Tuesday, May 28, 2013

Low interest rates compel employers to freeze pensions

I recall when my own pension with ReliaStar was frozen at the beginning of 2000, after ten years of employment.  My own pension amount seems a little more than the formula would calculate, partly because USLICO’s (based on the first company which ReliaStar as NWNL had acquired) was fairly generous (and had included a “Social Security Bridge” until age 62).  ING actually restored a retirement program after it acquired ReliaStar in 2000, but I was laid off at the end of 2001.

I also had six years of employment in Dallas, TX with Chilton  (now Experian) in the 1980s. Maybe I was vested when I left, and it would pay to go back and look.
My own history is interesting when viewed in light of a Washington Post Sunday Business section article Sunday May 26 by Michael A. Feltcher, “Why he froxe the company pension”, link here.  The narrative concerns ILM Group and its president John Wolf. The culprit seems tio be very low interest rates, as set by the Fed, which increases the reserves that companies have to keep in the funding of their pensions.  There is a partial holiday from that which allows companies to use a 25-year average rule, but that expires soon.

Understand, freezing a pension is not the same thing as terminating one, and putting it on the backs of the PBGC. 

My own mother used to complain about low interest rates, that it was impossible for seniors to earn anything, although she left the world in 2010 better off than a lot of women from one-earner homes..  It’s getting to the point that the Fed and banks would charge just for keeping deposits “safe”.  Maybe this plays into the rhetoric of the radical Left in the past, which railed against accumulated and familial “inherited wealth” and wanted to see everyone taking his turns as a peasant in the fields, maybe even the elderly.  

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