Pension deductions?

[IVE GOTTA PACKAGE 4U]

The company putting the money directly into 401k would have no bearing on your tax bracket whatsoever.


It also wouldn't effect the money you can put in personally. So your contribution plus the companies could be around 40k annually into a 401k.

We just had another large company pull out of our pension plan.

 

[Brownslave688]

I was just wondering what one would have in dollars, if a driver started in 1986 (30 years), and all his or her pension money went directly into a locked-no access, private pension account?

Let me preface this by saying it's only my opinion I may end up being wrong but it's what I believe.


I think guys that retired in the past or are currently retiring got a great deal dollar for dollar as far as their pensions go. In fact I believe they got overpromised. This is why you are seeing failing pensions all over the place.

Let's say a guy that started in 1975 had 250k put in on his behalf over the years and retired after 35 years with a 4K a month pension.


Now his pension fund is only 60% funded. To make up the difference the current employees are having huge sums put in on their behalf. However because of new federal regulations I don't believe you'll see payouts increase significantly.


So someone such as myself I expect to see something like 750k put in on my behalf but I don't expect to see a significant increase in pension payouts.


So while pensions may have been a good deal for past employees I do not believe they are a good deal for current or future employees.

 

[Brownslave688]

We just had another large company pull out of our pension plan.

They decide to do their own thing or go under?

 

[IVE GOTTA PACKAGE 4U]

They decide to do their own thing or go under?

Their own thing.

 

[104Feeder]

The company putting the money directly into 401k would have no bearing on your tax bracket whatsoever.


It also wouldn't effect the money you can put in personally. So your contribution plus the companies could be around 40k annually into a 401k.

No where previously did you state you wanted the company to deposit money directly in your 401k. You wanted "your money". In any case, this is a worse deal because now it is really $14,144 not $20,800. UPS would love the tax break windfall on such contributions.

 

[Brownslave688]

No where previously did you state you wanted the company to deposit money directly in your 401k. You wanted "your money". In any case, this is a worse deal because now it is really $14,144 not $20,800. UPS would love the tax break windfall on such contributions.

Why is it not 20k?


Defined contribution. I believe it's been mentioned in this thread a few times.

 

[104Feeder]

I would just like to thank Andy M and Local 177 for putting together such a well managed healthcare plan. I was just informed that of our $1.00 for Healthcare and Pension, only $.39 was needed for Healthcare and $.61 will be going toward our Pension.

 

[104Feeder]

Why is it not 20k?


Defined contribution. I believe it's been mentioned in this thread a few times.

All employer contributions, even to Roth accounts, are treated as pre-tax. They will grow tax deferred until you withdraw them. Taxes are lower than they have ever been now, so it is greatly to your advantage to pay them now because our future obligations will necessitate higher taxes. Economists have stated that a pre-tax $1 is more like $.68 while a Roth contribution is dollar for dollar because it can grow tax free and be withdrawn tax free.

 

[Brownslave688]

All employer contributions, even to Roth accounts, are treated as pre-tax. They will grow tax deferred until you withdraw them. Taxes are lower than they have ever been now, so it is greatly to your advantage to pay them now because our future obligations will necessitate higher taxes. Economists have stated that a pre-tax $1 is more like $.68 while a Roth contribution is dollar for dollar because it can grow tax free and be withdrawn tax free.

But you pay taxes on any pension payments same as a 401k withdrawal.



So it's not relevant at all.



You're comparing pension payments to a Roth account and you accuse me of being apples to oranges. Wow

 

[Faceplanted]

But you pay taxes on any pension payments same as a 401k withdrawal.



So it's not relevant at all.



You're comparing pension payments to a Roth account and you accuse me of being apples to oranges. Wow

He's amazing at wording or taking things and talking about them the wrong way. I have to re read everything he says and let it sink in before I realize it's not all true. A real talent that is

 

[Brownslave688]

He's amazing at wording or taking things and talking about them the wrong way. I have to re read everything he says and let it sink in before I realize it's not all true. A real talent that is

I'm trying to figure out if he's brilliant and doing it on purpose or just doesn't have a clue.

 

[104Feeder]

But you pay taxes on any pension payments same as a 401k withdrawal.



So it's not relevant at all.



You're comparing pension payments to a Roth account and you accuse me of being apples to oranges. Wow

It's completely relevant. For your 401k contributions you can put them all in a Roth 401k and see a huge savings as all your contributions and earnings grow tax free & are withdrawn tax free. Employer contributions are tax deferred as are the earnings, giving you a huge bite later.

