# Should a pension plan be to retain or reward an employee for years of service?



## WhatInThe (Oct 3, 2014)

Should a pension be designed to retain an employee for 30 years or reward time of employment or service for a company?

Some companies basically make you wait until the 30 year mark to get your pension or payout. If you retire at 29 years of service with a lot of companies you are more than one year short on pension money. Some companies and organizations rate pensions every 5 years. I know one person who was forced to retire early at almost 29 years of service but his pension was that of some one who worked 25 years yet he had the total hours of a 30 year retiree.

Shouldn't a pension or retirement plan be prorated year by year after a person is vested? Let's face it decades ago companies and governments needed the same employee to stay for 30 years but that is not the case now. Yet that 30 year number is still used in more ways than one. Many HRs and managers make verbal non binding promises based on the old school 30 year number which they have zero business making because they cannot guarantee a 30 year career let alone pension.

This would be a good thing for the employee that wants to or has to retire early. It might actually work out cheaper for some companies. Also you wouldn't have clock watching hangers on employees simply killing time waiting for retirement. 

Should a retirement or pension plan be designed to reward or retain an employee?


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## oldman (Oct 4, 2014)

Without going into a long winded blah, blah, blah story, I will just say that when I worked for DuPont, we had a formula that if an employee hit the number 81 by combining years of service and age, they could retire with 100% benefits, including health insurance for employee and spouse. So, if I was 51 years old and had 30 years with the company, I could retire with 100% benefits. Pretty sweet, huh? It's not that way anymore, I don't believe.  

At the airlines where I worked, (not all were the same), they use a formula based on the same thing; age + years of service + pay grade. We had what was referred to as a "defined" pension plan. Here in Pennsylvania, teachers have the best pension plan. This gets back to the question of the thread. This formula actually does both; retains and reward.

Good question. I'll be waiting to read the responses.


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## rkunsaw (Oct 4, 2014)

Not many companies offer traditional pensions any more. Most have gone to some version of the 401ks. 

The plan we had at Whirlpool was vested after 5 years and the paid by the length of service by number of years and months.


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## QuickSilver (Oct 4, 2014)

I have three small pensions coming in from employment... back when companies still offered pensions... That all changed when employers decided to offer 401Ks... which simply handed over our retirement money to wall street to gamble with... and we take ALL the risk..  AND they want to do that with our Social Security TOO!!!


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## WhatInThe (Oct 4, 2014)

oldman said:


> Without going into a long winded blah, blah, blah story, I will just say that when I worked for DuPont, we had a formula that if an employee hit the number 81 by combining years of service and age, they could retire with 100% benefits, including health insurance for employee and spouse. So, if I was 51 years old and had 30 years with the company, I could retire with 100% benefits. Pretty sweet, huh? It's not that way anymore, I don't believe.
> 
> At the airlines where I worked, (not all were the same), they use a formula based on the same thing; age + years of service + pay grade. We had what was referred to as a "defined" pension plan. Here in Pennsylvania, teachers have the best pension plan. This gets back to the question of the thread. This formula actually does both; retains and reward.
> 
> Good question. I'll be waiting to read the responses.



I've worked for companies where they had 'the number' ie total of age and service but they only offered it periodically. It was never policy. They had other buyouts but they would never total 30 years worth. Always advised wait for 30 years since that was more money. A lot of companies manage by threat openly telling the employees their job will be outsourced or eliminated and give them workplace reasons to leave yet the employee has no incentive to leave other than escape the pressure. The company literally wants people to quit or get themselves fired. To me that is a waste because now there is a hostile work environment which will lead to poor production and service for the company's customers. And people will be fired left with nothing.

The example I cited the individual not only was "asked" to retire early but is under a strict non compete agreement so where is the actual incentive to retire other than to save a partial pension. That goes back to trying to retain but we're in an era where longevity is not rewarded or required the way it was years ago. Should basic pay be more and employees left to their own devices to create a retirement plan? This would give the employee flexibility.


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## Lon (Oct 4, 2014)

The day of the Defined Benefit Pension Plans are over and we are not likely to ever see them again. 401 K's or something similar will remain.

Having been in a Defined Benefit Plan my self I was able to start taking a benefit at age 60 (twenty years ago) after having participated in the plan for just 20 years. I have been quite happy with the plan and appreciate the annual COLA increases.

