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Lockheed-Martin machinists on strike ... pension for new employees at issue

Discussion in 'Sports and News' started by doctorquant, Apr 24, 2012.

  1. doctorquant

    doctorquant Well-Known Member

    As promised, so as to end thread-jack of Romney board (for which, admittedly, I am partially responsible) ...


    Main point of contention is a switch to a defined-contribution (rather than a defined-benefit) pension plan for new workers. My argument on the other board was that it's silly to strike over this because defined-benefit plans are going, going, gone ...
  2. BitterYoungMatador2

    BitterYoungMatador2 Well-Known Member

    One of these days defined contributions will be too.

    We shouldn't fight that either.
  3. Stitch

    Stitch Active Member

    Splitting the union is a great strategy for management.
  4. doctorquant

    doctorquant Well-Known Member

    Defined contribution's totally different. Easily bargained over, easily budgeted for, easily accounted for. All you're really bargaining over is compensation. Plus, it has the wonderful quality of conforming to the matching principle in accounting: In exchange for your labor in period X, in that same period I pay you Y1 dollars in outright compensation, and I contribute Y2 dollars into an investment account that you control. If your labor is worth Y1 + Y2 dollars to me (and if you can't command any better than Y1 + Y2 dollars elsewhere), we have a deal. If you think my company's such a promising firm, you can always invest those dollars in my firm, but you can also look elsewhere for better, more diversified returns. If it's a defined benefit plan, you have no choice but to invest everything in my firm and its prospects.
  5. Starman

    Starman Well-Known Member

    Along with paying anything more than minimum wage (oh, they're getting rid of the minimum wage laws too). Don't fight that either.
  6. BitterYoungMatador2

    BitterYoungMatador2 Well-Known Member

    Ask some of the Boomers who are still working because their 401k's tanked in this recession just how great a defined contribution is. All you need to do is look at the wording. One has the word "benefit" and one doesn't. If they wanna' do anything they should compromise and go to a hybrid model, with some local health care professional unions have agreed to recently.
  7. doctorquant

    doctorquant Well-Known Member

    Yeah? And how 'bout all those boomers who saw their defined benefits fall to near-nothing in a bankruptcy reorganization? Put another way: What is it about a "defined benefit" plan that makes it more secure than those investments made in a defined contribution one?
  8. cranberry

    cranberry Well-Known Member

    There's always going to be risk associated ... bankruptcy, martian attack, whatever. I'll still try to negotiate a defined benefit over a defined contribution every time.

    The other thing I'd point out is that pensions (in private industry) are covered by ERISA laws and ultimately the Pension Benefit Guaranty Corporation.
  9. LongTimeListener

    LongTimeListener Well-Known Member

    I assume Lockheed's proposal guarantees that the employer will now and forever match the first 3 percent or 6 percent of an employee's contribution.

    Because no company would ever take away that match.
  10. doctorquant

    doctorquant Well-Known Member

    Whatever match is agreed to in this contract will be for only the duration of this contract. No forevers about it. The only way a company could get out of such a contract is to do it through bankruptcy, which is EXACTLY the same way it could walk away from substantial obligations under a defined-benefit plan.

    I'm still waiting for someone to explain how defined benefits plans -- which tie the long-term financial position of employees to one particular firm -- are somehow more secure than defined contribution plans.
  11. The Big Ragu

    The Big Ragu Moderator Staff Member

    And you should. But any business that allows you to do that is insane. Defined benefit plans have made older companies cost uncompetitive against newer rivals with younger workforces. I can write a Ragu-length post of companies that were forced into Chapter 11 bankruptcy due to the legacy costs of defined benefit plans that they couldn't make good on.
  12. Captain_Kirk

    Captain_Kirk Well-Known Member

    Didn't read any of the other thread, but will concur with the first post that DB plans are a thing of the past. You can try if you want, but companies are just not going to make this a negotiable item when they've run the numbers and know they can't continue to support it. The expense for a large company can be a staggering amount, and as Ragu notes, can lead down the road to Ch 11.

    If this is just for new hires, Lockheed employees are fortunate--many more companies have frozen benefits for existing employees as well.

    Should be noted that all this came about when they changed the accounting rules on how the present value of the pension expense had to be calculated and what portion was recognized in each current accounting period. Although logically there's merit to how the expense recognition was changed, the beancounters are the ones who really initiated all the activity of companies shutting these plans down, or at least freezing them.
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