Seems there are some more companies freezing their pension plan which was reported by various financial and business sites. But nobody is talking about how Freezing Pensions Unlock Golden Handcuffs. I can tell you from my experience that it is a big deal for an employee to come to grips with.
The latest articles was about Lockheed Martin Corp which happens to be the Pentagon’s largest defense supplier. They aren’t the only ones getting the frozen shaft. Boeing Co also recently announced the same thing.
I can tell you that there will be some key folks who have hung in there many years slogging away at these companies because of that pension benefit. Just waiting to hit the magic number when they can retire with their pension. Once the hammer falls and the pension does freeze employees will no longer receive credits for age, years of service, and salary increases. If they reach pension eligibility before the freeze they will get whatever the pension calculation is at that time. Staying longer won’t increase it.
Freezing Pensions can Release Top Talent
Anyone should see that top talent might be getting some big retention raises because the golden handcuffs are off. I don’t know how Lockheed or Boeing handles this issue. But where I worked I accepted a lower salary to others in the industry because I had a pension benefit. I assume that the same is true with these two companies. But I will talk about this from my perspective when pension freeze happened to me and my coworkers.
I worked for a Regional Bell Operating Company (ex-Ma Bell Telephone Company) for 31 years when the CEO called for an all-managers meeting. We watched as he did his thing. He then said the pension fund was hundreds of millions of dollars underfunded and they have no intention of adding another dime to it. It was to be frozen at end of year (this was November when he said this) and if you don’t like it you can leave. So I gave my early retirement notice right after the meeting. I retired for the first time at the age of 51. It was all I needed to take the leap.
You may be thinking that I was crazy. That I am impulsive to make a decision like that so soon after hearing what triggered emotions all around me. Let me give you some background.
What Happened at my Pension Freezing Company
I worked my way up to a Lead Engineer position. I did love what I was doing for many years. In the year 2000 when I was still eight years away from pension eligibility the company was taken over by a non-pension company. It was ran by a crooked CEO who as I write this is now a convicted felon. He was recently released from prison after serving 6 years or so.
In the two or so years he was at the helm he almost bankrupted the combined company. He also was paying out tens of thousands of laid off workers large severance packages out of our pension plan. I have no idea how he got Federal Government agreement on this. But hey, he is a criminal. So this total failure of a CEO with an ego the size of New Jersey is gone. If it wasn’t by brilliance and luck of the next CEO and his pal CFO the company could have tanked.
Laws were different in those crazy early 2000’s and all of our 401K match was in company stock. Anyone under age 50 couldn’t diversify it. Long story short we all lost most of it. I lost over 24 years of company match. What was once worth over $100,000 was worth about $7,000. That was 2003 or 2004. With a tanked 401K all I would say was I am glad I traded a higher salary all these years for a pension benefit. Little did I know then.
I Created My Early Retirement Plan
I started seriously planning my retirement for the day I became pension eligible and was already saving 30% of my salary and directing it to debt payoff and retirement accounts. By the time of the “pension freeze” announcement I had more than enough of this new company. A company that I didn’t recognize anymore. The passion and love was long gone and I was planning for career-divorce.
I had always planned on living a Retire Early and Often lifestyle. But when I reached Pension eligibility in 2008 the country was in a deep recession. So I stayed there waiting for the perfect time to leave.
Fast forward a year to November 2009 and those retirement trigger words from now the third CEO since the failed merger, “the Pension is frozen”. After hearing that, the little voice in my head said it was now the perfect time.
Because of the pension fund’s underfunded status I took a lump sum and fund my retirement with an IRA. I wanted as much financial separation from the company as I could get. I never looked back or ever regretted it. Sometimes it takes a small push to get people to move. Or in my case a couple of kicks to the crotch.
In Closing
I don’t know if the new Savings Plans at Lockheed and Boeing are crazy fantastic and everyone will be hugging and kissing each other to stay there. But I have a feeling there are some key people who will say, that was just the push I needed to retire early or go somewhere else and do something I can love. It is true, Freezing Pensions Unlock Golden Handcuffs.
Have you a story or comment about being released from the golden handcuffs?