A cautionary tale about pensions and wages

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Topic Author
RobLyons
Posts: 739
Joined: Tue Oct 31, 2017 12:55 pm

A cautionary tale about pensions and wages

Post by RobLyons » Fri Jun 19, 2020 7:32 am

We have heard you should not count pension benefits until the day you receive them, but this move has surprised some. Massachusett's largest private employer Mass General Brigham, (MGB) formerly Partners Healthcare, has decided to "temporarily" freeze all pension benefit contributions and annual pay increases to 50,000 workers, and is also cutting executive and leadership pay. This is expected to last 1 year and is the result of shortfalls due to the pandemic. Article is below.

This decision comes as a surprise to some. "MGB is the largest healthcare system and employer in New England. With annual revenues of $14 billion, MGB is consistently the most profitable healthcare system in Massachusetts. In the last fiscal year, MGB earned $485 million in income from operations – the system’s most profitable year. During the COVID-19 pandemic, MGB has received $1 billion in accelerated Medicare payments and $314 million in grants from a federal relief program. The system reported having more than $230 million in cash on hand during the first quarter."

And this comes after several major financial decisions were made...
- Last year, a $1B expansion project was announced (article below)
- This year, a $100M branding exercise changed the name of Partners Healthcare to Mass General Brigham
- MGH in Boston cared for more COVID-19 patients than any other hospital in the state by a large margin while denying hazard pay to front line workers, while other hospitals in the state paid hazard pay


The story:
https://www.boston.com/news/coronavirus ... s-pandemic

The $1B project:
https://www.bizjournals.com/boston/news ... -foot.html
"Great parenting sets the foundation for a better world"

Beehave
Posts: 727
Joined: Mon Jun 19, 2017 12:46 pm

Re: A cautionary tale about pensions and wages

Post by Beehave » Fri Jun 19, 2020 8:11 am

The post and articles are thought-provoking.

The organization apparently had two major projects under way when Covid 19 hit and damaged profitability. One was a billion dollar expansion of patient, admin, and parking space. The other project, one tenth the size, was for branding - - essentially public relations. I'm not sure about the need and value of the branding expenditure, but if this organization which was using capex for expansion of services is running into trouble, what of others which spent borrowed money to do stock buybacks?

KlangFool
Posts: 16639
Joined: Sat Oct 11, 2008 12:35 pm

Re: A cautionary tale about pensions and wages

Post by KlangFool » Fri Jun 19, 2020 8:15 am

Folks,

We have a healthcare bubble and a college bubble. The bubbles have to burst sometime.

KlangFool

stan1
Posts: 8528
Joined: Mon Oct 08, 2007 4:35 pm

Re: A cautionary tale about pensions and wages

Post by stan1 » Fri Jun 19, 2020 8:21 am

A local university affiliated hospital is running 5 minute TV ads explaining how safe it is to have elective procedures done.

Another large local medical group has cut physician pay by 50% and laid off a lot of staff.

My neighbor, who operates a solo dentist practice with his wife as the business manager, shrugs his shoulders and says "just gotta do it".

People who thought they were in a high paid, recession proof job are finding this time is different.

User avatar
TheTimeLord
Posts: 7729
Joined: Fri Jul 26, 2013 2:05 pm

Re: A cautionary tale about pensions and wages

Post by TheTimeLord » Fri Jun 19, 2020 8:26 am

RobLyons wrote:
Fri Jun 19, 2020 7:32 am
We have heard you should not count pension benefits until the day you receive them, but this move has surprised some. Massachusett's largest private employer Mass General Brigham, (MGB) formerly Partners Healthcare, has decided to "temporarily" freeze all pension benefit contributions and annual pay increases to 50,000 workers, and is also cutting executive and leadership pay. This is expected to last 1 year and is the result of shortfalls due to the pandemic. Article is below.

