HP's pension switch

[Omaha Steve]

I can't find a link.

Copyright 2007 Associated Press
All Rights Reserved

The Associated Press
March 14, 2007 Wednesday 5:46 PM GMT
BUSINESS NEWS
825 words
HP's pension switch
By LEE GOMES, The Wall Street Journal

Art Dill, president of the IBM Retirement Club in San Jose, remembers well when he left his company in the early 1990s. He received, in addition to the traditional gold watch, a $1,000 bonus and a company-sponsored dinner for him and 10 of his friends at the restaurant of his choice. For IBM retirees these days, says Mr. Dill, things are more perfunctory: a modest ceremony in which co-workers gather around the departing employee in some corner of the office to pay tribute.

Ceremonies aren't the only thing that is changing about retirement. The old-guard tech companies, the last bastions of traditional pensions, finally have joined their younger counterparts in the New Economy. Pensions that guarantee a set payout upon retirement are no more. In their place are 401(k)s, in which retirement benefits depend on how much individuals chose to set aside, along with how well their investments did.

One of the last holdouts from the old school was Hewlett-Packard, the 68-year-old Silicon Valley company long considered one of the most benevolent of U.S. employers. Late last month, the company announced it would be phasing out its pension plan for new employees and replacing it with a 401(k).

The company said it took the step which mirrors similar moves over recent years by IBM and Motorola, among others as part of its efforts to remain competitive.

When you read about "high-tech retirees" in the newspaper, they tend to be the highly visible entrepreneurs whose companies have just gone public and who can afford to turn off the alarm clock while still in their 20s or 30s, at least until they start all over again.

The more common retiree profile, however, is the traditional one: the person who dutifully serves 20 or 25 years as an employee before packing up the files and spending more time with the grandchildren. If they take a cruise, it isn't on their own yacht, but on a larger ship with a few thousand others.

Employees who retired before the turn of the century were able to take advantage of rising stock and real-estate prices over the past few decades to accumulate a nest egg. Their golden years, while dogged with the same uncertainty about rising health-care costs that everyone feels, are typically marked by activity and comfort.


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[Raven]

1. Isn't this a disaster waiting to happen?

People ages 55 to 64 only have $60k in their retirement accounts? Social Security doesn't pay much. People maxed out on credit. Houses not selling. Health care getting more and more expensive. How can this not end up to be a disaster?

[Solo_in_MD]

3. Short term pain, long term gain

Defined benefit pensions need to go. In the current environment they are worse for the employee. Defined contribution is portable and moves from job to job with you.

The article is wrong in one major respect. The largest remaining stronghold of defined benefit pensions is state and local government employees, including teachers. From an economic standpoint, that has to change for government to have a solid enough economic footing to server all constituents.

Recently several munincipalities have been fighting new disclosure rules that would project their retirement liabilities into the future fearing it would impact their bond rating. Its that scary.

[leftofthedial]

2. the capitalists have ruined this country