Government Pension Plans

Most government pension plans offer early retirement at age 55.  Some of these plans had offered full pension benefits after 30 years of service.

https://www.bls.gov/opub/mlr/cwc/early-retirement-provisions-in-defined-benefit-pension-plans.pdf

 

I terminated the pension plan at Electromagnetic Sciences, Inc. (EMS) in 1993.  Plan benefits were not available until age 65, PBGC plan insurance rates were rising. Pension plans were required to be reported as “liabilities” and defense companies were being consolidated. It was a “defined benefit” plan and we had no way of guaranteeing benefits if we were acquired. EMS had been contributing 5% of payroll to the pension plan. I replaced the pension plan with an “Age-Weighted” defined contribution plan to transition older workers.  We also had a 401K plan that was well used. When we terminated the pension plan, the funds in that plan were paid out to employees. They could also direct these payments to be transferred to their 401K plan to avoid being taxed and most employees did this. EMS continued to contribute 5% of payroll to the new “Age Weighted” plan. This worked well and EMS was eventually sold to Honeywell.

 

After the 1990s, the only companies who kept their defined benefit pension plans were utilities and government. But government plans were subject to failing due to bankruptcy.

 

401K plans with employer contributions typically vest company contributions after 5 years of service. It is the most portable form of retirement plan and the owner of the account owns the money. That is not the case with defined benefit pension plans, social security and annuities where the owner of the account doesn’t own the money.

 

The average company contribution in 401k plans is 2.7% of pay. Numerous formulas are used to determine company

contributions.  The most common type of fixed match, reported by 40% of employer's, is $.50 per $1.00 up to a specified percentage of pay (commonly 6%)

https://www.google.com/search?q=401+k+plan+employer+match&rlz=1C1CHWA_enUS664US664&oq=401k+plan+emplouer+&aqs=chrome.2.69i57j0l5.14647j0j7&sourceid=chrome&ie=UTF-8

 

Utilities, governments and other large employers need to convert their pension plans to 401K plans.

 

Norb Leahy, Dunwoody GA Tea Party Leader