Conference 7.286::digital_investing

re:                     <<< Note 472.0 by ANOVAX::JWICKERT >>>
              -< Pension and Social Security benefits integrated >-

about once per year, you get a statement from dec showing estimated
retirement income from your pension and from social security.
since your retirement is sometime in the future, they have to make some
assumptions to make the projection.  the assumptions are listed.

the total line would certainly be reduced by the social security
amount to determine your retirement pension amount. 
but the total is not your retirement benefit from DEC.

Disability payments are reduced by SS disability payments.  Perhaps 
there was confusion on that point.

Has anybody seen a statement from Digital, estimating retirement 
benefits, along the lines we used to get when there was *really* a 
defined pension benefit?  I don't remember seeing anything since we 
moved to the cash account plan.

- Scott

	Well since our Pension is now a cash-pension plan, ie. you
	can see exactly how much you have in your Pension, the only way
	they could reduce your benifit would be to remove money from
	your Pension account.  And there is no provision for them to
	do that (at least once you're 100% vested)!

    There was a story in (yesterday?)'s WSJ about some companies
    who actually reduce pension benefits by something like the amount
    of the company's contribution to social security for that
    employee over the years.  Various anecdotes of hair-raising results
    were included.  I have never seen anything in the Dec pension material
    that says Dec's pension works that way.
    

As was mentioned, under the new Digital Cash Account pension plan, you can see 
exactly how much you have credited and this is what you will get.  It is, of 
course, subject to various payment options.  To estimate the payout for each 
of these you have to make various assumptions.  None of these is dependent on 
how much Social Security you get, however.

Even under the old system, I do not think Social Security was factored into 
the amount you would get under pension.  You can verify this by reading one of 
the old benefit books where they describe the various formulas used to 
calculate you payout.  None that I've seen figures Social Security into the 
calculation.

The annual sheet that they used to send out did have a line with estimated 
Social Security benefits and another liine indicating your total retirement 
income which was the sum of your pension plus SS.  However, this was just for 
information purposes - to make you think you were really going to be better 
off than you thought - rather than showing what impact Social Security had on 
your pension calculation.

Larry

      I read the article in the WSJ which prompted me to investigate this
    matter. Some of the people in that story thought they had a pension
    benefit coming to them and then found out they got a lot less than they
    thought or in some cases nothing at all. I'd feel a whole lot better if I
    had something concrete in my hands showing that this is not going to
    happen to us. One of my coworkers contacted human resources today about
    this and is waiting for a reply. I'll post it when we get an answer.
    
                                              JRW 

> I read the article in the WSJ which prompted me to investigate this
> matter. Some of the people in that story thought they had a pension
> benefit coming to them and then found out they got a lot less than they
> thought or in some cases nothing at all.

	Once again, we now have a CASH pension plan.  A pension you can
	take with you when you leave Digital.  The old plan was different
	and likely the type of plan the WSJ talked about.

> I'd feel a whole lot better if I
> had something concrete in my hands showing that this is not going to
> happen to us.

	You get a statement every quarter showing your pension account
	balance.  This is your money.  Read your "Your Benifits Book"
	that we got in January.

    re: .7
    
    I don't believe the old plan did this either.
    

    Please stop calling it a CASH pension.  To me it makes it sound like
    there is actual money someplace set aside.  All DEC did was to find a
    not too subtle way of fixing their pension costs.  It's a defined
    benefit plan (a lump sum distribution), disguised as a defined savings
    plan.
    
    If you think it was done as a favor to us, you are wrong.  They got to
    define the initial amount, they got to define the contribution, they
    get to redefine the "interest" rate every year.  What they got was a
    way to figure out exactly how much they had to commit to "pensions" by
    limiting the amount an employee can ever accrue to 4% of salary per
    year.  Unlike the conventional pension that had a lifetime benefit, and
    was tied to the income in your last years of employment.
    
    So now you get a lump sum payout, payable whenever you leave.  The
    only good thing about it is that if you leave young enough to roll it
    over into a 401K at a new company with a better pension plan.
    
    

> Please stop calling it a CASH pension.

	Well it is called the "Cash Account" pension plan :-)

> If you think it was done as a favor to us, you are wrong.

	That's correct, it favors *both* Digital and most of us.
	Yes, some would say it screwed older long time employees,
	see topic 428 for previous discussion on that.

> Unlike the conventional pension that had a lifetime benefit, and
> was tied to the income in your last years of employment.
> So now you get a lump sum payout, payable whenever you leave.  The
> only good thing about it is that if you leave young enough to roll it
> over into a 401K at a new company with a better pension plan.

