Saturday, July 11, 2009

After many mergers, even "fortunate" retirees can find pensions complicated

Retirees with defined benefit pensions from companies that have acquired the companies that they had originally started working for, may find it very difficult to calculate or understand their pension rights from the documents that the “final” companies provide.

Most larger companies try to honor the obligations of the companies that they bought (usually they have to, and usually those items are part of the due diligence before a merger is approved). In some cases, older companies, especially those with specialized customer bases, have pension plans that were more generous than those of the larger (and sometimes more leveraged) acquiring companies. They may have less social security offset, and may offer social security bridges until age 62 instead.

Everyone says now that retirement ages will have to increase, in the heels of an era when companies “bought out” expensive career employees in their 50s and sometimes designed packages that encouraged them to retire earlier, at 62. A large conglomerate may find it is paying pensions that are indeed hodge-podges, with some operations giving formulas that assume associates work until full retirement age and other operations having pushed people out the door early (sometimes because of archaic legal restrictions, for example, not letting pilots fly past 60). And this is true of salaried and management employees, let alone unions.

Its hard to say how all of this plays out in the recent auto industry bankruptcies and restructurings.

There was never a time when it was so important to give individuals control over their own retirement futures. The “conservatives” are right on this one.

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