Redefined benefits

I was reminded recently of the dramatic difference between pensions and 401(k)s. 

A company I worked for briefly back in the 1990s is trying to clear participants out of their pension so I got an offer to take my money out.  That makes sense and I have no problem with it.  But it illustrates what employees have lost with the replacement of pensions with 401(k)s.  I do not have a lot of money in this thing, but this pension has more money in it than I got out of a fully vested 401(k) that I participated in with maximum contributions with a maximum employer match.  And the funds in that 401(k) were very well managed.

The pension has more in it than the 401(k) I was in for twice as long.

401(k)s were created to provide an opportunity to people who didn’t have pensions, but instead companies have been replacing pensions with 401(k)s.  Not only do 401(k)s save the employer money, savings that aren’t shared with the employee, they also pump a lot of money into Wall Street where it can just disappear.  Pensions can be raided, but with 401(k)s there are no real obstacles and much higher risks.

Not all companies have eliminated their pensions and of course not all companies can afford pensions; defined benefit plans are more expensive than defined contribution plans.  But a lot of companies that can afford them have replaced them with the riskier and less profitable for the employee 401(k).  The NFL is trying to do it to the referees now.

Unions and workers are attacked for having the outrageous benefit of a pension, even though they often take less salary in exchange for it.  What’s outrageous with negotiating for a benefit?  Is asking for a higher salary outrageous?  Of course it costs money – doing business costs money.  So does teaching students, fighting fires and stopping criminals.  Is compensation for work a bad thing now?

Suppliers and vendors are paid in full; CEO and executive salaries, bonuses and retirement packages are paid in full; why should employees be an exception?  Isn’t it more outrageous that more people don’t have pensions?  Shouldn’t more people be in unions so they can negotiate for a pension?

We shouldn’t criticize pensions.  They are a good benefit and offer a chance at a secure retirement that 401(k)s simply can’t match.  I’m not saying everyone should go out and protest over this.  I haven’t been as active as I should have been.  Just don’t fall for the smears of people with pensions.  Don’t buy into the divisive tactics that castigate people with pensions as getting something they don’t deserve.  Rather than taking pensions away from people who have them more employees should get them.

Consider that when you vote.