This decision comes as a surprise to some. "MGB is the largest healthcare system and employer in New England. With annual revenues of $14 billion, MGB is consistently the most profitable healthcare system in Massachusetts. In the last fiscal year, MGB earned $485 million in income from operations – the system’s most profitable year. During the COVID-19 pandemic, MGB has received $1 billion in accelerated Medicare payments and $314 million in grants from a federal relief program. The system reported having more than $230 million in cash on hand during the first quarter."

And this comes after several major financial decisions were made...
- Last year, a $1B expansion project was announced (article below)
- This year, a $100M branding exercise changed the name of Partners Healthcare to Mass General Brigham
- MGH in Boston cared for more COVID-19 patients than any other hospital in the state by a large margin while denying hazard pay to front line workers, while other hospitals in the state paid hazard pay


The story:
https://www.boston.com/news/coronavirus ... s-pandemic

The $1B project:
https://www.bizjournals.com/boston/news ... -foot.html
You are going to have to help me on how this relates to the article. Is there any mentioned of benefits accrued not being honored or covered by the PBGC?
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

User avatar
Watty
Posts: 19730
Joined: Wed Oct 10, 2007 3:55 pm

Re: A cautionary tale about pensions and wages

Post by Watty » Fri Jun 19, 2020 8:48 am

Even in good times companies have steadily been freezing private pension plans to save money. I had one that was frozen back in the 1990s.

That not only saves them a lot of money but it also means that older workers are much more likely to voluntarily leave on their own which is perceived as being a good thing.

X528
Posts: 114
Joined: Fri Nov 30, 2018 8:51 am

Re: A cautionary tale about pensions and wages

Post by X528 » Fri Jun 19, 2020 9:18 am

KlangFool wrote:
Fri Jun 19, 2020 8:15 am
Folks,

We have a healthcare bubble and a college bubble. The bubbles have to burst sometime.

KlangFool
People primarily associate bubbles with costs (healthcare costs, real estate and tuition).

Does this apply to physician/nurse salaries (for the healthcare bubble) and professor salaries (for the college bubble) too? Are salaries in these professions going to decrease. American doctors in the U.S. are the highest paid in the world I think.

Regarding the college bubble:

https://johntreed.com/blogs/john-t-reed ... om-scratch

KlangFool
Posts: 16639
Joined: Sat Oct 11, 2008 12:35 pm

Re: A cautionary tale about pensions and wages

Post by KlangFool » Fri Jun 19, 2020 9:36 am

X528 wrote:
Fri Jun 19, 2020 9:18 am
KlangFool wrote:
Fri Jun 19, 2020 8:15 am
Folks,

We have a healthcare bubble and a college bubble. The bubbles have to burst sometime.

KlangFool
People primarily associate bubbles with costs (healthcare costs, real estate and tuition).

Does this apply to physician/nurse salaries (for the healthcare bubble) and professor salaries (for the college bubble) too? Are salaries in these professions going to decrease. American doctors in the U.S. are the highest paid in the world I think.

Regarding the college bubble:

https://johntreed.com/blogs/john-t-reed ... om-scratch
X528,

1) If the whole industry is going to hell, why would the salary of those working in the industry not being affected? Just look at the Telecom and Oil industries.

2) If college education is going remote, what is there to stop the top universities of the world to compete to the universities inside the USA?

KlangFool

User avatar
Horton
Posts: 700
Joined: Mon Jan 21, 2008 3:53 pm

Re: A cautionary tale about pensions and wages

Post by Horton » Fri Jun 19, 2020 9:37 am

Don’t count on your employer to maintain their benefit programs into perpetuity without changes. The benefits you have accrued to date are typically very safe, but anything is possible with respect to benefits offered in the future.

Don’t expect dinosaurs to continue to roam the Earth.

potatopancake
Posts: 26
Joined: Fri Jul 13, 2018 4:38 pm

Re: A cautionary tale about pensions and wages

Post by potatopancake » Fri Jun 19, 2020 9:40 am

With the amount of debt, years of training, and low pay during residency, physician pay should not be decreased. A family medicine doctor in 2019, on average, generates 2.1 million dollars for their hospital system and earns, on average, total compensation of $247,000 (incl. benefits and bonus). This salary is after incurring an average of > $200,000 student loans and seven years of post-college training.

