FedEx 'Modernizing' Pension Plan

Discussion in 'FedEx Discussions' started by squeekywheel, Feb 27, 2007.

  1. squeekywheel

    squeekywheel New Member

    Package delivery company FedEx Corp. said Tuesday that it is making changes to its pension plan and increasing its matching contributions to 401(k) plans.


    The company said most eligible employees who participate in a pension plan will begin accruing future benefits under a cash balance formula called portable pension account starting on June 1, 2008. Benefits accrued under a traditional pension benefit formula will be capped on May 31, 2008 and paid monthly at retirement.

    FedEx said the changes are a result of shifting demographic trends, the federal Pension Protection Act and recently adopted and proposed changes in accounting rules. The company is also raising its matching contributions for most workers and providing additional investment options under its 401(k) plans.

    How long before UPS follows?:crying:
     
  2. scratch

    scratch Least Best Moderator Staff Member

    Fedex might be doing this to keep the Teamsters out? Hmm....:confused:1
     
  3. Channahon

    Channahon New Member

    Following industry trend, FedEx to cap retirement pension plan, revamp 401(k) benefits
    AP
    MEMPHIS, Tenn. (AP) - Like many companies across industries, FedEx Corp. is capping the traditional pension plan offered for most of its employees. Instead it will offer a cash balance plan, which lets workers take benefits with them if they leave the company.

    Traditional pension plans offer a defined monthly benefit when employees retire, with employer contributions varying, depending on pension fund investment returns. But the unpredictability and volatility involved has led many companies to move away from those kind of pensions.

    Under FedEx's program, disclosed Tuesday, most employees who participate in a pension plan will begin accruing future benefits under a cash-balance formula, which FedEx calls the Portable Pension Account, effective June 1, 2008. Current retirees won't be affected, FedEx said.

    Any benefits already accrued under the traditional pension benefit formula will be capped as of May 31, 2008, and will be payable monthly at retirement.

    About 170,000 employees in the U.S. will be affected by the changes, according to FedEx spokesman Jess Bunn.

    The package shipper and owner of the world's largest cargo airline said the pension shifts resulted from changes in accounting rules and increasing life expectancy rates.

    Alan Graf Jr., FedEx's chief financial officer, said the Pension Protection Act, which passed last year, lets FedEx improve its 401(k) retirement plans and expand the number of workers covered by its Portable Pension Account, which FedEx introduced in 2003. Cash-balance plans also have risen in stature since Congress last year sought to end questions about their legality.

    The Portable Pension Account will allow employees to take their vested benefits with them if they leave FedEx; they will be vested after three years of service instead of the current five years.

    For its 401(k) plans, FedEx will increase its matching contributions for most employees and will provide additional investment options. The new federal law allows FedEx to automatically enroll employees and increase their saving contributions each year.

    FedEx said its costs for administering the new plans would be about the same as what it would have incurred with the current plan.
     
  4. Cementups

    Cementups Box Monkey

    It would be nice even if Teamsters or UPS offered any match at all towards our 401k.
     
  5. Overpaid Union Thug

    Overpaid Union Thug Well-Known Member

    I don't know why UPS doesn't match ours. As far as the Teamsters goes...well, they are only giving us 40% of our pension contributions so I don't see why anyone would expect anything else from them. We are on our own.
     
  6. moreluck

    moreluck golden ticket member

    Would be nice if this was under the FDX topic where I posted it in the first place. :sad:
     
  7. rushfan

    rushfan Well-Known Member

    I don't care, I don't work for them.
     
  8. sendagain

    sendagain Member

    I suppose that means that everyone at FedEx who has not retired will rely solely on their 401K plans as of next year. This probably won't bother newer employees, but I would think someone who already put in 15 years with Fred might shudder a little. It depends on diligence in contributing to a 401K and good personal management of your investment. A lot of people fail to take full advantage of what they can contribute to a retirement plan, and whether these investments will provide as well as past pension plans is still debatable.
     
  9. CTOTH

    CTOTH Not retired, just tired

    They are only capping the pension. This is my interpretation. This means that you will still get the money that's in your pension fund as of March 2008 but Fedex will no longer be dumping money into the pension fund after march 2008.
     
  10. brownmonster

    brownmonster Man of Great Wisdom

    Monkey see Monkey do. Just like healthcare. Once companies started cutting benefits they all jumped on the bandwagon, and not just because they could'nt afford to pay the benefits. More money for the CEO and other Suits at the top. The sheep at the bottom keeping trudging along happy with less and less of the pie.
     
