Hi, I'm back to... kill the idiocy of pension discussions right here in the bud. Employees with pensions are absolutely the death of America, aren't they? Um, no, no they aren't. Management of pension plans by company management is the problem, not the pension themselves.
It is my duty, as a lifetime employer, to provide my employee with enough money to live in a manner according to his station in life, and to provide that he can retire from my employee when he is no longer able to work for me, and as a reward and compensation for all those years duly serving me, can retire and live in the manner that he has become accustomed. If you can't afford to operate on employing somebody at that level, you can't afford the employee, stupid.
Actuarial tables show how long the average person is supposed to live, a number that has been going up at a fairly consistent overall rate for years and years and years. When you decide to offer your employees a pension plan- something I've been contemplating doing as of late, by the by- you have to work out how much it costs you. You have a typical old fashioned worker. He starts working for you at 20 or so, retires around 65, works for you for forty-five years. Right? Right.
Ok, so in todays dollars, Mr. Worker Dude works for me at, say, 30,000 a year. Lets assume no inflation, and no resulting raises, and an interest rate ahead of inflation at 3%, for simplicity of math. Actuarial tables suggest Mr. Worker Dude is going to live until he is approximately 90 years old (again, this is 40 years in the future, most people don't live to 90, but I should account for the fact that the average lifespan keeps going up). Ok. Fine. All well and good.
The pension plan keeps Mr. Worker Dude on at 2/3rds his working wage, social security and the fact that he should no longer have a home mortgage making his pensioned income match his working income. Ok. Time for the math all the other corporations should have been doing.
He does not make 30,000 working for me- thats his take home pay. Common trick stating the full amount, so that people can compare it with their take-home pay. No, employment costs way more than take home pay. Providing for the employees break area, workers compensation, etc. etc. makes it much higher, and the pension is part of the payment. Period. Its not just part of the payment- it is part of what the employee earns.
Anyway, employee will make 30,000 a year in salary, plus 10,000 a year in basic benefits (health insurance, workers comp, provided protection equipment, paid vacation and sick leave, etc) for 45 years, or $1.8 million. For a $20,000 a year pension, it will cost me $25k a year including the continued lifetime benefits, so if he lives until he is 90 I need to support him for 25 years at $25k, or $625,000.
Using a retirement calculator, we find that we need to prepare, under the parameters I laid out, to lay aside $6800 per additional employee per year. So the cost of that typical employee working those parameters with take home pay of $30,000 is $46800 a year. That $6800 per employee should be considered a separate account at the company. It should be untouchable, designed to fund each employees retirement. If there are less employees now, well thats irrelevant, because by the time Mr. Dude is retired, the amount I have contributed into the fund on his behalf should have provided the $625,000 I need to pay off his pension.
The bull-**** of Ponzi schemes, funnels, bubbles, and so on is just a company's way of trying to blame the fact that they mismanaged their business and possibly their retirement funds on the employees. That money should be set aside and separate from day to day management and operations of the business. They can, I suppose, use it to invest in their own business, paying the returns on it back to the fund with interest. Its as valid a place as any to try to generate that 3% return betting on your own competence. But the fact that you can't fund the company because you made that bet and lost is NOT the fault of retirement benefit drains. Its the fault of you screwing up your management of your business.
I'm not saying I am a perfect businessman, or that I haven't bet funds I perhaps shouldn't have been playing with on my belief that my next project was going to yield huge returns. I do that. But when I bet my money and lose it, its my fault. When I bet my employees pension benefits, and lose it, it is also my fault. When I promise to offer benefits, it is my job to recognize that providing that costs me $6800 extra a year for Mr. Dude, and consider that part of his compensation. Period.
He isn't draining me. He is working for me. If a satisfied worker, secure in his knowledge that his retirement and future are secure so long as he does good solid work for me, he is probably working hard for my benefit. It is my DUTY to guide my firm in a way that provides security for my workers livelihood (I build my empire with their hands, man), as well as make a decent living for myself (and I don't blast large salaries to competent management, either), and provide a fair return for my shareholders/investors.
So please, drop the retirement funds killing companies argument. Its a load of poppycock. People will blame anyone for doing something wrong, regardless of who the fault lays with.
