In 1991, 35% of employees were participating in defined benefit pension plans. By 2005 that number had fallen to 21%. In March of 2018 only 17% of American employees had access to some sort of defined benefit pension plan. Companies are getting rid of their defined benefit pension plans, fast. If you rely on your company to save for you, it’s time for a dose of reality, you must save for yourself, because no one else will.
Pensioners from legacy companies Sears and Xerox are watching as their benefits are being stripped away. Around 100,000 pensioners from Sears are hoping the Pension Benefit Guaranty Corp., run by the U.S. government, will pick up the tab on their pensions. Steven Strahler writes in Crain’s Chicago Business:
Should Sears Holdings file for bankruptcy protection, its 100,000 remaining pensioners would look to an independently funded government agency known as the Pension Benefit Guaranty Corp. to cover most of what’s owed them.
The PBGC, created by the Employee Retirement Income Security Act of 1974, has already been looking out for Sears’ pension obligations, which quickly could become its own.
Two years ago, Sears and the agency struck a five-year deal to wall off various assets and earmark revenue streams for pension funding, giving the PBGC veto authority over deals like last year’s sale of Sears’ Craftsman line of tools.
Anyone relying on a Sears pension is undoubtedly worried about their future today. Meanwhile, over at Xerox, employees are being stripped of medical benefits they were told they could rely on only three years ago. Sarah Taddeo reports in the Rochester Democrat and Chronicle:
Xerox Corp. will end some company-sponsored health benefits for non-union retirees by the end of the year, according to several letters received by former workers at the document technology company.
Maria Leonardo, 61, of Perinton voluntarily retired from a three-decade stint in management at Xerox in 2015, after the company told employees that it was ending its corporate “Benefits Allowance” subsidy program for employees who retired after Dec. 31 of that year. Leonardo said she “jumped at the opportunity” to quit before December, so she would be guaranteed her subsidized health insurance.
But now, Xerox is reneging on that program. Leonardo received a letter on Oct. 3, alerting her that Xerox will end Benefits Allowance, which covers a little over half of her yearly health insurance premiums, she said.
“You entice me with a carrot, I take it, and now you’re telling me you’re taking it away,” she said.
Relying on your company to save for you is a mistake. You need to save for yourself. You need to make savings urgent, or you could unfortunately end up as one of the many “retirees” who will keep working. Don’t let that happen.