	You may call it "only", but that reason in and of itself is
	a major thing.  Remember that in general the length of employment
	with a single company is something like 5 years, and only 2-3 years
	in the computer industry.  And someone like me with 30 years
	til retirement, even with my 10 years of service at Digital,
	under the old (convential) pension plan, because like you said
	my pension at retirement would be fixed based on my salary at
	Digital when I left the company, would of had 30 years for
	inflation to erode and would have been worth very little when
	I started receiving it.

	And now that Digital has sold my group to another company, and
	because my new company does not have a pension plan (or even
	an employer match to our 401k, so be thankful you still work
	for a company that has both, even if it's not the type of pension
	plan you want, it's got to be better than nothing) we're
	allowed to take our pension money with us (I plan to roll mine
	into a self-directed rollover IRA).  My pension account balance
	is more than I have in my 401k, or my existing IRA, combined.
	So I'm happy about that, much happier than what I would have
	been in 30 years under the old pension plan, especially if
	the old plan went insolvent and I got nothing.

    RE: .10
    
    Jeff,
    
    Good points.  We can belabor all day the merits of the old versus the
    new pension plan, and never arrive at a consensus.  Those who feel they
    were boned will always feel that way, and those that feel they were
    helped will always feel that way.  Personally, while my time until
    retirement appears to be squarely between yours and Fred's (22-24
    years), I favor the cash account for the reason that it is more
    tangible.
    
    Regardless of how you feel, we all need to take on as much responsibility
    as we can for our own retirement.  If you think it is too daunting a
    task, read the most current issue of Money Magazine.  It contains
    excellent articles on how everyday people like ourselves can retire
    with $1M or $2M or more in the bank ("potentially a LOT more", to steal
    a line from an obnoxious radio commercial.)  Anyone can do it, but it
    takes will power, committment, some time, and an average 8-10% return on
    your portfolio over the years.  Start doing it now, and the cash
    pension plan, while potentially significant, will be less likely to
    impact you adversely.
    
    Chuck

    Re: .11
    
    All very well, but the new pension plan zaps older long
    time employees just at the point where they were about to
    gain the most benefits from it, and where, because of their
    age, they are less likely to be hired by another company.
    The 5 year grandfathering clause doesn't begin to address this.
    signed, still steaming.
    

    RE: .12
    
    Karen,
    
    I agree.  But I also agree with the opionion polls that show the large
    majority of employees agreed with the changes.  So the company was in a
    damned in you do/damned if you don't scenario.
    
    My wife and I have never been able to depend upon parents or anyone to
    leave us anything, so we have always had the tendency to feel that our
    retirement was our own responsibility.  That will likely allow us to
    weather such changes as the pension plans much better than others,
    since we have tended to assume we will never have anything guaranteed
    except what we put away ourselves.  That holds true for Social Security
    as well as Digital's pension plan.  The only unfairness I see in what
    is happening is that you are likely penalizing a group of slightly
    older employees that did not grow up when we did, so they may have been
    less likely to save with the same intensity that we have.  I don't have
    any answers for you, since it is really time and the compounding of
    returns that make for success in this area.  No one can give
    individuals that are nearing retirement the extra years they need to
    save properly.
    
    Chuck         

    	Digital always had the option of allowing the older Pension
    plans to be "grandfathered", as they HAVE done over the last 20
    years.  I believe this is the first time that they broke with
    that "tradition".  Up until the latest plan, many of us were
    still grandfathered in the "prior to 1979" plan, which was a
    good bit more generous...  I'm still unhappy, too.
    
    Cheers!
    Dave Eklund
    

Does anyone have any feedback on the Securing Your Future DVN? 

I found the worksheets interesting.  For those of you who did not go, the
worksheet helps you estimate your future need for income when you retire.  It
then examined you current assets by estimating your

1. Social Security benefit
2. You Cash Account Pension benefit
3. The projected value of your SAVE and any other investments

Based on your future needs and these estimates, the worksheet projected a
savings gap.  

There was one point that bothered me.  When you used your current Cash Account
Pension balance and projected the number ahead to age 65, I was not happy
with the number.  The worksheet projected a number that was about 25% lower
than my pension benefit based on the old pension plan.  

Did anyone else have a similar experience?

Gil

    I thought that one of the things we gave up when the pension plan
    changed over to (essentially) a 401-K is any sort of guaranteed benefit
    level.  Instead, just like any 401-K, the benefit depends on
    contributions, and performance.  I don't know for sure, but perhaps
    the estimate of benefit is just conservative, which translates into
    less than the original pension plan.
    
    jeb
    

    Yes, it was conservative.  But if you go through the work sheet, I
    believe it is an accurate estimate (is that's not an oxymoron(sic?))
    considering the fact that our pension rate of return is the 1 year
    Tbill + 1%.