I retired from my medium-sized company two years ago, at age 65, after 33 years service. My pension, based on salary and years of service, promised to pay me $55,000/yr at retirement with a COLA, for the rest of my life. That was my choice. Iíve got that and Social Security. I was OK with that.
It was common knowledge that the company has been struggling for a number of years. Like many other similar-sized companies, legacy costs are part of the problem that are brushed aside by a good economy and come to the fore when times get tough.
My retired colleagues and I received a letter from our company yesterday outlining recent developments and a plan that would enable the company to continue to provide pension payments without turning our benefits over to PBGC or going bankrupt. It called for our accepting a plan that would result in monthly payments that would decline at the annual rate of 5% per year for twenty years and then disappear. There was also a lump sum offer, based on an annuitized rate of 4.25%.
Whew! I think I might be one of the lucky ones. It gives me time to adapt and to make some choices. Itís not the long-term retirement I thought I was going to have. Iím going to have to make some big adjustments in the way I live, but Iíve got time to think it through, and Iíll be OK. It beats hearing that my pension is disappearing as of July 1, or being chopped by 70%. Iím on Medicare. My company provides the supplemental portion. Their portion will decline at the same rate.
Rather than talking all or none moves, can something gradual like this, shared equally by management and labor, work for the auto company legacy costs?