  11. rocket88

    rocket88 Member

    You don't know why UPS doesn't match ours!!??? I am incredulous. They don't contribute matching funds to our joint Teamster's/UPS National 401k Plan because they already contribute on our behalve to the Teamster's muti-employer pension plan. They contribute quite alot I might add. Please educate yourself.
     
  12. As a FedEx employee, I am upset that there is a capping of the existing pension plan as of May 31, 2008. The current plan takes the average of the 5 highest years salary multiplied times 2% per year of service. A 25 year vet gets 50% of their salary as a pension. To the company, this is an undefined benefit since they don't know how much they'll pay me when I retire since I could live 1 year or 20 years.
    The new Portable Pension Account means the company will contribute a percentage of my salary (based on years of service + age) to an account every 3 months. I can choose how it's invested. It creates a fixed-benefit account that I can take as an annuity or lump-sum at retirement. I can roll it to another company if I leave FedEx. Bad part is I could outlive the PPA. I can't outlive the old pension plan.
    Also, 401(k) matching increases from $500 (50% on 1st $1000) to 3.5% match to employee's 6% contribution.
    Hope this helps explain things better.
     
  13. Overpaid Union Thug

    Overpaid Union Thug Well-Known Member

    Ok smart ass. I guess the whole concept of contributing to the pension fund and matching a 401-K is just a rediculous fairy tail...OH WAIT...other companys (many of which are less "financially sound" have been doing it for decades! And my "education" on the matter is in question? LOL. Good LORD there are allot of people with a stiff hair up their asses on here. LOL. That's why I love this board. It's such the perfect little metaphor for the attitudes at UPS.
     
  14. wilberforce15

    wilberforce15 Member

    How many of those wonderful "other companys" have to overcompensate their employees by 20-50% (depending on the job) like UPS does?


    By the way, how long are fairy tails? Do they wag when the fairy is happy?
     
  15. Overpaid Union Thug

    Overpaid Union Thug Well-Known Member

    "Overcompensate" ???? Ok, I feel it is my duty as a fellow human being to help you out here. First....slowly remove the needle from your arm. Second...check yourself into the the nearest rehab clinic. You can kick this habbit. There is still hope. It's not too late! Good luck.
     
  16. govols019

    govols019 You smell that?

    I'd like to see a list of the companies that pay what UPS does into a pension AND matches the 401k.

    Not saying I don't believe you, I just want to know if they have any job openings.
     
