Goodyear Tire kills their pension plan

Goodyear Tire and Rubber, with a company pension plan since the 1930s, killed its pension plan and put about 40,000 employees into employee-paid 401(k) plans.
This is the tip of the iceburg as more and more big-name companies dump their company pension plans.

The ice age hits pension freezes: Who Stole My Pension?

The effects of the new Pension Protection law continue to sweep through corporate America. Last week Goodyear Tire & Rubber Company - who established a defined benefit pension plan in 1930 - announced that it would freeze its pension plan for 31,000 workers and replace it with an enhanced 401(k) savings plan with company contributions. Typically, this is good news to Wall Street. Goodyear's shares were up two percent on the New York Stock Exchange the day of the announcement.

But giant corporations are not alone. SureWest Communication near Sacramento, California followed Goodyear's news release with its own. The company said it would stop the payments it has been making on its existing pension plan covering 875 people. "The changes we have made are consistent with what is occurring throughout the country," the company president said.

Why is this important? Because the company can avoid skyrocketing future pension contributions AND shift much of the burden of funding future retirement payout to the employees. That's right! Sharply reduced employer costs for a pension and off-load much of the cost of future retirement benefit to the employee.

But this only a tip of the iceberg. The Pension Protection Act that President Bush signed last year has had the real effect of opening the floodgates to corporate pension terminations. Why? Because it is now an easy task to simply freeze a pension and replace it with a 401(k). You can't lose any benefits already earned, but the money will be invested by the employer and grow slowly until your retirement. Then it becomes a "Money Purchase" retirement plan. As the name implies, the monthly retirement benefits will be whatever is in the account when you retire.

Those workers hurt most are those over age 55 with 15 or more years of service. In a traditional defined benefit pension, they would start to build hefty sums in their later years and earn well over half their pension benefit in the last few years. In the replaced 401(k), they earn future benefits the same as a 25-year-old worker, based on their contributions and the employer's matching money.

What can you do? Look for a new book Who Stole My Pension with specific instructions in each chapter on freezing pensions, the PBGC, and how to save what you have when you lose your company pension. Also, e-mail info@financialsavvy.com with your name, phone number, and you'll receive more information on how to protect yourself as millions of workers lose their pension this year, and a sample copy of Financial Savvy Report - the weekly internet newsletter.

Comments

Submitted by Robert Turley (not verified) on
I worked there from 1966-1976. How do I get my back pension? Thanks

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