User avatar
TheTimeLord
Posts: 7729
Joined: Fri Jul 26, 2013 2:05 pm

Re: A cautionary tale about pensions and wages

Post by TheTimeLord » Fri Jun 19, 2020 9:42 am

Horton wrote:
Fri Jun 19, 2020 9:37 am
Don’t count on your employer to maintain their benefit programs into perpetuity without changes. The benefits you have accrued to date are typically very safe, but anything is possible with respect to benefits offered in the future.

Don’t expect dinosaurs to continue to roam the Earth.
Exactly, why would anyone being counting something that is not yet accrued and vested? This thread topic confuses me.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

BlueCable
Posts: 318
Joined: Fri Jun 17, 2016 9:20 am

Re: A cautionary tale about pensions and wages

Post by BlueCable » Fri Jun 19, 2020 9:48 am

Is this any different than my employer reducing the 401k match or making it harder to get a bonus? To me, this pension freeze is the same as any other compensation cut. Your employer has altered the terms of your employment, and you can choose to stay or move on.

This does not appear to be a case of a company cutting pension benefits that have already been earned, which is a situation that would actually warrant caution.

I guess my company does not give everyone a raise each year, so it wouldn't be such a shock to see wage freezes.

wolingfeng
Posts: 52
Joined: Sat Dec 01, 2012 9:09 pm
Location: Syracuse, New York

Re: A cautionary tale about pensions and wages

Post by wolingfeng » Fri Jun 19, 2020 10:09 am

I guess my take is really no one is 100% safe in term of job security and benefit. It’s all relative to everything else. I think it’s always controversial to argue when the employer cut worker’s benefit, but that would be another discussion.

gr7070
Posts: 1151
Joined: Fri Oct 28, 2011 10:39 am

Re: A cautionary tale about pensions and wages

Post by gr7070 » Fri Jun 19, 2020 11:33 am

TheTimeLord wrote:
Fri Jun 19, 2020 8:26 am
RobLyons wrote:
Fri Jun 19, 2020 7:32 am
We have heard you should not count pension benefits until the day you receive them
You are going to have to help me on how this relates to the article. Is there any mentioned of benefits accrued not being honored or covered by the PBGC?
That was my reaction.

Plus it's not like the pension is truly guaranteed on day one of retirement, not without a lump sum anyway.

Depending upon the provider and other circumstances it is perfectly reasonable to expect ones pension to pay. I think it's reasonable to understand the defined benefit may change, possibly significantly. However, it would have to be the unusual pension to wholly discount it.

sreynard
Posts: 354
Joined: Thu May 02, 2013 8:11 pm

Re: A cautionary tale about pensions and wages

Post by sreynard » Fri Jun 19, 2020 11:42 am

There was a surprise here?

User avatar
Flobes
Posts: 1293
Joined: Tue Feb 16, 2010 12:40 am
Location: Home

Re: A cautionary tale about pensions and wages

Post by Flobes » Fri Jun 19, 2020 12:09 pm

RobLyons wrote:
Fri Jun 19, 2020 7:32 am
We have heard you should not count pension benefits until the day you receive them
Horton wrote:
Fri Jun 19, 2020 9:37 am
Don’t count on your employer to maintain their benefit programs into perpetuity without changes. The benefits you have accrued to date are typically very safe, but anything is possible with respect to benefits offered in the future.
TheTimeLord wrote:
Fri Jun 19, 2020 9:42 am
Exactly, why would anyone being counting something that is not yet accrued and vested?
gr7070 wrote:
Fri Jun 19, 2020 11:33 am
Plus it's not like the pension is truly guaranteed on day one of retirement, not without a lump sum anyway.
My pension was vested. And then it changed. Again and again and again. Quoting my 2016 self:
Flobes wrote:
Tue Feb 23, 2016 12:06 pm
They can change the rules at any time.

When I stopped working at age 57, I was vested with 5 years in my pension system. I called to get my money out as a lump sum. I was convinced that if I waited until 60, I'd get another 25%. As I didn't need the money, I happily opted for the delayed benefit.

