Skip to comments.American Companies Can’t Continue Offering Adequate Pensions
Posted on 04/27/2006 7:53:51 AM PDT by qam1
A new survey from the American Institute of Certified Public Accountants (AICPA) indicates that the vast majority of CPAs in executive positions, such as corporate chief executive officers (CEOs), chief financial officers (CFOs) and Controllers, believe American companies cant continue providing pensions that adequately cover their employees retirement years. Further, many of the CPAs surveyed also believe reductions in pension benefits pose a threat to a companys ability to attract and retain the talent they need to compete.
These findings are a wake-up call, John Morrow, Vice President of the AICPAs division for CPAs in business and industry, commented in the statement announcing the survey results. The traditional system of rewarding employees with pensions after long years of service is on its way out, because companies simply cannot bear the cost. Therefore, employees will have to find alternate methods of funding their retirement.
This is further bad news for Generation X workers, most of whom indicated they plan to rely on savings and investments to carry them through their retirement, according to another study from the AICPA. Generation X, or Gen-X as it is often referred to, represents more than 29 million adults born between 1964 and 1980. According to that study which was released earlier this month, 65 percent of Gen-Xers surveyed dont expect social Security to be a retirement option and even more, 68 percent, dont see a pension as a safety net, either.
The message is getting through to Generation X consumers about taking control of their own financial futures, said Carl George, CPA Chair of the AICPAs National CPA Financil Literacy Commission and CEO of Clifton Gunderson LLP, in a statement about the Gen-X survey. As a result, they intend to draw on personal savings and investments for retirement, unlike many of their baby boomer elders.
Virtually all the respondents in the executive survey indicated that their companies offer some type of retirement benefits today, with the majority (65.6 percent) offering a 401(k) plan with matching contributions. Less than 5 percent said their companies offer no retirement plan at all.
When asked if U.S. companies could continue providing employees with pensions that adequately cover their retirement years, nearly three in four (74 percent) of the 3,100 AICPA members in business and industry participating in the executive survey said no; more than half, or 54 percent, indicated that the erosion of these benefits would hurt recruiting and retention efforts. A slightly higher number, 57 percent, believe rising healthcare costs are the biggest barrier to a companys ability to offer pension benefits; nearly 30 percent said pressures to compete in the marketplace outweighed the pressures to provide retirement benefits.
American workers have to understand the pension safety net will probably not be there for them and that planning for retirement is their personal responsibility, George said in a prepared statement. Americans must recognize that unless they take a more active role in their own retirement planning, they may find themselves working far longer than they had intended.
"reductions in pension benefits pose a threat to a companys ability to attract and retain the talent they need to compete."
If the competition can't afford to offer pensions, then I don't see how it's a threat to their ability to get talent. You've gotta work somewhere.
Ping list for the discussion of the politics and social (and sometimes nostalgic) aspects that directly effects Generation Reagan / Generation-X (Those born from 1965-1981) including all the spending previous generations (i.e. The Baby Boomers) are doing that Gen-X and Y will end up paying for.
Freep mail me to be added or dropped. See my home page for details and previous articles.
On the other hand, the company can easily offer an extra 10% (or whatever is a good amount) paid into a retirement plan for the employee. If the employee leaves or is laid off, it still belongs to the employee. If the company goes bankrupt, the retirement plan will be untouched and will not put an expense on the government bailing it out.
I can't imagine a situation where I would expect to work for a company for a lifetime and hope to be taken care of in retirement. 5-6 years at a company is my average. I work, they pay me for that work. It isn't a "til death do us part" bond.
Yeah, well maybe if they didn't give their retiring executives $400 million going-away presents, they could afford to provide pensions to their workers. The investment income off of $400 million could make one person very happy, and provide trust funds to descendants in perpetuity, or make several more at least comfortable in their old age.
***YIKES*** Anti-Capitalism warning.
However those same large corporations can continue to offer their executive officers millions of dollars (and, ahem, in some cases hundreds of million of dollars) in "deferred compensation" (aka executive pensions) and golden parachute packagess. The old "screw you, I got mine" mentality is alive and well. How convenient.
"If the competition can't afford to offer pensions, then I don't see how it's a threat to their ability to get talent. You've gotta work somewhere."
Yep. But I don't speak Chinese and couldn't stand the heat in India. American companies can no longer afford the pension game in part because they are competing with overseas companies.
Only 20 percent of Chinese workers have either pension systems or health insurance. Eight out of ten have neither. That's what American workers are competing with, another nuance of globalization.
Jeez louise folks, do we want the gubmint mandating that someone makes "too much" money and install a cap? Should a company be required (by the same gubmint) to fund retirement for the workers?
pension = ponzi
Agree on the Anti-Capitalism alert. It isn't how much the other guy makes, as if that is anyones business but the other guy, it is how much you make and save. As to the article on which this thread was based:
I wonder if state government the federal government, state school systems, unions, and others involved in pension funds feel the same way. I don't think companies allowing 401k type pensions are out very much other than the cost to tie up to companies offering the 401 programs, and the company match, which is a single digit percentage, and they cover some of that with a program of vesting.
Retirement is not just the responsibility of an employer. As employees it is important to get away from thinking pay check to pay check. Think ten to twenty years out, because before you know it, twenty years can go by so fast you will wonder where it went. It happened to me, but then despite the shock and speed of the twenty, by always thinking and planning for the next ten and twenty, you remain hopefully on top of things.
"This is further bad news for Generation X workers, most of whom indicated they plan to rely on savings and investments to carry them through their retirement, according to another study from the AICPA."
It's not further bad news, or bad news at all. I don't know about the rest of my age cohort, but I've never had any expectation that'd I'd likely ever work long enough in a single job to earn a defined-benefit pension, nor that even if I did that such a thing would be available. At least in the sector I work (IT/software) few, if any, companies offer those types of pension plans. I'm saving and investing for my own retirement. I also have no expectation of getting any meaningful pension, whether OAP (Old Age Pension - Canada) or CPP (Canada Pension Plan - a Canadian gov't contributory pension plan similar to Social Security) from the government, especially if I do a decent job of providing for myself (since they'll likely claw back anything I would get, anyway). Not entirely sure if this is a good thing or a bad thing, but that's the reality, today.
There is a pretty big contingent on FR that believes scr*wing everyone who's stupid enough to have contact with you is capitalism.
Thanks for the bump. Most Xer's will never see a pension.
Of course they can't because the "model"
by which the modern, American corporation operates is extremely flawed and skewed in favor of those who will never need to rely upon a pension for their retirement.
Profitablility now is almost exclusively reflected in stock prices and "future earnings estimates" which bear no relation to reality or which cannot be defined in concrete terms (i.e. actual dollars and cents). These are esoteric benchmarks, not an actual reflection of profit, nor a physical reflection of the ability of a company to actually compete in the marketplace with a superior product or service.
Precisely. If a CEO can make money while keeping the company's end of its contracts, he deserves whatever the board gives him. Violate that stipulation, and he's just another grifter.
"You've gotta work somewhere."
Working for a paycheck is a waste of time and energy.
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