Empoyer Sponsored Pension Programs.

August 1, 2006 4:21 PM

What is the percentage of workers, in the private sector, that now receive pensions?

I work in the food service industry and do not receive a pension. Yet, on my property tax bill, I am being charge to cover pension programs for eight government sectors. This is quite disturbing. I therefore would like to know how many workers are covered by employer sponsored pensions.
Thank you.

posted by Mckoan1 to work & money (11 answers total)

Workers do not receive pensions. Retired workers do. (those who retire and then take a new job excepted) I am not sure I really understand your question.
posted by caddis at 4:28 PM on August 1, 2006

In Denmark or in Burundi?
posted by timeistight at 4:45 PM on August 1, 2006

Pensions are common in government and industries where there are unions - manufacturing, airline pilots, etc.

They are extremely uncommon in other industries. Since manufacturing in the U.S. has long been in decline, the number of workers working toward a pension has also declined. (I don't know about the absolute number of retired workers receiving pensions - that's probably peaking about right now, actually.)

A charge on your property tax bill indicates that your local government is charging you for something. One assumes that in previous years, the government hired workers and promised them a pension, and now it is making good on that promise to pay, finding itself short of ready cash, and raising your property taxes to compensate.

While no one likes to see their property taxes increase, the alternative might be for the government to default on promises it had made to government workers. You can see how this would annoy those workers, who undoubtedly counted on their pension funds for retirement.

If you would like to receive a pension, you need to form or join a union to increase your negotiating power with your employer.
posted by jellicle at 5:03 PM on August 1, 2006

Further, the pension programs for government sectors you're paying don't cover workers in the private sector.
posted by ChasFile at 5:04 PM on August 1, 2006

Disclaimer: I do not have JD, LLM, or CPA after my name.

What is the percentage of workers, in the private sector, that now receive pensions?

A pension traditionally meant a defined benefit plan - that is, an employer sponsored retirement plan in which an employee did not make contributions.

Today you will hear many people use the term "pension" when they mean a "401 (k)" or other defined contribution plan. These plans are ones to which employees contribute and employers may match contributions up to a certain amount.

This link from the IRS states that According to the Pension Benefit Guaranty Corporation, there are about 38,000 insured defined benefit plans today compared to a high of about 114,000 in 1985.

They are extremely uncommon in other industries.

It was not always so. Congress created defined contribution plans in the 1970's to supplement pensions.

From that time through the 90's it was very common for white collar employees (read: non-union members) to have pensions.

Unfortunately, the last few years have seen profitable companies like IBM begin to do away with their pension plans.
posted by mlis at 5:53 PM on August 1, 2006

I recently discovered that I am vested in my company's pension plan, much to my surprise. It's MTV Networks, not the kind of company you'd expect to have a pension. It's a fairly nominal amount, at this point, especially considering the inflation that will surely happen in the 30+ years until I retire, but it's free money, so WTF. I don't think you're paying any part of it though, McKoan1.

Just wanted to point out that it's not just government and "old industry"/unionized-type jobs that get them.
posted by TonyRobots at 6:02 PM on August 1, 2006

MLIS, your definitions are quite a bit off.

Yes, a pension is usually a defined-benefit (DB) plan, but the term signifies that you are paid a fixed amount prescribed by some formula such e.g. x% of your average earnings multiplied by your years of employment. There may be various other benefits for beneficiaries / surviving spouses, e.g. a X% continuation after your death for Y years.

How the contributions are made in a DB Plan to provide for current and future pension obligations is determined by actuarial (a branch of mathematical finance) methods, and often a contract between unions and employers defines who picks up the tab. Though most DB plans did not require employee contributions in the past, many do these days. But usually the employee contribution is a fixed percentage of salary, whereas the employer is obliged by law to make up any shortfall in the solvency of the pension fund. When investment returns do not meet expectations, this can present a massive bill to the employer, which is partly why the trend is moving away from DB plans.

In a defined-contribution (DC) plan, there is no obligation to pay a retiree any fixed annual or monthly amount. The employer contribution to the individual's retirement account is fixed or tied to employee contributions (which will often ends up being small). Essentially the employer is passing off the investment risk to you -- if the fund performs poorly then that's your problem.

