GE has slashed nearly $5 billion in long term employee obligations. But hey, they offered a 401K

The death of pensions is at the crossroads of longevity and out of control healthcare costs. When these pensions were originally calculated some 30-40 years ago, they were calculated with the then current costs plus a few % inflation. The years of higher (than expected in 1970) inflation did a number on them back in the 90s, breaking a good number of companies who were slowly obligated to pay higher than calculated amounts.

401k type programs are better for companies because when you part ways they have no dangling obligations, and you’re at least that part secure. It also simplifies things for HR, where the old system might represent dozens of contracts and pension plans that came from mergers or parts were spun off. And then if the company goes kaput, you had your money outside of their grasp (provided you sold your stock bonuses instead of holding them). But that doesn’t help anyone over 75, who started working in the pension era.

Of course, 401k type programs are better for companies as they cost less. Why not have both 401k programs and pensions? Pensions are most often annuities, basically you’re getting a fixed amount forever with no COLA increases until you die.

Once you’re vested in a pension plan, usually after five years, you can retain your pension benefits even if you transfer to another company. Your 401k can also tag along. But, if your company makes rolling over your 401k into another company’s 401k difficult, say, by paying you in company shares instead of cash then restricting its conversion from stock to money, you run into issues too. Again, pensions and 401k programs are great but they cost companies more.

So, the middle class gets screwed, the elderly get impoverished, all so companies and shareholders make bigger profits.

Federal Judge Lynn Adelman observed in December that GE didn’t end the retiree benefits for any of the reasons it specified in the handbook. Those reasons all “involve a force majeure, something outside [GE’s] control such as a change in the law,” Adelman wrote. Rather, the company “appears to have terminated the Plans to save money.”