Then they changed the rules, and I couldn't get the money until I turned 65. And then they changed the rules, and lowered the payout amounts. And then they changed the rules yet again, and I am no longer vested: I will now get 25% less than I would have received years ago when I made that phone call. When I turn 65, I'll get whatever.
P.S. Pension has changed twice more since the ^post. Luckily, it's a really small amount of my retirement cache. I've since lapped 65, but I'm waiting 'til 70 to collect. Que sera, sera...

MathIsMyWayr
Posts: 1792
Joined: Mon Mar 27, 2017 10:47 pm
Location: CA

Re: A cautionary tale about pensions and wages

Post by MathIsMyWayr » Fri Jun 19, 2020 12:12 pm

Any illusion of job security or rosy future benefits such as pension is just an illusion. No employer can guarantee such things in the real world. It is not the fault of the employer. It is simply not sustainable. Any guarantee for the future is nothing but kicking the can down the road. I like a job security and a cushy pension, but the reality cannot support such a fantasy.

User avatar
Horton
Posts: 700
Joined: Mon Jan 21, 2008 3:53 pm

Re: A cautionary tale about pensions and wages

Post by Horton » Fri Jun 19, 2020 12:27 pm

How many more posts until you think this thread gets locked? :twisted:

Normchad
Posts: 647
Joined: Thu Mar 03, 2011 7:20 am

Re: A cautionary tale about pensions and wages

Post by Normchad » Fri Jun 19, 2020 12:47 pm

Pensions are going the way of the dodo bird. I’m actually shocked that any company still has them.......

anakinskywalker
Posts: 475
Joined: Sun Aug 24, 2008 8:20 pm

Re: A cautionary tale about pensions and wages

Post by anakinskywalker » Fri Jun 19, 2020 1:04 pm

MathIsMyWayr wrote:
Fri Jun 19, 2020 12:12 pm
Any illusion of job security or rosy future benefits such as pension is just an illusion. No employer can guarantee such things in the real world. It is not the fault of the employer. It is simply not sustainable. Any guarantee for the future is nothing but kicking the can down the road. I like a job security and a cushy pension, but the reality cannot support such a fantasy.
Exactly. And this is why 401ks are infinitely better.

Depending on a pension, which is nothing more than an unsecured obligation of the employer, is like putting _all_ of one's retirement money into _unsecured_ bonds issued by a _single_ entity.

Anakin

User avatar
Watty
Posts: 19730
Joined: Wed Oct 10, 2007 3:55 pm

Re: A cautionary tale about pensions and wages

Post by Watty » Fri Jun 19, 2020 1:18 pm

Horton wrote:
Fri Jun 19, 2020 9:37 am
Don’t count on your employer to maintain their benefit programs into perpetuity without changes. The benefits you have accrued to date are typically very safe, but anything is possible with respect to benefits offered in the future.

Don’t expect dinosaurs to continue to roam the Earth.
Accrued pension benefits are not always safe especially if you have a large one. I know someone that was a pilot for a major airline and near early retirement with a large pension. The airline went through bankruptcy so he lost about two thirds of then pension he had accrued at that point because it was that much above the amount that the PBGC would insure.

The PBGC guarantees are not all that high for early retirees. There are lots of details but for a 55 year old it is only about $2,500 a month at 55.

https://www.pbgc.gov/wr/benefits/guaran ... -guarantee

Strategic bankruptcies to get out of pension obligations are way too common.

JonnyB
Posts: 633
Joined: Sun Jan 19, 2020 5:28 pm

Re: A cautionary tale about pensions and wages

Post by JonnyB » Fri Jun 19, 2020 1:21 pm

MathIsMyWayr wrote:
Fri Jun 19, 2020 12:12 pm
Any illusion of job security or rosy future benefits such as pension is just an illusion. No employer can guarantee such things in the real world. It is not the fault of the employer. It is simply not sustainable. Any guarantee for the future is nothing but kicking the can down the road. I like a job security and a cushy pension, but the reality cannot support such a fantasy.
There's no fantasy about it. Actuarial tables are quite accurate, even projecting out decades. An employer can know with quite precision exactly how much money they need to pay out and when.

