The Pension Cliff

Be Careful Not to Be Born Too Late!

I fell off the pension cliff through no fault of my own and so did some of my colleagues.  This my crybaby tale of poor me.  Whhhhhaaaaaaa!

I have written many times about my misadventures at work

Some people have careers but I have worked a series of J.O.B.'s.  I have been in my present thankless J.O.B. for almost 16 years and one benefit when I started was an old school defined benefit pension plan.  Briefly, that type of plan is paid by the employer and pays out an annuity-like amount commonly based on service time and salary.  Whichever way the plan formula works the benefit is "defined" by known inputs like the ones I mentioned.  Those plans usually pay out until the employee kicks the bucket or buys the farm, whichever comes first.

More work related:  Pros and Cons of Seniority for Professionals – Reflections On My Union J.O.B.

I Only Go To Work to Get the Money (GTM)

Working for Big Brother Corp.

I work for one of those old guard chemical manufacturers, many of whom offered pension plans back in the day.  My employer and many others began phasing out pensions soon after they hired me around 2005.  That was fine with me at the time because in place of only our pension benefit accruing at 1/3 its former rate the company enhanced the 401k match quite a bit.  It seemed like a fair trade and those 401k funds were portable if I left the company.  I figured I could just roll them into an IRA and I knew better how to invests the funds if I moved on. Benefits got worse around 8 years ago when new employees at that time would accrue zero pension benefits, but mine kept accruing at that 1/3 rate of the original rate.  Essentially, I never really counted on that future pension money for our retirement calculations.  It was a small amount and not worth much until age 65.  I guessed I would be long gone from full-time employment by 65 and still think so.  However, I did want that money eventually as it was promised to me.

Mergers and splits and a "new employer"

My ray of hope for seeing some of this pension money early came a couple of years ago.  Some peckerhead activist investor had forced out the former CEO and placed his own henchman at the helm of our formerly industry leading blue chip company.  He merged us with another formerly great giant and split that up into several pieces. In other words he successfully rearranged the deck chairs on the Titanic.  The buzz phrase was to "unlock value." OK, then. The beacon of hope in all this was the fact the remaining employees who were not "right sized" essentially kept doing the same work but technically for a different company.  We even got new insurance cards and all that crap. News came out that eligible employees would be able to collect their pensions early with reductions for age and service time if those did not add up completely to 85 years.  Example:  you get a 5% reduction for every combined year less than 85.  Therefore, if Jack was 58 years old at the time of the split and had 24 years with the company his combined years were 58 + 24 = 82.  That meant a 15% reduction if Jack chose not to wait the extra 3 years.  It was still a pretty good deal if ol' Jacky was still working and eligible to "double dip" and collect his full salary along with 85% of his pension.

Welcome to the pension cliff rules.  We just make them up

Big Brother laid out a few rules around who could collect and how much.  To get anything at all employees had to have a minimum of 15 years time served AND be at least 50 years old.  Service accrual stopped a year prior or thereabouts.  I called the company benefits line and while I would not be eligible right away to collect with only my 14 years service.  They also mailed me a letter detailing the fact I could begin collecting 50% of my full amount 9 months later at my service anniversary.  That was a pretty good deal for me. I watched my older and longer tenured coworkers double dip and was very happy for them.  Hell, they put the time in.  Big Brother surely did not allow double dipping because they are a nice corporation.

They are not nice  They did it because it is the law.

I waited patiently for the month before my service anniversary. Then I called the new benefits line only to be told to go fuck myself.  According to the representative, el Diablo,  I needed to have those 15 service years at the time of the split and I did not.  Despite my letter of estimated benefits to the contrary the devil told me I was hosed.  Now, listen, this was not going to be a big payout.  It was estimated to be just a new hundred bucks a month but some of my coworkers born a few months too late would have gotten much more.  They worked their 20 years in good faith and were told "wait until you're 65, bitch!"  Big Brother pushed a lot of us around my age off the pension cliff. A lot of people are getting the double dip goldmine and we're just getting the shaft.  Imagine if you were 49+ years old with 20+ years of service and a coworker a few weeks later was 50 at the time of the split?  You have to watch that person eat your lunch along with his just for being born a little too late.  That would want to make me work extra hard, how about you?

My reasoning behind wanting the early payouts

Even though the estimated payout was small that 50% number was a good deal to me.  My age and service only added up to 15 + 51 = 66.  So 50% for 14 years they promised meant it would take me until age 79 to break even.  I probably won't live to age 79 plus I planned to invest that small amount and would probably have grown those payouts decently.  Also, I figured a bird in the hand is best with uncertain payouts in a more distant future.  In other words, give ME the money to hold before you fuck up the whole mess and a bunch of us are staring at a big zero!  I wouldn't really trust Big Brother's ability to run a two-holed shithouse much less stay viable long enough to pay out a promised liability. It's the same reason we plan to take Social Security as early as possible.  Go ahead and send me a lesser amount and I'll manage it.  I do not trust you to be a good steward of MY money which came from MY paychecks.  You have not proven yourself worthy of such trust. But let's get back to Big Brother here.

If you're pushing me off the pension cliff, what about the 401k, JizzFace?

So, we all now work for a brand spanking new spin-off.  Some of us are screwed out of the double dip and have to watch our coworkers bask in its glory.  Why did we not get an option to roll our 401k to an IRA when we became a new company?  After all, we have new insurance accounts and pension rules?  Does the law only apply when your nailing us in the brown eye? The reason I want to roll my 401k into an IRA is the same as wanting a pension/Social security early.  I would rather be responsible for investing it with all the options available in a brokerage account.  For the record, I have not yet pursued trying to make my case for the rollover option.  I just thought it was a typical weasel move for a weasel company to not offer the rollover.  If you ask me having a technically new corporation means technically a separation of employment and triggers the rights like any other separation. The one reason I might not want to make any noise is the one benefit of 401k money over tax advantaged IRA money.  That is money available without penalty after age 55 in early retirement.  It's called the Rule of 55.

The 410k "rule of 55" for early retirement

Basically if you are not 59.5 years old you can withdraw from your 401k if you retire in the year which you turn 55.  You can't apply this rule to a traditional IRA.  I might want to just leave the matter to drop in case I retire in 2-3 years so I can access that money.  On the other hand I would love to do battle just once before I leave this employer.

This pension cliff amount did not change my life but it sure as hell changed my attitude

Like I said before, we were talking about a pretty small amount of money.  However, like a wrote when The Baby Boomers Ate My Lunch I want younger employees to recognize where part of our efforts go from week to week.  Part of my ongoing competent work goes towards keeping this a viable business.  A viable business can surely continue to fund fat pensions for the double dippers and precious retirees.  Many of us still working will never see any meaningful benefit for that portion of our efforts.  I don't think it's worth crying over but is worth recognizing the facts. So, the next time a very important person is here on a self important site visit I may just tell them something.  When we're sitting at a catered crappy lunch I don't even want to eat eyeing our esteemed visitors with contempt they will probably wonder:  What the hell is this guy's major malfunction?  I sincerely hope one of them asks.  I'll have to calmly tell them the story.  It's not personal towards the esteemed visitor, only what they represent!