problem when management intentionally makes it one.

Because honoring contracts is for the peasantry.


Defined benefit plans are an unsustainable expense.

In order to be price competitive, you have to offer lower salaries. Talent will go for higher salaries - you can always go to a job with a pension later, in theory, and do so with a higher salary.

Even the federal government had to increase the amount employees pay towards their retirement - someone who starts today will pay 5.5x what someone hired a few years ago has to contribute towards their defined benefit plan
 
2018-01-19 08:09:25 AM  

gar1013: Defined benefit plans are an unsustainable expense.


What you're really saying here is that saving for retirement is an unsustainable expense.
 
2018-01-19 08:46:53 AM  

gar1013: Fukuzawa: gar1013: This is the problem with defined benefit plans.

With defined contribution plans, the company pays x% of payroll in. No wiggle room.

With defined benefit, you're talking about a moving target. If you get great returns, you don't have to put away as much. Lousy returns? You have to put away more...unless great returns are around the corner.

Want a stream of income that'll last through retirement? Buy a lifetime annuity. Shocked at the price? It's that high because that's what it takes to effective offer a defined benefit plan in a responsible manner.

It's only a problem when management intentionally makes it one.

Because honoring contracts is for the peasantry.

Defined benefit plans are an unsustainable expense.

In order to be price competitive, you have to offer lower salaries. Talent will go for higher salaries - you can always go to a job with a pension later, in theory, and do so with a higher salary.

Even the federal government had to increase the amount employees pay towards their retirement - someone who starts today will pay 5.5x what someone hired a few years ago has to contribute towards their defined benefit plan


Some people do take lower wages in return for retirement benefits, eg the US military.
 
2018-01-19 09:11:24 AM  

Foolkiller: Don't you have to be able to afford to retire to get a pension?


My father got his GE pension when they sold off his unit. He kept working for the new owners for a number of years.

Bet they have closed that loophole.
 
2018-01-19 09:15:58 AM  
Why are pensions still a thing? They seem like a terrible way to save for retirement.  "Sure you can pay for your retirement. Just as long as this company is still around and is still growing you are golden!"  What is the theoretical benefit of a pension over a 401k, etc.?  Seems like simply instead of putting that money into the pension, put it in my 401k and things are better all around. Am I missing something?
 
2018-01-19 09:56:07 AM  

stuff: Why are pensions still a thing? They seem like a terrible way to save for retirement.  "Sure you can pay for your retirement. Just as long as this company is still around and is still growing you are golden!"  What is the theoretical benefit of a pension over a 401k, etc.?  Seems like simply instead of putting that money into the pension, put it in my 401k and things are better all around. Am I missing something?


Couple things:

With a defined benefit plan,  you know how much you'll be getting and how long you'll be getting it for. There's no market volatility. The scenario of "6 months before you retire,  the market crashes and you've lost half your money"* doesn't exist.

And I've done the calculation for my DB plan - there's no way I would be able to save enough in my country's version of the 401K to match my plan. Both by practicality, and as a percentage allowed.

Disclaimer: My pension is known as "gold-plated", ie healthy,  government backed.

*Yes,  I know that so close to retirement, you shouldn't have anything in something volatile.
 
2018-01-19 10:06:15 AM  
In theory, pensions make good sense. Retirement savings are managed by professionals who have the expertise and resources to prepare for a reasonable retirement. Employees don't have to learn how to do that, which is good since a large number of them have much simpler gaps in financial literacy. And the vesting/seniority rules give a good incentive to minimize employee turnover. That used to be valued and for a big company would likely cover the expenses of managing a pension.

In practice, pensions are managed by sociopaths with no interest in their success over 40 and 50 year windows.
 
2018-01-19 10:23:55 AM  

rcain: Well, if they could just get all their employees to invest in stocks or bitcoin instead, they wouldn't need a pension!


you mean companies rip off their employees?
impossible!
 
2018-01-19 11:27:30 AM  
Ah, the ol' "we accidently forgot to fund the pension" routine.  Classic.
 
2018-01-19 11:30:41 AM  
My division of GE just got sold off a few months ago. When they announced it, everyone assumed the pension was going bye-bye.

Turns out our countries pension (think poutine and maple syrup) was fully funded and wholly part of our division, so it actually came with us - intact.

It was a pleasant surprise and after reading this (and having watched GE's share price over the last year) I'm feeling pretty good about the divestiture.
 
2018-01-19 12:17:51 PM  
I see they are become UnGenerous Electric.

/ Increase shareholder value. At. All. Costs.
 
2018-01-19 12:25:27 PM  

Yankees Team Gynecologist: gar1013: Defined benefit plans are an unsustainable expense.

What you're really saying here is that saving for retirement is an unsustainable expense.


Indeed. Retirement is for the Aristocracy.
 
2018-01-19 01:06:42 PM  
I'm just glad the training fad of wanting your company to be run just like Jack Welch ran GE is over now. Used to drive me batshiat having in training classes to hear what a brilliant genius Jack Welch was and how we all needed to be like him.
 
2018-01-19 05:52:10 PM  

Yankees Team Gynecologist: gar1013: Defined benefit plans are an unsustainable expense.

What you're really saying here is that saving for retirement is an unsustainable expense.


If people retire in their early sixties, then yes.

If we kick back the retirement age, it starts to work.

Retirement lasting a few decades is a relatively new thing, and a bit of a luxury.
 
2018-01-19 06:47:10 PM  
Former Capital employee here. Fark GE. That is all.
 
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