Paid to do nothing

[JasonA]

I realize that money should be put aside now for them to retire in the form of funding retirement/pension plans but that is merely a promise as the pension fund is still in play for the company to use as they see fit.   So none of those companies have any real liabilities for pensioners for quite some time yet.

This is where I disagree. In my experience, when there's a retirement plan like a 401(k), the employee puts into it as he or she works. The company may also have a match, like a 10% or 25% or 50% or even 100% match. But still, this money is invested AT THE TIME OF THE PAYCHECK. In other words, Tom Smith working at Toyota in Ohio contributes $50 this check to his 401(k) plan. AT THE SAME TIME, Toyota contributes whatever their current match is, maybe $10. That's IT. That's the extent of Toyota's input to that plan, for that pay period. 30 years down the road when Tom Smith retires, there will be NO burden on the company, becaues the money was invested up front, both by him and by Toyota (or whatever the foreign make in question is). There are no burdens down the road because all the money that will ever be in that retirement account was put in during the duration of Tom Smith's employment. In effect, the foreign auto makes' have their retirement burdens UP FRONT, as they contribute to Tom Smith's 401(k) plan.

That's obviously NOT how a pension system works, and that's of course part of the reason why GM is in a mess of doo-doo right now. 30 years down the road, foreign makes will NOT have an extra burden...because they're using a modern retirement plan right now. GM, as you say, now also has a robust 401(k) program, but that doesn't erase the burden it has from the pensioners from decades ago (that were of course set up when 401(k) plans didn't exist).

You and I both agree that the playing field will eventually be leveled, decades from now. But I don't think it will be because of foreign auto makers' retirement plans creeping up on them like it has GM, because they won't. It'll be because GM's older retirees will slowly be "exiting" the pension system, and I assume no current employees (or at least no NEW employees) are under the pension system...so the load on the pension system will decrease over time. The situation will certainly better itself when GM can renegotiate the union contracts (or get out from under them all together) and get all of its employees under a modern retirement program, but it will of course take time...and lots of it probably.

[brmurph]

I realize that money should be put aside now for them to retire in the form of funding retirement/pension plans but that is merely a promise as the pension fund is still in play for the company to use as they see fit.   So none of those companies have any real liabilities for pensioners for quite some time yet.

This is where I disagree. In my experience, when there's a retirement plan like a 401(k), the employee puts into it as he or she works. The company may also have a match, like a 10% or 25% or 50% or even 100% match. But still, this money is invested AT THE TIME OF THE PAYCHECK. In other words, Tom Smith working at Toyota in Ohio contributes $50 this check to his 401(k) plan. AT THE SAME TIME, Toyota contributes whatever their current match is, maybe $10. That's IT. That's the extent of Toyota's input to that plan, for that pay period. 30 years down the road when Tom Smith retires, there will be NO burden on the company, becaues the money was invested up front, both by him and by Toyota (or whatever the foreign make in question is). There are no burdens down the road because all the money that will ever be in that retirement account was put in during the duration of Tom Smith's employment. In effect, the foreign auto makes' have their retirement burdens UP FRONT, as they contribute to Tom Smith's 401(k) plan.

That's obviously NOT how a pension system works, and that's of course part of the reason why GM is in a mess of doo-doo right now. 30 years down the road, foreign makes will NOT have an extra burden...because they're using a modern retirement plan right now. GM, as you say, now also has a robust 401(k) program, but that doesn't erase the burden it has from the pensioners from decades ago (that were of course set up when 401(k) plans didn't exist).

You and I both agree that the playing field will eventually be leveled, decades from now. But I don't think it will be because of foreign auto makers' retirement plans creeping up on them like it has GM, because they won't. It'll be because GM's older retirees will slowly be "exiting" the pension system, and I assume no current employees (or at least no NEW employees) are under the pension system...so the load on the pension system will decrease over time. The situation will certainly better itself when GM can renegotiate the union contracts (or get out from under them all together) and get all of its employees under a modern retirement program, but it will of course take time...and lots of it probably.

I might be missing the point here but 401K's cost companies very little compared to the traditional pension plan. Normally the most a company will contribute is a match of 50% up to the first 6% of the employees contributions (really like saying the match is 100% up to 3% contribution). The employee is the one that contributes the most money (in my case 20% and my employer 3%). Now some folks have both the 401k and a traditional retirement plan, thats what I want LOL.

The sad part is that even with the 401k's I don't believe that many people contribute all that much money to them (I would love to know the figures). My wife and I both contribute 20% and I still don't feel I will have enough to retire on compared to my dad who has the traditional pension (and a 401k).

[JasonA]

You can only contribute so much to a 401(k). And yes, much of it is employee-sponsored. It all depends on your company. My company matches 50% of my contribution. If I put in 10% of my check, they put in 5%, etc. Some companies match 100%. Some none.