So say, as in my earlier example, where the Teamster retires early at age 50 drawing a $60,000/yr pension. This Teamster decides to enjoy life and relax for 9.5 years while withdrawing his money and letting his 401k grow which he maxed all those years and has reached the tidy sum of $1 million. He now decides to withdraw 4%, or $40,000. His money was in a Roth, so the $40,000 is withdrawn tax free, his principal stays the same, and he only is taxed on income of $60,000, not $100,000. He is able to delay withdrawing Social Security until age 70 realizing his maximum benefit.

In your example our poor tired Teamster has to work 9.5 years longer until he can retire. He was out a few years due to his back giving out or knee needing replaced and didn't receive the full employer contribution & couldn't nearly afford to put in as much as he liked. Most of his money came from the Employer contribution, so it's in taxable dollars. Still, somehow he managed to amass $1 million dollars at which he can either live $8000 below the median income level in Arizona or withdraw more and see his money disappear before Social Security kicks in. He is forced to withdraw Social Security at age 62 realizing a 25% penalty. Of course, the tax rates have soared and he's being taxed the same as our $60,000 Teamster, but it's eating up a greater portion of his withdrawals. To net the $40,000, he has to withdraw $55000 annually. Oh and his knees need replacing again.

BUT wait there's more!

When the company went to a defined contribution, it wasn't the $20,800 promised. Contributions are based on 2080 hours, or fifty two, 40 hour weeks. Gone was the all compensible of the past. Our Teamster couldn't get 2080 hours anymore because of months like February where the last two years he only accumulated 160 hours that month. Now he was seeing contributions based on 2040 hours or 2028 hours, even as low as 1791 hours when he was out 6 weeks for surgery. The Company finally reduced overtime and now he was barely making the base pay of $72,737 his last few years. The IRS has a rule for employer contributions, it's the lesser of 25% of earnings or $53,000. UPS could only contribute $18,184 on his behalf. Sadly his own contributions could never rise to more than 10%. Now suddenly it's not $1 million in his account, but only $750,000. He can only take out $30,000 a year and keep his principal.

Does the last example sound far fetched? We have quite a few bid 8 hour runs in Feeders and at some point the Company is going to blink about paying so much overtime. We won All Compensible hours in 2002, don't think the Company wouldn't like to go back to straight time hours. At $100,000 that 25% doesn't touch our max contribution now, but it sure would at the base pay. Our 22.3 drivers were denied overtime for years, same as our shifters. Surely there will be plenty of Senior drivers sticking around sucking up all the 60 hour week runs while everyone below them suffers but screw them right? As it is now, it's easy to hit the max contribution as early as October most years.

Still think I don't have a clue?

 

[104Feeder]

If we were given pension money in an account just like our 401k I think everyone could amass a sum for retirement. You would have to take away the ultra safe investments like the stable value fund though so that people, in a panic, couldn't sell low and transfer the funds to a very low interest investment or only invest ultra safe their entire career.

I think it would be foolproof. Just like a pension though, returns could be less then envisioned if a person happens to work during a crappy 30yr period.

UPS wouldn't want to do this though because IMO the turnover rate for drivers would increase if the money was portable.

Our pensions are portable throughout the Western Conference to any covered employer. ABF, Safeway, & Waste Management are some local examples.

The participation rates for 401k's across the board do not bear out your foolproof assumption. Even when free money is on the table, most do not participate. Only 32% of workers age 25-64 participate in employer sponsored 401k plans (2011).

 

[Brownslave688]

It's completely relevant. For your 401k contributions you can put them all in a Roth 401k and see a huge savings as all your contributions and earnings grow tax free & are withdrawn tax free. Employer contributions are tax deferred as are the earnings, giving you a huge bite later.

So say, as in my earlier example, where the Teamster retires early at age 50 drawing a $60,000/yr pension. This Teamster decides to enjoy life and relax for 9.5 years while withdrawing his money and letting his 401k grow which he maxed all those years and has reached the tidy sum of $1 million. He now decides to withdraw 4%, or $40,000. His money was in a Roth, so the $40,000 is withdrawn tax free, his principal stays the same, and he only is taxed on income of $60,000, not $100,000. He is able to delay withdrawing Social Security until age 70 realizing his maximum benefit.

In your example our poor tired Teamster has to work 9.5 years longer until he can retire. He was out a few years due to his back giving out or knee needing replaced and didn't receive the full employer contribution & couldn't nearly afford to put in as much as he liked. Most of his money came from the Employer contribution, so it's in taxable dollars. Still, somehow he managed to amass $1 million dollars at which he can either live $8000 below the median income level in Arizona or withdraw more and see his money disappear before Social Security kicks in. He is forced to withdraw Social Security at age 62 realizing a 25% penalty. Of course, the tax rates have soared and he's being taxed the same as our $60,000 Teamster, but it's eating up a greater portion of his withdrawals. To net the $40,000, he has to withdraw $55000 annually. Oh and his knees need replacing again.