The problem comes when employers fail to fund their pensions adequately given the accurate information they are provided. That isn't a failure of the pension system. That is a failure of management.

Many of the pension problems occur because managers cut their pension funding when times are good, relying on stock market increases. And likewise they cut funding when times are bad because they say they can't afford it now. That's just bad management.

Saying that pensions are a fantasy is just providing an excuse for larcenous managers.

anakinskywalker
Posts: 475
Joined: Sun Aug 24, 2008 8:20 pm

Re: A cautionary tale about pensions and wages

Post by anakinskywalker » Fri Jun 19, 2020 2:50 pm

JonnyB wrote:
Fri Jun 19, 2020 1:21 pm
MathIsMyWayr wrote:
Fri Jun 19, 2020 12:12 pm
Any illusion of job security or rosy future benefits such as pension is just an illusion. No employer can guarantee such things in the real world. It is not the fault of the employer. It is simply not sustainable. Any guarantee for the future is nothing but kicking the can down the road. I like a job security and a cushy pension, but the reality cannot support such a fantasy.
There's no fantasy about it. Actuarial tables are quite accurate, even projecting out decades. An employer can know with quite precision exactly how much money they need to pay out and when.

The problem comes when employers fail to fund their pensions adequately given the accurate information they are provided. That isn't a failure of the pension system. That is a failure of management.

Many of the pension problems occur because managers cut their pension funding when times are good, relying on stock market increases. And likewise they cut funding when times are bad because they say they can't afford it now. That's just bad management.

Saying that pensions are a fantasy is just providing an excuse for larcenous managers.
Larceny is human nature. That's why pensions are a terrible idea and 401ks are a much better approach.

People should be able to control their own destiny.

Anakin

anakinskywalker
Posts: 475
Joined: Sun Aug 24, 2008 8:20 pm

Re: A cautionary tale about pensions and wages

Post by anakinskywalker » Fri Jun 19, 2020 2:54 pm

Apart from cutting out the scope for larceny, 401ks also promote worker mobility, which is a very good thing.

Also it's just good practice to get paid when the work is done, as opposed to hoping the money will sit around to get paid out decades later.

Imagine if you were supposed to pay the plumber half the money when the work is done, and hold the other half to be paid when he's old and retired. Terrible idea, right?

Anakin

sad2
Posts: 106
Joined: Mon Feb 16, 2015 1:55 pm

Re: A cautionary tale about pensions and wages

Post by sad2 » Fri Jun 19, 2020 2:55 pm

KlangFool wrote:
Fri Jun 19, 2020 8:15 am
Folks,

We have a healthcare bubble and a college bubble. The bubbles have to burst sometime.

KlangFool
+1000

Morford
Posts: 25
Joined: Tue Jun 20, 2017 8:42 am

Re: A cautionary tale about pensions and wages

Post by Morford » Fri Jun 19, 2020 4:16 pm

:idea:
anakinskywalker wrote:
Fri Jun 19, 2020 2:50 pm
JonnyB wrote:
Fri Jun 19, 2020 1:21 pm
MathIsMyWayr wrote:
Fri Jun 19, 2020 12:12 pm
Any illusion of job security or rosy future benefits such as pension is just an illusion. No employer can guarantee such things in the real world. It is not the fault of the employer. It is simply not sustainable. Any guarantee for the future is nothing but kicking the can down the road. I like a job security and a cushy pension, but the reality cannot support such a fantasy.
There's no fantasy about it. Actuarial tables are quite accurate, even projecting out decades. An employer can know with quite precision exactly how much money they need to pay out and when.

The problem comes when employers fail to fund their pensions adequately given the accurate information they are provided. That isn't a failure of the pension system. That is a failure of management.

Many of the pension problems occur because managers cut their pension funding when times are good, relying on stock market increases. And likewise they cut funding when times are bad because they say they can't afford it now. That's just bad management.

