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| "I gotta letter from Fi-fi-feedelity? I think it's a check." Credit: ninetythrees.com |
First, Pfizer recently told employees that severance packages would be reduced as of mid-May. Now, the big drugmaker plans to eliminate its defined benefit pension plan as of 2018 and will direct employees to funnel their money into a 401K investment account, according to a company memo. And the pending changes will apply to all employees, including the c-suite crowd, a Pfizer spokeswoman tells us.
“The pension changes apply to colleagues at all levels, including executives,” the spokeswoman writes. “There are some exceptions, such as colleagues hired after (January 1), 2011, as they already participate in an enhanced savings plan, rather than a pension plan; certain union colleagues based in the US, per their collective bargaining agreement; and colleagues who were part of an acquisition and are not currently earning benefits under a Pfizer pension plan.”A commenter on the post clarifies what this really means:
To put in human terms, the people who are getting shafted the most are those with around 10-15 years to go before retirement. Basically, if you are turning 55 anytime around 2018, you lose all of the accelerated growth in your pension prior to full retirement, costing some up to $600,000 or more.I'm torn about pensions and whether or not they're economically possible in These Modern Times; it just seems to me that a promise from a company that "30 years from now, I'll pay you a modest sum of money for work you're doing today" seems a little tenuous. 30 years from now, we could all be floating in our Jetsons-like cloud palaces. Or more likely, I'll be traveling with my family through a desert wasteland in dune buggies, fending off marauding bandits while searching for an abandoned (yet still working) multiprobe NMR.*
In all seriousness, it's just one more kick in the shins to Pfizer scientists that have put in more time at the company, and now have to stash that much more in their 401ks and IRAs to prevent themselves from eating cat food at 72. Best wishes to them, and all of us.
*Hopefully, the Postman will come, bearing a Pfizer pension check. I won't hold my breath.
This move will certainly clear the decks of a good amount of 50-somethings prior to 2018. I'm under the assumption that if you retire prior to that cut-off, you'll still receive full pension benefits. Where I work you can retire starting at age 50 with a certain amount of time with the company.
ReplyDeleteRealistically speaking, the pension is nice (not expecting mine, of course), but what folks I know of around that age worry about would be the insurance coverage for retirees that are typically part of a pension plan. This piece of the pie is probably the most expensive part for the company.
If you're smart with your money you can probably retire and figure out a way not have to eat cat food. For being an Evil Empire, pharma does pay well, but if you have to retire prior to being Medicare eligible and have no discounted insurance plan, that's a different story.
Hopefully the Postman also brings you some cryogens for when you do find that NMR - unless this fanciful future wonderland also features ambient temperature superconductors.
ReplyDeleteWell, crap. Maybe I'll have to find a permanent magnet NMR -- but will it have the resolution I'm looking for?
Delete@ WCA - It won’t be long before they also do away with providing for health insurance for individuals and family. Some have already done that.
ReplyDeleteWhat will happen to the money already paid into the defined benefit pension plan, does anyone know?
ReplyDeleteIt seems to me this is the company screwing the workers, their major resource, once again. Come the revolution these Pfizer managers and their ilk should be put against the wall and made to pay for their sins.
I deeply sympathize with these poor employees and I wish them all the best. Unfortunately I am not in a position to help. I just ran out of money to bye cat food and am scavenging the garden for worms.
They will probably get that money in the form of a roll-over, but it won't be near what it would have been worth in that retirement annuity. Unless a company goes bankrupt, I believe they are legally responsible to disperse that money. When I left my employer years ago, I received information about what I could do with the money placed into my pension account...
DeleteHmmm.... honestly, this and the medical insurance thing were one of the big reasons why I left the USA and will try hard not to have to come back. But it's not like a European pension plan has a definite future either due to no one having kids or importing a bunch of deeply religious menial laborers. Still, at least outside the USA medicine is done a lot more cheaply, so there is hope you would have some basic hope for ye olde times.
ReplyDeleteStill, even in this country with its retirement plans and cheap health care, there was a story in the news of an old couple in their early 80s commiting suicide when the old man found out he had a bad and incurable desease. He wanted to kill himself, but his wife didn't want to live without him, so they left a note saying that they are doing this so as not to be a burden to their children and called their oldest son to say goodbye. By the time he got to the house they were both dead of gunshot to the head. Well, I guess the children now get the house and savings without having it wasted on all that expensive old age homes and health care and after a brief mourning period they will be happy. Which reminds me of an essential part of my retirement plan: a vial of cyanide and a gun (more choice). Kidding of course! I think....
"I'm torn about pensions and whether or not they're economically possible in These Modern Times"
ReplyDeletePensions are viable, but only if all companies provide them. In the absence of that, there's a strong economic disincentive to give 401(k)s and have employees fend for themselves (I'm sure all individual investors will be able to generate above average returns: all my neighbours in Lake Woebegon certainly do), as most (all?) biotechs do.
I agree that getting rid of employee sponsored health insurance is the next inevitable step. It'll seem sensible to all the seniors, who overwhelmingly vote GOP while enjoying medicare.
Hey, bbooooooya, how good is the average targeted retirement fund at replicating a typical pension fund manager's return? (Thanks in advance.)
DeleteI don't know for certain. I think pension funds are more regulated than mutual funds (and certainly more regulated than hedge funds). Data I saw a few years back suggested that <25% of mutual funds outperform the S&P over a 5 year period. That is, the fund portfolio managers were getting paid a boat-load to perform at a lower level than a blind squirrel who just put his nut in the SPY box. It's a sweet deal to collect a fee for managing money no matter what performance is.....(not unlike biotech CEOs who get $250,000+ annual bonuses for declining share prices).
ReplyDeletethis: http://money.cnn.com/2012/02/23/pf/fund_manager_performance.moneymag/index.htm, is a recent interweb reference on MFs v. S&P.
Morningstar.com tracks a lot of these, though since many unsuccessful firms fold any averages are likely overstated.
I'm that blind squirrel, mostly. Let me tell ya, the 2000s were great.
DeleteYou don't want to eat cat food. Dog food is what you want. They put chicken feathers in cat food because cats can digest it but dogs can't. People can't digest it either so you have to get dog food, which doesn't have chicken feathers.
ReplyDeleteYes definitely. You would quickly tell the difference between cat and dog food and opt for the latter. The first just tastes bad to humans and the second is basically a bad version of human food. Which, if you're used to fast food, should be easy on the old digestive tract. That said though, I've never tried Whiskas since I'm not one of 'em... aristocats.
DeleteSigh...
You want to try worms, the are great on a barbecue. AND they cost nothing!
DeleteWorms and grubs are a great way to go for the peasantry. If you're among the aristokitty you could afford that dog food that looks like chunks of beef.
Deletewas wondering does this go for people that were warner lambert employees ,before PFIZER BOUGHT US OUT . YU
ReplyDelete