  17. Channahon

    Channahon New Member

    Some interesting details and facts
    FedEx moving from traditional pension plan to 401K Feb. 28--Tens of thousands of FedEx Corp. workers got word Tuesday that their pensions will be capped as the company moves into the brave new world of employee-managed retirement planning.
    Beginning June 1, 2008, FedEx will stop funding its traditional pension program, providing instead a 3.5 percent match to employees' 401(k) contributions.
    Any benefits already accrued under the traditional pension will be payable monthly at retirement.
    For most workers, the company will also fund a cash balance account -- which FedEx calls a portable pension account -- paying 5 percent of salary each year for its newest and youngest workers and up to 8 percent for more senior people.
    These accounts will pay a fixed rate of return -- based on interest rates -- giving employees a way of knowing long before they retire what their base-line benefits will be.
    Long term, FedEx said it expects to spend the same amount on the on the new programs as it would have spent under its current plan.
    The changes affect 34,000 employees in Memphis and more than 170,000 nationwide.
    "We have been studying these issues closely and actively participating in the debate about retirement program reform and believe, that given the circumstances, this is the right thing to do for our employees," said Alan Graf, executive vice president and chief financial officer.
    Tuesday, he answered questions from employees who learned about the change in a interactive noon broadcast on FXTv, the intra-company television station it uses to broadcast news to employees worldwide.
    "The questions were very good," Graf said. "The fact of the matter is before you couldn't know what your benefits would be. Now you can, and there is no pressure."
    The company will provide independent advisers to help employees tailor plans. It also has created intranet portals so workers can try on various scenarios from the desks at work or computers at home.
    A triumvirate of external factors are driving the shift, including changes in accounting rules, the newly enacted federal Pension Protection Act and the changing complexion of the American workforce, which is now not only more mobile, but increasingly inclined to be single and as a result interested in bequeathing benefits to someone besides a spouse.
    Several companies have already made changes, including IBM, after a contest at the U.S. Supreme Court, and Hewlett-Packard.
    Without changing its benefit structure, FedEx says it would have been forced to pay fewer benefits down the road and face volatility and risk unacceptable to the corporation and its shareholders.
    Experts say the plan shifts retirement benefit risks from FedEx to its employees, pension and retirement.
    "The risk in the old (defined benefit) plans is on the employer to produce benefits," said Robert Burleigh, principal in Burleigh Consulting Group, a Memphis employee benefits consulting firm.
    If investments fell short, the company had to make up the difference, he said.
    But in the PPA, benefits depend on plan investment earnings. In other words, Burleigh said, "If you don't earn it, we don't make up the shortfall."
    Veteran workers are hurt the most under the system, said John Ueleke, president of Legacy Wealth Management, a Memphis financial and retirement planning firm.
    "If an employee stayed there a long time, then lived a long time, you become a big winner under the old plan," he said.
    In the portable account, "if you live a long time, then that risk of funding your retirement shifts to you and totally away from the company."
    FedEx's PPA will offer the choice of a monthly or lump-sum payment and pre-retirement death benefits that can be paid to any designated beneficiary, including charities.
    Employees will be vested after three years instead of the current five and will have no cap on the years of service.
    The company's current plan does not accrue benefits after 25 years.
    The 401(k), with its multiple new investment options, gives employees incentives to save. Together the plans give employees more power to imagine the lifestyle they want in retirement and plan accordingly, said Bill Margaritis.
    "Now, if you want to retire and own a second home, you'll be able to plan for that. You'll see a statement that will tell you exactly where you are."
    As the name implies, the portable accounts are designed to follow employees if they leave the company, a nod to today's more transient workforce.
    "When Social Security was founded, people didn't want to plan their own futures. They wanted someone to manage that for them," said Howard Clabo, FedEx spokesman.
    "That's not the reality today. People don't expect to work for one company for 40 years anymore. They want to take their retirement savings with them."
    Ron Gebhardtsbauer, senior pension fellow at American Academy of Actuaries, credits FedEx for offering the PPA. Others, including IBM, have chosen only to fund matching 401(k) contributions.
    "If you don't contribute to a 401(k), you don't get any match, and typically one third of workers don't contribute.
    "This way, you make sure everyone some kind of a pension. In addition, it's also good for people who retire in the period like we have had in the last six years when the stock market was down."
    Actuaries say the mix makes more sense because it doesn't put all the eggs in one basket.
    Under the 401(k) plan, employees are responsible for managing the investments and, thus, take the risk.
    "It behooves people to put as much away in your 401(k) as you can, regardless of how much the company matches," Ueleke said.
    And, once you reach 401(k) limits, start adding to IRAs and other savings. "I don't think you can oversave."
    By Jane Roberts and David Flaum
    RETIREMENT PLAN HIGHLIGHTS:
    --Portable pension account follows employees if they leave the company.
    --Benefits can be taken as lump sum or paid out monthly.
    --Pre-retirement benefits can be paid to spouse or any beneficiary.
    --No limit on years of service.
    --Benefits vest after three years.
    --Eligible employees will receive transition credits.
    --FedEx will increase 401(k) match from $500 a year to 3.5 percent of pay. An employee earning $50,000 would receive $1,750 a year.
    -----
    To see more of The Commercial Appeal, or to subscribe to the newspaper, go to Memphis Commercial Appeal - Memphis' Source for News and Information.
    Copyright (c) 2007, The Commercial Appeal, Memphis, Tenn.
    Distributed by McClatchy-Tribune Business News.
     
  18. Overpaid Union Thug

    Overpaid Union Thug Well-Known Member

    Oh they exist. I'd like to search for such a list but there is an even better example, proof if you will, that UPS isn't "overcompensating" us. Just look at their profit margins for Christ's sake! LOL. Look at all the money they donate to charitys, campaigns, etc. Now that would be a long list. I'm not saying that UPS gives away too much money. I'm just pointing out the fact that they have the money to give at all. And after all that they still have enormous profits.
     
  19. pkgdriver

    pkgdriver Member

    I'd like to see a list of the companies that pay what UPS does into a pension AND matches the 401k.

    Yep me too

    Ill Wait
     
  20. govols019

    govols019 You smell that?

    I never said that we were overcompensated; I just wanted you to show me these companies that do as you say.