Saying that pensions are a fantasy is just providing an excuse for larcenous managers.
Larceny is human nature. That's why pensions are a terrible idea and 401ks are a much better approach.

People should be able to control their own destiny.

Anakin
I’m very, very happy to still be accruing benefits in my company’s now closed and well-funded pension plan. I also participate in our 401(k), but when the market tanks 20% the company gets hit in the pension vs. the employee with the 401(k).

X528
Posts: 114
Joined: Fri Nov 30, 2018 8:51 am

Re: A cautionary tale about pensions and wages

Post by X528 » Fri Jun 19, 2020 4:22 pm

anakinskywalker wrote:
Fri Jun 19, 2020 2:50 pm
JonnyB wrote:
Fri Jun 19, 2020 1:21 pm
MathIsMyWayr wrote:
Fri Jun 19, 2020 12:12 pm
Any illusion of job security or rosy future benefits such as pension is just an illusion. No employer can guarantee such things in the real world. It is not the fault of the employer. It is simply not sustainable. Any guarantee for the future is nothing but kicking the can down the road. I like a job security and a cushy pension, but the reality cannot support such a fantasy.
There's no fantasy about it. Actuarial tables are quite accurate, even projecting out decades. An employer can know with quite precision exactly how much money they need to pay out and when.

The problem comes when employers fail to fund their pensions adequately given the accurate information they are provided. That isn't a failure of the pension system. That is a failure of management.

Many of the pension problems occur because managers cut their pension funding when times are good, relying on stock market increases. And likewise they cut funding when times are bad because they say they can't afford it now. That's just bad management.

Saying that pensions are a fantasy is just providing an excuse for larcenous managers.
Larceny is human nature. That's why pensions are a terrible idea and 401ks are a much better approach.

People should be able to control their own destiny.

Anakin
Having both a pension and a 401k is good too.

Would a federal government FERS pension be viewed the same way? Fed. employees also have the TSP (which is like a 401k).

MathIsMyWayr
Posts: 1792
Joined: Mon Mar 27, 2017 10:47 pm
Location: CA

Re: A cautionary tale about pensions and wages

Post by MathIsMyWayr » Fri Jun 19, 2020 4:30 pm

JonnyB wrote:
Fri Jun 19, 2020 1:21 pm
MathIsMyWayr wrote:
Fri Jun 19, 2020 12:12 pm
Any illusion of job security or rosy future benefits such as pension is just an illusion. No employer can guarantee such things in the real world. It is not the fault of the employer. It is simply not sustainable. Any guarantee for the future is nothing but kicking the can down the road. I like a job security and a cushy pension, but the reality cannot support such a fantasy.
There's no fantasy about it. Actuarial tables are quite accurate, even projecting out decades. An employer can know with quite precision exactly how much money they need to pay out and when.

The problem comes when employers fail to fund their pensions adequately given the accurate information they are provided. That isn't a failure of the pension system. That is a failure of management.

Many of the pension problems occur because managers cut their pension funding when times are good, relying on stock market increases. And likewise they cut funding when times are bad because they say they can't afford it now. That's just bad management.

Saying that pensions are a fantasy is just providing an excuse for larcenous managers.
We hear retirement crises and crises in pension programs. Pension programs and individual retirement savings have a lot in common. In both cases, you have to 1) estimate future obligations/expenses, 2) assume reasonable rates of return for investment, and finally 3) set aside periodic contributions based on 1) and 2). If you overly underestimate 1) and/or use unrealistically rosy numbers for 2), it will make the current actors happy at the risk of paying dearly for the mishap later and/or dumping the burden to a third party. This forum is presumably focused on finding a balancing act on individual levels. Instead of looking for scapegoats, we should look for the causes of the problems as a part of learning process.

