UPS to freeze pensions of 70K non-union workers

Displaced Bama Fan · Jun 28, 2017

Ouch!

http://www.msn.com/en-us/money/comp...on-workers-to-cut-costs/ar-BBDmBdv?li=BBnbfcL

UPS’s pension plans in the U.S. had a $9.85 billion shortfall at the end of last year, meaning they were about 76 percent funded, according to regulatory filings.

The shift won’t occur until Jan. 1, 2023, giving affected workers more than five years to prepare, Atlanta-based UPS said Tuesday. Most of the employees, which account for about 16 percent of the workforce, are in administrative or management positions.

Well, at least their pension plan is at least 76% funded.

crimsonaudio · Jun 28, 2017

No surprise, pensions may as well have been created by Charles Ponzi.

Jon · Jun 28, 2017

crimsonaudio said:
No surprise, pensions may as well have been created by Charles Ponzi.

I have some friends in Senior management over there, ouch, hate this for them

Displaced Bama Fan · Jun 28, 2017

Jon said:
I have some friends in Senior management over there, ouch, hate this for them

Again, at least it's 3/4 funded. That's better than a lot of the shell games many other companies have played in the past.

4Q Basket Case · Jun 28, 2017

Don't cry too much for them.

There are very few defined benefit plans any more. The fact that they will continue to accrue benefits until 2023 is pretty unusual.

Also, the benefits accrued until that time will be paid. It's just that existing participants wouldn't continue to accrue new benefits. Additionally, I'm sure new employees won't participate at all.

Finally, the fact that it's 76% funded does NOT mean that retirees would receive only 76% of what was promised. It means that FedEx will need to pony up some more money, primarily as a result of the extraordinarily low interest rates of the most recent decade. Which FedEx is 100% capable of doing.

No, it's not as good as some folks may have anticipated. But they have 5 1/2 years to plan for that, during which time they continue to accrue. Most of the rest of the workforce would trade places in a heartbeat.

Bamabuzzard · Jun 28, 2017

4Q Basket Case said:
Don't cry too much for them.

There are very few defined benefit plans any more. The fact that they will continue to accrue benefits until 2023 is pretty unusual.

Also, the benefits accrued until that time will be paid. It's just that existing participants wouldn't continue to accrue new benefits. Additionally, I'm sure new employees won't participate at all.

Finally, the fact that it's 76% funded does NOT mean that retirees would receive only 76% of what was promised. It means that FedEx will need to pony up some more money, primarily as a result of the extraordinarily low interest rates of the most recent decade.

No, it's not as good as some folks may have anticipated. But they have six years to plan for that, during which time they continue to accrue.

A lot of people who depended solely on a company retirement plan realize this when they retire, unfortunately when it's really too late. My parents, my in laws and many other adults I know who have now reached retirement age have learned this hard lesson.

crimsonaudio · Jun 28, 2017

4Q Basket Case said:
Finally, the fact that it's 76% funded does NOT mean that retirees would receive only 76% of what was promised. It means that FedEx will need to pony up some more money, primarily as a result of the extraordinarily low interest rates of the most recent decade. Which FedEx is 100% capable of doing.

Possibly mistyped or maybe I missed something - how is FedEx involved?

Displaced Bama Fan · Jun 28, 2017

crimsonaudio said:
Possibly mistyped or maybe I missed something - how is FedEx involved?

Memphis or Atlanta. In the end its just a plane ride or short haul away, right?

AlexanderFan · Jun 28, 2017

The government wants railroad pension so bad they can taste it. It's still viable for now, but with the reduction in payers versus the people receiving benefits it may meet a similar fate.

Sent from my iPhone using Tapatalk

Bamaro · Jun 28, 2017

Whats this thing called a pension?

Displaced Bama Fan · Jun 28, 2017

Bamaro said:
Whats this thing called a pension?

Illinois state employees would like to know.

4Q Basket Case · Jun 28, 2017

crimsonaudio said:
Possibly mistyped or maybe I missed something - how is FedEx involved?

UPS....FedEx...what's the difference?

You got me. Need to read better. ;-)

Tide1986 · Jun 28, 2017

crimsonaudio said:
No surprise, pensions may as well have been created by Charles Ponzi.

I assume you meant to use blue font because pensions are most definitely not a Ponzi scheme.

Tide1986 · Jun 28, 2017

crimsonaudio said:
Possibly mistyped or maybe I missed something - how is FedEx involved?

Did they move to New Jersey?

Tide1986 · Jun 28, 2017

Bamaro said:
Whats this thing called a pension?

I have one, and it's well-funded.

Bamaro · Jun 28, 2017

Tide1986 said:
I have one, and it's well-funded.

Consider yourself blessed.

Tide1986 · Jun 28, 2017

Bamaro said:
Consider yourself blessed.

I work for a pretty responsible firm, and of course our business is all about pricing risk.

crimsonaudio · Jun 28, 2017

Tide1986 said:
I assume you meant to use blue font because pensions are most definitely not a Ponzi scheme.

No blue font needed, I'm dead serious. If they didn't rely on taking from others in order to fund the liability, they might actually work - but they don't because they over-promise returns on the initial investment.

Tide1986 · Jun 28, 2017

crimsonaudio said:
No blue font needed, I'm dead serious. If they didn't rely on taking from others in order to fund the liability, they might actually work - but they don't because they over-promise returns on the initial investment.

As a retirement vehicle, they do not do what you describe. Do organizations make unrealistic assumptions that reduce current contributions? Yes, some do.

Organizations are only going to invest so much in employee retirement. Some invest solely in a pension (defined benefit) program, which puts a significant amount of risk on the organization itself. Some invest solely in a 401k (defined contribution) program, which puts essentially all of the risk on the employee. And some like my firm, invest their retirement dollars in both.

The success or failure of a pension program depends on assumptions about the future much like your own assumptions about your 401k and personal investments. Some firms, like mine, are very conservative about what the future holds.

4Q Basket Case · Jun 29, 2017

Pensions are an area where the low interest rates of the past decade have really hurt. Assumptions of 6% +\- return on bonds are historically sound, but haven't held in this cycle.

That's forced a greater allocation to equities. Which is fine in the long run, but generates volatility that can unnerve participants. It can also force the sale of depressed equities to fund immediate cash needs (read: pension payments), which means those investments are gone and don't get to participate in the ensuing upswing.

Low interest rates are great if you're borrowing, but that knife cuts both ways. If you're an investor they're not such a good thing. And if you have an IRA or 401k or are a participant in a pension plan, make no mistake...you are an investor.

UPS to freeze pensions of 70K non-union workers

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