What really happened to your Pension?... (Long Post)

Discussion in 'FedEx Discussions' started by hypo hanna, Aug 24, 2012.

  1. hypo hanna

    hypo hanna Well-Known Member

    By now I’m sure you realize you got the shaft with your pension. I thought you might like to know a little of the details.

    First a little Pension 101.
    The money for your pension is deferred compensation. Money you normally would receive in your weekly paycheck but instead is set aside by the company in a pool for you and your fellow employees for when your retire. You agree to this when you hire on. You were told, (at least it was told to me), that “this wonderful pension and other benefits are why FedEx doesn’t pay nearly as much as the folks at Big Brown.”
    The pension is then managed like any other account with it’s own investments, it’s assets and it’s liabilities. The assets consisted of the money being contributed, the money on hand and returns on it’s investments. It’s liabilities were you the employees who would be retiring or had already retired and would be drawing from the pension. Using actuarial tables etc, they could fairly accurately predict just how much employee liability the pension faced.
    Just like your own finances. You know how much you have on hand and invested, how much is coming in with earnings and how much you owe down the road. A basic balance sheet if you will.

    In the fall of 1999 US corporate pensions were over funded to the tune of 25 billion dollars. This means if they paid every employee what the fund would be required to pay them on retirement, there would still be a quarter of a trillion bucks sitting in the old checking account. This was due to several factors, corporate downsizing, a hot stock market, and a 1974 law that required companies to adequately fund their pensions. Things were going so well that many companies hadn’t needed to contribute to their pension in over a decade and they could still meet the obligations to the pensioners.

    Now you would think an excess is a good thing right? Having a cushion for when the market inevitably tanks or interest rates fall still allows you to protect those worker until things get better. But it’s not a good thing if you are blinded by greed.

    So here’s what happened next. A bunch of our corporate captains (including execs from Dupont, Northrop Grumman, AT&T and a host of others) got together with their lobbyist to petition the labor department to get the rules changed. They claimed it was un-American to let that money just sit there. If the government would just change the rules and let those big brained corporate leaders have access, it would strengthen their companies and make the benefits to the retirees even more secure. Besides the market can only go up and the pension plans would only get more bloated. There were only a few dissenters to the plan, notably representatives of the AFL-CIO and AARP. Sadly they were up against a powerful lobby, (The ones who greases the politician’s pockets) and the forces of greed won out, the rules were changed.

    Now this still leaves management with some issues on how to get to the cash. Don’t worry though. They are a creative bunch when it comes to stealing.

    Layoffs are good and would be the first order of the day. Layoffs of older workers would take priority and would produce the most bang for the buck. You may remember in some of that paperwork that your pension payout is calculated on the average of your last 5 years salary. This is important since with the leverage of traditional pension formulas, as much as half of your pension would be earned in your final 5 years on the job. When you are laid off, your pension stops growing.

    Now FedEx with it’s no layoff policy couldn’t do this. (Their normal tactic of displacing employees for 90 days wouldn’t work either.) There had to be a better way. They couldn’t cut the pensions outright. The law still forbids them from cutting money already being paid out to retirees and they can’t rescind benefits the employees had locked in up to that point. There was however a third option. Bring on….

    The Freeze

    There were some variables on how each company implemented pension freezes but the basic scam works like this.

    On a set date the plan is frozen. No new workers can join and no new money will be added. For those in the plan, your payouts will be based on your salary for the 5 years leading up to the freeze date. Based on actuary tables the company will retain enough money in the plan to cover the predicted liabilities, (retirees). The company will then retain the entire surplus to add to the bottom line.
    A cash balance plan would be offered as a better option. (It’s not BTW). The main function is to disguise the pension cuts.

    Now lets have a look at a typical FedEx worker.

    Jeff hired on as a driver in 82’ at the tender age on 23. He did well, worked hard and bled purple for the company. In 2008 He is 49 years old. A little slowed from humping freight but still a great employee. Based on his salary from 2003 to 2008, upon his retirement, Jeff would get a monthly pension check for 1,723.17. Not much but Jeff knows it should grow much larger, (As much as 80% more based on the plan’s leveraging and the fact that he is only 49 and plans to stick around to at least 55. (Maybe longer if his legs hold out.) Jeff knows it’s those last 5 years when he is 55+ that are really going to pay the bills.
    Now with the freeze in place Jeff will receive 1,723.17 a month and not a penny more. This means for all of Jeff’s dedication, he can look forward to a retirement of dog food dinners and dumpster diving for aluminum cans. (He need to buy pain meds for all the damaged he did to his body moving Fred’s packages.)

    There is plenty more to this sordid tale, (Mostly how they enriched themselves in the process), but that’s the basic facts. If you want a more in depth study, I suggest you pick up a copy of “Retirement Heist” by Ellen E. Schultz.