I don't consider pensions as a reward or a means to retain employees. simply a means to attract them to the company.


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## oldman (Oct 5, 2014)

Lon, I agree. My defined pension plan has given me a very nice financial retirement. I have not even had to touch my 401(k), which I had to move to a retirement IRA when I retired. With my pension check and my SS check, I am actually even able to stick money into my IRA each money. The defined pension plan costs the companies a lot of money and because they are then guaranteed by the Fed, they are well protected. Going back to what I said in my first post, the teachers here in PA have the best of the best. Probably even better that the UAW, Teamsters or any other big union.


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## WhatInThe (Oct 5, 2014)

oldman said:


> Lon, I agree. My defined pension plan has given me a very nice financial retirement. I have not even had to touch my 401(k), which I had to move to a retirement IRA when I retired. With my pension check and my SS check, I am actually even able to stick money into my IRA each money. The defined pension plan costs the companies a lot of money and because they are then guaranteed by the Fed, they are well protected. Going back to what I said in my first post, the teachers here in PA have the best of the best. Probably even better that the UAW, Teamsters or any other big union.



A lot of government unions and contracts are better than private sector contracts. A lot of government jobs are "for the public" and deemed a necessity and only government employees could and should do the job(the leverage used anyway). The private sector will replace you in a heart beat. The government, partly because of the unions cannot. When the benefit package bill gets high enough and most do the public will revolt.  California needed a "temporary" tax increase to pay for government stuff. Look at Detroit-eek. Local taxes have gotten so high here partly because the first generation of full union represented teachers and public employees have been retiring. They're so high it has affected the local real estate market. Properties are having to be sold at much lower prices because some view the tax bill worse than the mortgage. 

Ironically I've lived in what should be some of the worst anti union parts of the country and but the union represented government jobs are the only 'good' jobs in the area. Part of that are transplants from union towns. Right off the bat government jobs are harder to outsource because they are only needed on one location, you can't move a town to India for cheaper labor. 

But back to the retain or reward. Should local governments even be offering a pension. Government jobs USED to be lower paying so they had to offer extensive benefit packages but now government is quite competitive to the local economy anyway.


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## QuickSilver (Oct 5, 2014)

I am of the mind that we shouldn't worrying so much about what others are getting in the way of benefits... pay... pensions... BUT should be more concerned with trying to make sure everyone gets good benefits and pay if they are working, and stop voting against the interests of the working poor and middle class.  BUT  hey I'm a Democratic Socialist... so what do I know.. but it seems to me if people made a decent living wage and can retire with dignity there wouldn't be such a dire need for welfare and food stamps.. and the elderly trying to decide if they want their medicine or if they want to eat.


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## Son_of_Perdition (Oct 5, 2014)

The company I worked for had a 10 year vestment and if you met the 80 formula you could retire at 55.  Most waited until 65+ to withdraw theirs.  They also figured your pension based upon you highest 5 consecutive years out of the last 10.  I was able to wait when we had an upgrade company wide to update our technology and then a refresh after 3 years.  I was able to bank credit for the overtime at both ends and in between.  When the economy crashed, I was able to retire at 64 with a sizable severance package but lost a little pension/SS wise.  

Combining income from my SS and pension I actually take more home monthly than when I was working along with getting a tax refund yearly, (something I never seemed to have before).  I had what was left of my 401k after the crash to take out enough to upgrade our home for resale and outright purchase a smaller home in a much more tax friendly state, paid off all outstanding debt and never looked back.  The company has since closed the pension but all of us who were grandfathered in are still receiving our government backed pensions.

But as for the question of the thread.  After vesting a pension was like money in the bank and if an employment change was in your best interest and well being then it didn't matter whether you stayed or not.  A 401k is the replacement and follows you from company to company.  If the company doesn't match your contributions then you should take full advantage of IRA's both traditional or Roth.  Incentives to remain with a company based solely upon a pension is a personal choice that you must make.


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## LogicsHere (Oct 9, 2014)

Most plans regardless of the type penalize you for taking money out before age 59-1/2 or whatever age they deemed as their full retirement age.  I for one feel that *bonuses* were created to reward people; retirement plans are to retain GOOD people as it costs a lot of money to train them. Full vestment however, should either be considered immediate or 5 years max., not the 10 and 20 years of the past.


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