ALL ARE THE SAME, JUST THE NAMES ARE DIFFERENT!



“Deloitte & Touche, the giant accounting firm, made a big miscalculation when it tried to switch to a cash-balance plan in 1998: The finance guys apparently forgot that a large number of the firm’s employees were older, experienced actuaries and accountants, who took a professional interest, as well as a personal one, in the plan’s novel design. They were horrified when they connected the dots and saw that their pensions would go over a cliff. They went ballistic, and the firm backtracked, allowing all who were already on the staff when the cash-balance plan was adopted to stick with the old benefit if they wished.*

IBM also underestimated the über-nerds on its staff, though it’s not hard to understand why the company was so complacent: It had cut pensions several times in the 1990s, and no one had noticed. Traditionally, it provided 1.5 percent of pay for each year of service, which resulted in a pension that replaced roughly one-third to almost one-half of a person’s salary in retirement. The calculation was simple: years of service times average pay in the final few years times.015. For example: If someone worked thirty years, and his
average pay in the final years was $50,000, the pension would be worth $22,500 a year in retirement ($50,000 x 30 x.015).

Reducing any of these factors would produce a smaller pension. In the early 1990s, IBM reduced all three. In 1991, it capped the number of years of service that got taken into account when calculating pensions, limiting it to thirty years. This meant that if people worked longer than that, their pensions wouldn’t grow. Next, it lowered the multiplier from 1.5 percent to 1.35 percent, again reducing the pensions. Finally, it reduced the salary component; instead of basing the pension on the average salary an employee earned in the final five years of service, it began to use an average based on the entire time of service, including the early years when pay was low.

These early cuts were like gateway drugs: The first one produced a mild high; the next two were more potent; then IBM moved on to the equivalent of heroin: the “pension equity plan.” The very name was deceptive, like “low-fat” and “organic.” “Equity” suggested fairness. More than that, the pension equity plan looked as though it favored older workers.
At[…]”

Excerpt From
Retirement Heist
Ellen E. Schultz
https://itunes.apple.com/us/book/ret...81793549?mt=11
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