@mec+1iUnJJIf HR has been looking at and proposing this as a cost savings tool for years. In the past the leaders squashed it as the pension was a “retention tool”, meaning the leaders wanted to keep their own pension, they didn’t really care about GSR retention. Now that enough of the leaders with pension have retired or will retire this year, AND the interest rates have become favorable to Ford (they need 20-27% less $ to convert the active employee pension liability) this has become an action item for 2023.
It has always been on the plan that BGC provided for reducing labor costs.
13 replies (most recent on top)
What that means is that your lump sum will go down not 20-25% (2023), but instead 40-50% (2024) if they wait 1 more year. Please research this so you are informed.
I agree they may convert it, but I think they will wait 1 more year, due to interest rates, so they can give you even less money.
Stock market has been down so a lot of folks want reassurance that they made the right choice of taking the lump sum over the pension.
Why do people keep stating Ford is planning on converting pensions to 401k deposits automatically? Where is this documented or under what evidence is this being stated?
Just some additional comments on PBGC. They only guarantee the lifetime part of the monthly pension that you get from retirement thru death. They do not guarantee the additional supplement you get from retirement to age 62.
The caps are based on your age when your employer terminates their plan.
As an example, my monthly pension amount would be approximately 2/3 of lifetime and 1/3 supplement. And that 2/3 lifetime amount wouldn't be fully guaranteed by PBGC until I'm 60.
Ford capped the pension at 35 years. Legal? There are many rules. They offer a lump sum because it is a good deal for them, not you.
It is a little misleading to say that the PBGC reduces pensions if they take over a pension. The PBGC actually caps pensions only for those with large pensions who are relatively young. Most Ford pensions are not large enough to be capped. If you are concerned the PBGC website has information on caps by age.
This ==> It is legal for those not yet retired.
It is legal. A pension plan can be frozen. The plan 'stops' and employees are entitled to the benefits they have earned at that point but those benefits do not continue to grow until the employee reaches retirement. A plan can be terminated which means the plan is over and assets are liquidated. Active employees would get a lump sum equal to the present value of their accrued benefits. Ford would likely move the lump sums into the SSIP or FRP. Those already in pay would have an annuity purchased for them and they would continue to receive their same monthly payments.
If Ford were to terminate their plan, employees are required to be notified at least 60 but no more than 90 days of the termination date.
Unless a plan is underfunded and the employer is unable to meet their obligations, the PBGC does not take it over. Ford's plan is not underfunded, nowhere near. The calculation of the lump sum is based on IRS actuarial tables, the same way lump sums are currently calculated for new retirees. Any money remaining in the plan will be used to pay fees, which will be significant. While there is no accrual of additional benefits, your current benefit cannot be reduced. If the plan were underfunded and Ford unable (unable, not unwilling) to pony up what is needed, the PBGC would take it over and benefits would be reduced, like what happened with our salaried friends at Delphi.
It is legal for those not yet retired. It is not legal for those already retired.
Ford is planning the conversion for those not yet retired. Several companies starting in the 1990s adopted this scheme. They are called things like “pension equity plans". IBM was one large US company that did this. What basically happens is the company uses a formula to determine the value of the employees pension at present and deposits that sum of money into their 401k and from that point forward the pension ceases to exist. Usually the company will announce the change 2-6 months before it is enacted which gives people an opportunity to retire with pension.
According to the PBGC site a company can do a standard termination as long as they are able to pay all benefits that are owed. Termination of a plan is subject to PBGC review.
Highly doubtful. Read the Pension Benefit Guarantee site to see the rules for employers to terminate a plan. Also Google GM pension to Prudential to see what they did in 2012. GM froze contributions to their pension in 2007 and then sold it to Prudential which turned into an annuity and therefore no longer subject to government Pension Guarantee. Those retirees can still get a monthly check and I personally know many that do. 737