BUT wait there's more!

When the company went to a defined contribution, it wasn't the $20,800 promised. Contributions are based on 2080 hours, or fifty two, 40 hour weeks. Gone was the all compensible of the past. Our Teamster couldn't get 2080 hours anymore because of months like February where the last two years he only accumulated 160 hours that month. Now he was seeing contributions based on 2040 hours or 2028 hours, even as low as 1791 hours when he was out 6 weeks for surgery. The Company finally reduced overtime and now he was barely making the base pay of $72,737 his last few years. The IRS has a rule for employer contributions, it's the lesser of 25% of earnings or $53,000. UPS could only contribute $18,184 on his behalf. Sadly his own contributions could never rise to more than 10%. Now suddenly it's not $1 million in his account, but only $750,000. He can only take out $30,000 a year and keep his principal.

Does the last example sound far fetched? We have quite a few bid 8 hour runs in Feeders and at some point the Company is going to blink about paying so much overtime. We won All Compensible hours in 2002, don't think the Company wouldn't like to go back to straight time hours. At $100,000 that 25% doesn't touch our max contribution now, but it sure would at the base pay. Our 22.3 drivers were denied overtime for years, same as our shifters. Surely there will be plenty of Senior drivers sticking around sucking up all the 60 hour week runs while everyone below them suffers but screw them right? As it is now, it's easy to hit the max contribution as early as October most years.

Still think I don't have a clue?

And yes you don't have clue. Once again lots of words little substance. You failed almost immediatly. Even Roth withdrawals before 59.5 are subject to taxes.


Also you failed on giving any tax advantage. The pension is taxed as income just like my 401k would be. So if we had a defined contribution plan i would essentially have two 401k. One with the company's money in it and a Roth with my money in it. EXACT SAME SCENARIO YOU LISTED. The difference is instead of being forced to take a 5k a month payment every month I have the freedom to do what I choose with the money.


Personally I would buy high divedend stocks and live off of the divedends. So not only am I not touching my principle I'm reducing my tax burden and paying capital gains only.


The only place you have me is retiring at 50. While that may be a common occurance in the WC. I can assure you going before age 57 is a very rare occurance for the rest of the country.

 

[Brownslave688]

Our pensions are portable throughout the Western Conference to any covered employer. ABF, Safeway, & Waste Management are some local examples.

The participation rates for 401k's across the board do not bear out your foolproof assumption. Even when free money is on the table, most do not participate. Only 32% of workers age 25-64 participate in employer sponsored 401k plans (2011).

Defined contribution does not depend on an employees participation for a match. The money goes into the account as long as they work the hours. End of story.

 

[onestoptogo]

Let me preface this by saying it's only my opinion I may end up being wrong but it's what I believe.


I think guys that retired in the past or are currently retiring got a great deal dollar for dollar as far as their pensions go. In fact I believe they got overpromised. This is why you are seeing failing pensions all over the place.

Let's say a guy that started in 1975 had 250k put in on his behalf over the years and retired after 35 years with a 4K a month pension.


Now his pension fund is only 60% funded. To make up the difference the current employees are having huge sums put in on their behalf. However because of new federal regulations I don't believe you'll see payouts increase significantly.


So someone such as myself I expect to see something like 750k put in on my behalf but I don't expect to see a significant increase in pension payouts.


So while pensions may have been a good deal for past employees I do not believe they are a good deal for current or future employees.

This is exactly true. The old guys with their 2% and more accrual rates probably had half the amount contributed on their behalf each year and their pension is close to the guy's who have $20,000 plus each year in theirs. Today's workers are supporting the retired workers who got the great deal. Today's workers are having a ton of money contributed on their behalf, but are not being promised very much. This is one reason the western conference is in such great shape right now.

 

[Wally]

Maybe I'm wrong here, but isn't part of the problem growth? We aren't adding new employee's for a decade now.

 

[UpstateNYUPSer(Ret)]

Maybe I'm wrong here, but isn't part of the problem growth? We aren't adding new employee's for a decade now.

The problem, at least with our pension fund, is 5,000 more retirees than actives.

 

[Brownslave688]

Maybe I'm wrong here, but isn't part of the problem growth? We aren't adding new employee's for a decade now.

No. A pension should based off of money already in on your behalf.


If you need new people paying in to keep it afloat then you have a Ponzi scheme.

 

[IVE GOTTA PACKAGE 4U]

Maybe I'm wrong here, but isn't part of the problem growth? We aren't adding new employee's for a decade now.

That's part of the problem . The biggest problem is too many orphans in our plan.