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More Corporate Greed - Better Oppage Version
AngelHedgie
Registered User regular
Registered User regular
Companies are abusing pension tax loopholes to benefit their executives at the expense of their workforce.
Fuck.
This image should sum up the problem here:
Basically, a pension plan balances the liabilities (the pensions of members both drawing and able to draw) with assets that they (well, their employer as part of their compensation) pay in. In comparison, executive benefits are usually assessed directly against the company. The reason for this is that the laws regarding pensions requires that to be tax-exempt, they have to treat all members equitably, so you can't have a small number of people drawing the lion's share of benefits. What these companies have figured out is a way to make it look like bringing the execs into the plan is legitimate, allowing them to shift the liability for their perks from the company to the plan. Oh, and they don't bother funding the added liability, making the pension plan unstable. In the worst case scenario, execs taking their perks out (say, by rolling them into an IRA or other investment vehicle) can cause the plan to go insolvent.
Yep, it's execs stealing from the rank and file again. And it's sick.
Fuck.
This image should sum up the problem here:
Basically, a pension plan balances the liabilities (the pensions of members both drawing and able to draw) with assets that they (well, their employer as part of their compensation) pay in. In comparison, executive benefits are usually assessed directly against the company. The reason for this is that the laws regarding pensions requires that to be tax-exempt, they have to treat all members equitably, so you can't have a small number of people drawing the lion's share of benefits. What these companies have figured out is a way to make it look like bringing the execs into the plan is legitimate, allowing them to shift the liability for their perks from the company to the plan. Oh, and they don't bother funding the added liability, making the pension plan unstable. In the worst case scenario, execs taking their perks out (say, by rolling them into an IRA or other investment vehicle) can cause the plan to go insolvent.
Yep, it's execs stealing from the rank and file again. And it's sick.
XBL: Nox Aeternum / PSN: NoxAeternum / NN:NoxAeternum / Steam: noxaeternum
AngelHedgie on
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I should not be filling up my "Never work again" fund with a naturally fluctuating asset. Especially not if I'm a young guy who has years for it to drop.
I sure as shit don't trust the Conservatives not to plunder CPP. As soon as they start running out of money to pay for their lavish tax cuts, their solution will be the same as always: do the same thing the Americans did. And if they don't do that, then I'll have two pensions when I retire and I'll be filthy rich.
Assuming your young your 401k is already in the stock market, the only difference is that part of it is now forced into company stock instead of your choice and its still far better than them not matching at all.
My company does this too, and I'm not a big fan of it. At any point I can enter my 401k and rearrange my allocations. I can change future contributions and also transfer funds between the various funds. They encourage us to look at our 401k quarterly and it has built in risk assessment and compares them to your retirement goals, age, and salary etc. Naturally the "fund" that only has our company stock in it is the riskiest investment.
The problem I have with it is if my company goes under or needs to do some severe restructuring I'm fucked on two fronts. I could lose my job and a large percentage of my retirement. I don't see this as very different from a company pension plan getting screwed up when a company fails, though. I'm sure many employees at Enron and Worldcom would warn against investing in the company you work at, and I would agree.
edit: there's a big difference between being in one stock and being in the "stock market" namely diversity. The goal of diversity is to minimize risk. Naturally owning one stock is much more risky than owning 100 different stocks. Having half your money in one stock isn't much better.
1) This is simply a tax maneuver. It allows companies to offer increased benefits packages without taking on as much of a tax burden in doing so. I know that makes people squirm, but we could always just simplify the tax code (without reducing it). Otherwise companies are going to continue to find ways to use the tax breaks offered to them by the government to their fullest extent.
2) "Freezing" a pension plan doesn't mean what you implied it means. It just means that companies are moving towards 401(k) and other forms of retirement benefit. Which actually means that the hypothetical screw-job on the rank-and-file really isn't as bad - they've moved those people onto other retirement vehicles anyway.
3) If a company goes into bankruptcy and can't meet the demands of the increased liability in the plan, the article clearly gives the precedent that the executives get nothing. That's right, tax code is one thing, but bankruptcy court is not going to take a unfunded pension plan and use it to round out the benefits package of millionaires in favor of the rank-and-file. In the example they gave, the execs all got nothing, one middle manager lost half his benefits, and everyone else still got paid. In all of their examples, they couldn't point to any example where the risk of increased liability actually became material. It is not true that this plan is being used to grant executives their golden parachute while the lower-level employees lose their retirement. So effectively the added liability doesn't mean what you implied it means. Everyone still gets paid, or if they don't, it's the execs who don't first. The executives are the ones getting screwed here, because they are told that their retirement/parachute benefits are being put into a more secure fund of assets (instead of being completely empty promises like they usually are), but if push comes to shove, those assets aren't going to the executives and so it was never more secure.
4) It is true that an executive could leave and roll the benefit over to an IRA and then the plan could go insolvent. The article doesn't give any case of this actually happening. My guess is if that happened people would go to jail and tax code would be changed, but who knows. Or the executive's rollover account would be sued for the assets. It's a hypothetical at this point.
5) It is also true that the gerry-mandering of pensions that is done to make this legitimate is a possible violation of the spirit of the tax break in the first place. But, a) the gerry-mandering is accomplished by increasing benefits to several lower-paid workers, so win-win, and b) like I said above, companies will take advantage of tax breaks you give them unless Congress tells them they can't.