Texanbybirth
Posts: 1339
Joined: Tue Apr 14, 2015 12:07 pm

Re: A cautionary tale about pensions and wages

Post by Texanbybirth » Fri Jun 19, 2020 4:42 pm

JonnyB wrote:
Fri Jun 19, 2020 1:21 pm
MathIsMyWayr wrote:
Fri Jun 19, 2020 12:12 pm
Any illusion of job security or rosy future benefits such as pension is just an illusion. No employer can guarantee such things in the real world. It is not the fault of the employer. It is simply not sustainable. Any guarantee for the future is nothing but kicking the can down the road. I like a job security and a cushy pension, but the reality cannot support such a fantasy.
There's no fantasy about it. Actuarial tables are quite accurate, even projecting out decades. An employer can know with quite precision exactly how much money they need to pay out and when.

The problem comes when employers fail to fund their pensions adequately given the accurate information they are provided. That isn't a failure of the pension system. That is a failure of management.

Many of the pension problems occur because managers cut their pension funding when times are good, relying on stock market increases. And likewise they cut funding when times are bad because they say they can't afford it now. That's just bad management.

Saying that pensions are a fantasy is just providing an excuse for larcenous managers.
JonnyB, I like your post
Old Tom Bombadil is a merry fellow, | Bright blue his jacket is, and his boots are yellow. | None has ever caught him yet, for Tom, he is the master: | His songs are stronger songs, and his feet are faster.

SteadyAsSheGoes
Posts: 21
Joined: Fri Jun 12, 2015 12:35 pm

Re: A cautionary tale about pensions and wages

Post by SteadyAsSheGoes » Fri Jun 19, 2020 4:59 pm

X528 wrote:
Fri Jun 19, 2020 9:18 am

Regarding the college bubble:

https://johntreed.com/blogs/john-t-reed ... om-scratch
Spot on.

User avatar
sergeant
Posts: 1556
Joined: Tue Dec 04, 2007 11:13 pm
Location: The Golden State

Re: A cautionary tale about pensions and wages

Post by sergeant » Fri Jun 19, 2020 5:00 pm

Flobes wrote:
Fri Jun 19, 2020 12:09 pm
RobLyons wrote:
Fri Jun 19, 2020 7:32 am
We have heard you should not count pension benefits until the day you receive them
Horton wrote:
Fri Jun 19, 2020 9:37 am
Don’t count on your employer to maintain their benefit programs into perpetuity without changes. The benefits you have accrued to date are typically very safe, but anything is possible with respect to benefits offered in the future.
TheTimeLord wrote:
Fri Jun 19, 2020 9:42 am
Exactly, why would anyone being counting something that is not yet accrued and vested?
gr7070 wrote:
Fri Jun 19, 2020 11:33 am
Plus it's not like the pension is truly guaranteed on day one of retirement, not without a lump sum anyway.
My pension was vested. And then it changed. Again and again and again. Quoting my 2016 self:
Flobes wrote:
Tue Feb 23, 2016 12:06 pm
They can change the rules at any time.

When I stopped working at age 57, I was vested with 5 years in my pension system. I called to get my money out as a lump sum. I was convinced that if I waited until 60, I'd get another 25%. As I didn't need the money, I happily opted for the delayed benefit.

Then they changed the rules, and I couldn't get the money until I turned 65. And then they changed the rules, and lowered the payout amounts. And then they changed the rules yet again, and I am no longer vested: I will now get 25% less than I would have received years ago when I made that phone call. When I turn 65, I'll get whatever.
P.S. Pension has changed twice more since the ^post. Luckily, it's a really small amount of my retirement cache. I've since lapped 65, but I'm waiting 'til 70 to collect. Que sera, sera...
What type of pension is this?
AA- 20+ Years of Expenses Fixed Income/The remainder in Equities.

Blue456
Posts: 726
Joined: Tue Jun 04, 2019 5:46 am

Re: A cautionary tale about pensions and wages

Post by Blue456 » Fri Jun 19, 2020 5:21 pm

X528 wrote:
Fri Jun 19, 2020 9:18 am
KlangFool wrote:
Fri Jun 19, 2020 8:15 am
Folks,

We have a healthcare bubble and a college bubble. The bubbles have to burst sometime.

KlangFool
People primarily associate bubbles with costs (healthcare costs, real estate and tuition).