Because they are expensive and risky to offer, DB plans are mainly popular in a) lucrative industries that compete to attract employees, and b) unionized industries. In most other sectors the trend is toward DC plans. Take a look at page 3 of this document. I can't comment on its accuracy but I agree with the overall trend. E.g. assets held in DB vs. DC has gone from 354 vs. 161 billion in 1980 to 1,697 to 2,311 billion in 1999. That's a massive shift toward DC. Oh yeah, there's also a good summary of the differences between DB and DC on page 6.

As for how many permanent employees are not covered by any employer retirement plan whatsoever (whether DB or DC), the statistics I've seen generally indicate roughly 30%. When you also factor in all the people working in temporary positions or illegally, that's a lot of people without employer retirement benefits.

So back to mckoan's original point -- that you're paying a tax to cover a pension for civil servants. Well yes, it sucks, but the general trend is that better benefits are a small compensation for the lower pay and other rewards in public sector jobs. Civil servants are serving you, therefore you do have an obligation to contribute to a fair standard of living for them.
posted by randomstriker at 6:48 PM on August 1, 2006

I can't blame you, but instead of resenting people who have pensions, organize towards a union and get yourself covered by a pension. It's shameful how many people have no employer - supported health insurance and pension plans.
posted by theora55 at 8:16 PM on August 1, 2006

hmmm. your employer does not provide a pension, yet you resent that your town does. get over it. quit your lousy job which will never pay you retirement benefits and find yourself a job with the town which will.
posted by caddis at 9:44 PM on August 1, 2006

randomstiker is provides a pretty good overview of the difference between defined contribution plans and defined benefits plans. Some of the details vary depending where you live. In my province, the legislation dictates that the costs are shared equally by the employee and emloyer in a DB plan, so when there is a shortfall in the plan both the employees and the employer have to toss in more money.

(I'm a union rep in a workplace that has an underfunded defined benefits plan and that is analysing possible changes to the plan, so I keep fairly current with the situation. The laws where you live may be different.)

Your property taxes (and income taxes for that matter) pay for all kinds of things that you don't directly benefit from. You may not send kids to school, ride the bus, play in the parks, attend City sponsored concerts, call the Fire department, or use any number of other services your taxes pay for. Why does this disturb you? When you buy a car, part of the purchase price goes to pay for the manufacturing employee's pension. When you fly, some of your ticket price contributes to the employees pension plan. Do these things also disturb you?
posted by raedyn at 12:41 AM on August 2, 2006

More on the issue of your property tax assessment.

I don't know where mckoan lives, but my guess is a municipality in the US whose pension fund for civil servants is insolvent. More and more of these are springing up in recent years both at municipal and state levels due to changing demographics, insufficient tax revenues, underperforming investments, and sometimes financial mismanagement. Some of these problems are similar to those afflicting the federal Social Security program that has been a subject of national debate.

Anyway, when a employee earns an entitlement to pension, he is said to have a vested benefit. I.e. his entitlement is guaranteed by law. So if the pension fund is insolvent, someone (in this case the taxpayer) has to pony up extra money to meet the fund's pension obligations. Now, as raedyn pointed out, there are plenty of things that public funds get spent on that you might resent, object to or envy. What's unusual is that the levy for public pensions actually appears as a separate item in your tax assessment.

This might indicate that your municipality has a balanced-budget law, and the only way for it to fund the pension plan without diverting money from other programmes is to implement a special tax outside of the existing regime. Or, this might indicate a deliberate ideologically-motivated campaign by The Powers That Be to dismantle a "liberal welfare program". Draw attention to offending program, stimulate resentment in the ignorant taxpayer and build support for dismantling the program. In recent years, this has become a classic Republican tactic.

Anyway, I'm of the same opinion as those who say you should get over your gripe. Fight to get a pension for yourself rather than getting all huffed about someone else's fortune. If you believe you shouldn't contribute to pensions for civil servants because you don't get one yourself, then you believe in everyone around you cutting each other down rather than build each other up.
posted by randomstriker at 1:43 AM on August 2, 2006 [1 favorite]