But over the long haul, 401(k)s are not nearly as subject to failure when a company goes down like pensions are. My grandpa worked for Freuhauf trucking in Grand Rapids, MI, for ever. He worked there for like 40 years, and built up quite a pension. When the company went under, he got nothing. ZERO. NOTHING. Luckily, they were penny-pinchers anyway, so they lived ENTIRELY on what they saved (and SS). If I feel angst against pension-type accounts, it's from personal experience (through my grandpa), and from the gross misuse of public-type funds such as SS.

Match a solid 401(k) with responsible contributions to a personal IRA, and you'll be rich beyond your dreams in retirement (if you start soon enough). Keep YOUR money in YOUR control and you'll have a much more fruitful retirement. The way the government (mis)handles most of its financial programs, I don't trust them with a penny of my money. Unfortunately, SS is not optional. I'd love to option out of it and forfeit any benefit (I have my own 401(k) and IRA accounts), but they'd never let me do that because I support yesterdays retirees with my current SS contribution. It's such a messed up system.

That is a bit of a tangent to this subject though. The real point is that a 401(k) type retirement account, regardless of how much the company matches, is paid for UP FRONT, and not by subsequent generations like many pension plans are (and like the major automakers' are). It's for this reasont that the foreign makes will never have a "latent retirement" burden like GM/Ford/ChryCo does now because the entire retirement system isn't a pension-type system. It's a modern system, just like the Big 3 have moved to. The current latent pension burden the Big 3 face is inarguable, and the reason it got to such drastic levels isn't really germaine anymore I don't guess.

[Regis]

I find myself scratching my head. While I'm always in favor of long term planning and the 30 year outlook looks fine.......am I alone or is anyone else thinking the obvious like me?......what about the front end of the 30 years? Yes it all sounds good at the 30 year mark but it won't amount to squat if GM can't make it through to that 30 yr mark. Call me crazy but i think that's what the jist of all 8 pages of hubbub was all about. If GM doesn't get some kind of "relief" soon all the fantastic 401Ks of the world won't mean dukie. Perhaps I'm missing something here but it sure looks like a simple case of putting the carriage before the horse.

[Bob D]

Could you tell me excatly when 401K plans actually came into being??

1981,during Ronalds Regans administration (when he wasn't out mowing lawns..LOL) A financial consultant in his admin, by the name of Ted Benna came up with a loophole that launched it...the rest is history.

[mike5514]

Please forgive me Im so sorry but I have to whine again! Even though I know it is hopeless Im compeled to do this it its one of my few weeknesses. Pension plans were the only retirement plans out side of sochable security when I enterd the labor market. The people entering the labor market today dont know what it was like in 1956 and I dont expect them to. But many times I looked across the street at a job that I would have liked but I stayed at my old job for the pension Companies did that to keep US. Ford In the real old days offerd a 8 dollar day unheard of! the catch was you had to work there a year to qualify. How many did not git fired before a year was up I can only guess. 401s are a modern idea unknow in the 50s,60s and early 70s. today we are caught between a rock and a hard place my pension has proven to be solid gold 401s are yet to be tested look at enron! I feel that my kids though that I was a dumb sob but im telling you right know IF YOU PLAY BALL WITH J.P. MORGAN WHEN HE FEELS LIKE IT HE WILL SHOVE THE BAT UP YOUR BUT! Please bruce shut down this thread. Mike

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[WarrenJ]

I feel that my kids though that I was a dumb sob but im telling you right know IF YOU PLAY BALL WITH J.P. MORGAN WHEN HE FEELS LIKE IT HE WILL SHOVE THE BAT UP YOUR BUT! Please bruce shut down this thread. Mike

NOT! There's simply too much info here.

Regards,

Warren

[CadiKing]

Please forgive me, Im so sorry, but I have to whine again! ... Please bruce shut down this thread. Mike

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mike5514,

Excuse me, but are you serious???

(I didn't want to use the word crazy.)

[CadiKing]

GM plants won the gold, silver and bronze awards totally sweeping the ratings eliminating all the other manufacturers.  TexasAxeMan...this is called "data" as it is true and unrefutalbe.  Pardon my spelling.

Guru,

Love your sense of humor.

[JasonA]

Yes, I understand 401(k) plans have not been around for a long time, compared to how long pensions have been in place. I referenced that a few times in my post, saying that pensions were the only option back when they were set up.

I really enjoy GM's new television commercials where they say multiple times that their plans are the highest quality in North America. Compared to the "good deal" commercials of just a few months ago, I think the new wave of GM's "good image" commercials are just what the market needs.

Mike5514, if the thread is of no interest to you, you are free to disregard it. Please don't request to shut a thread down that so many people are interested in, and that gets contributed to so regularly.