    It will break your heart.
  2. Mr Fedex

    Mr Fedex Banned

    Walmart has some great deals on dry dog food.
  3. I Am Jacks Damaged Box

    I Am Jacks Damaged Box Well-Known Member

    By the time you reach retirement age Mr. Life, that dry dog food you speak so highly of will be a luxury item. You'd be best served to take your own advice and start stocking up early.
  4. hypo hanna

    hypo hanna Well-Known Member

    Better buy the canned stuff. You won't be able to afford dental should you break a tooth on the dry food.
  5. 59 Dano

    59 Dano Some of my best friends are black.

    With the freeze in place, he will earn $1723.17 a month plus his disbursement from his portable pension plan, which he can elect to take in a lump sum or as a monthly annuity payment for the rest of his life. Based on his time in service, the company will contribute up to 13% of his yearly W-2 earnings to his PPA account for another year or so at which the rate will drop down to either 8% or 5%.

    I appreciate the tearful story, but I have to question the validity of it. I've seen the most recent statements sent out by the Retirement Service Center of 2 25 year couriers. Their monthly payment from the traditional pension plan is quite a bit more than the figure you've given, and that's in a B market. Both currently get an amount equal to 13% of their gross wages placed in their PPA accounts.
  6. packageguy

    packageguy Well-Known Member

    just want to say, come work for ups,
    you break your ass but it''s all worth it.
  7. I Am Jacks Damaged Box

    I Am Jacks Damaged Box Well-Known Member

    I know I have certainly thought about it once or twice. But the more I read about over at Brown, the more I think of it as a same :censored2::censored2::censored2::censored2::censored2:, different toilet scenario. I've already considered FedEx to be short term by shooting down more than one advancement opportunity. Once I finish school, I'm on to making career moves instead of just another job moves.
  8. thedownhillEXPRESS

    thedownhillEXPRESS Well-Known Member

    What about someone with 10- 15 years of service and 30-35 years to retirement, (the younger folk have to retire later , say 70, to pay for your benefits) capped in TODAY'S dollars and receiving a minuscule amount from the portable pension contribution and a likewise minimal interest accrual.
    Why are those closest to retirement getting the larger contribution?
    They have had their best 5 years capped before any serious inflation can eat it away.
    They won't lose much buying power but yet are getting a larger percentage thrown in their portable?

    Those in the middle will have a monthly benefit that has been eaten away by decades of inflation, and a little crap sandwich portable pension that might be worth a year or twos salary by the time they retire.
  9. vantexan

    vantexan Well-Known Member

    A few points. 25 billion isn't a quarter of a trillion dollars. That would be 250 billion.

    The FedEx pension was based on averaging your 5 highest paid years, which might or might not be your last 5 years.

    I agree that the cash balance plan is inadequate. But as your money inflates over the years the amount added each year will grow. Make $40k now? With raises, which are roughly the equivalent of the inflation rate, you might make $50k in 10 or so years. So your contributions will increase also. Not a good deal, but it's not like your money just sits there and suffers 30 years of inflation. Plus you get the 1% quarterly that will offset normal inflation.

    It's pretty much academic anyways. If FedEx manages to make do with a high turnover, mostly part-time workforce their pension plans will mostly affect exec's, pilots, mechanics, basically anyone that they truly value. We couriers are expendable assets that must be managed in a way that protects the bottom line.
  10. check6ii

    check6ii New Member

    You hit the proverbial nail on the head-fredex is in the business of screwing the employee. And has been since day one essentially!
  11. I Am Jacks Damaged Box

    I Am Jacks Damaged Box Well-Known Member

    I would not go as far to say that. From what the Vets have told me, being a FedEx courier actually used to be a legitimate career when it was just Express...a long time ago in a galaxy far, far way.
  12. Goldilocks

    Goldilocks Well-Known Member

    I still have my pension. $2500 in traditional per month and $28000 in portibal pension. Plus double that because I am married to a courier....
  13. MrFedEx

    MrFedEx Engorged Member

    Double the pension if you worked for UPS, and add $30,000 to $40,000 in missed annual income.
  14. Goldilocks

    Goldilocks Well-Known Member

    I hear ya but its a little too late for us.
  15. MrFedEx

    MrFedEx Engorged Member

    That's one of the biggest reasons some of the old-timers are so bitter. We made a commitment based on promises that were not upheld. By the way, one of those was that Ground and Express would never be intermingled. There is one person th thank for it...Fred Smith.
  16. 59 Dano

    59 Dano Some of my best friends are black.

    My guess is that it probably has something to do with seniority and transition from the DBP to the DCP. You'd have to ask someone who is in that boat.
  17. 59 Dano

    59 Dano Some of my best friends are black.

    Imagine what she'd make if she was a starter for the Knicks!
  18. MrFedEx

    MrFedEx Engorged Member

    Irrelevant. UPS makes way more than we do for essentially the same job. Fred is already getting a bargain on labor, but that isn't good enough. Double the pension (based on the Traditional Plan), much higher compensation, and a 3-year topout over at UPS. Oh, and if you consider the PPP, which doesn't have anything but a tiny "pension" component, the UPS retirement is better by a huge amount.
  19. Cactus

    Cactus Just telling it like it is

    What's that go to do with anything? You're comapring apples to watermelons.
  20. 59 Dano

    59 Dano Some of my best friends are black.

    What does UPS' pay have to do with anything? She doesn't play for the Knicks, she doesn't work for UPS.