Does this apply to physician/nurse salaries (for the healthcare bubble) and professor salaries (for the college bubble) too? Are salaries in these professions going to decrease. American doctors in the U.S. are the highest paid in the world I think.

Regarding the college bubble:

https://johntreed.com/blogs/john-t-reed ... om-scratch
They are higher paid for a good reason. My student loan is $450,000 and it took me 12 years to become a physician. If you decrease my salary, I will just move to Canada and let you see a nurse practitioner instead. Most likely I will retire in 15 years and this will be right when I am about to be at my experiance peak. No, I will not have a mansion, a Lamborghini or even Mercedes Benz. I will live in a small house and drive a Honda. But at least I will not have to deal with the corporate nonsense and government metrics. A lot of young physicians who graduated with me are looking into the same, FIRE and call it a day. We are burned out and public still thinks that we are millionaires.
Physician pay is not the problem here, it is the corporate world that cares more about money than your health. Patient satisfaction scores more than patient outcomes. And of course the government, that cares more about useless metrics requiring me to click 100 times per visit than me actually spending more time with you. There has been entire industry created to exploit physicians and patients.
potatopancake wrote:
Fri Jun 19, 2020 9:40 am
With the amount of debt, years of training, and low pay during residency, physician pay should not be decreased. A family medicine doctor in 2019, on average, generates 2.1 million dollars for their hospital system and earns, on average, total compensation of $247,000 (incl. benefits and bonus). This salary is after incurring an average of > $200,000 student loans and seven years of post-college training.
You have not taken into account 7-8% interest on federal loans for both graduate and undergraduate and then 3-7 years of post graduate training during which those loans are not being paid.

X528
Posts: 114
Joined: Fri Nov 30, 2018 8:51 am

Re: A cautionary tale about pensions and wages

Post by X528 » Fri Jun 19, 2020 6:02 pm

Blue456 wrote:
Fri Jun 19, 2020 5:21 pm
X528 wrote:
Fri Jun 19, 2020 9:18 am
KlangFool wrote:
Fri Jun 19, 2020 8:15 am
Folks,

We have a healthcare bubble and a college bubble. The bubbles have to burst sometime.

KlangFool
People primarily associate bubbles with costs (healthcare costs, real estate and tuition).

Does this apply to physician/nurse salaries (for the healthcare bubble) and professor salaries (for the college bubble) too? Are salaries in these professions going to decrease. American doctors in the U.S. are the highest paid in the world I think.

Regarding the college bubble:

https://johntreed.com/blogs/john-t-reed ... om-scratch
They are higher paid for a good reason. My student loan is $450,000 and it took me 12 years to become a physician. If you decrease my salary, I will just move to Canada and let you see a nurse practitioner instead. Most likely I will retire in 15 years and this will be right when I am about to be at my experiance peak. No, I will not have a mansion, a Lamborghini or even Mercedes Benz. I will live in a small house and drive a Honda. But at least I will not have to deal with the corporate nonsense and government metrics. A lot of young physicians who graduated with me are looking into the same, FIRE and call it a day. We are burned out and public still thinks that we are millionaires.
Physician pay is not the problem here, it is the corporate world that cares more about money than your health. Patient satisfaction scores more than patient outcomes. And of course the government, that cares more about useless metrics requiring me to click 100 times per visit than me actually spending more time with you. There has been entire industry created to exploit physicians and patients.
potatopancake wrote:
Fri Jun 19, 2020 9:40 am
With the amount of debt, years of training, and low pay during residency, physician pay should not be decreased. A family medicine doctor in 2019, on average, generates 2.1 million dollars for their hospital system and earns, on average, total compensation of $247,000 (incl. benefits and bonus). This salary is after incurring an average of > $200,000 student loans and seven years of post-college training.
You have not taken into account 7-8% interest on federal loans for both graduate and undergraduate and then 3-7 years of post graduate training during which those loans are not being paid.
How are the "mid-level" healthcare professions (e.g., physician assistants, CRNAS, nurse practitioners, etc.) going to affect physicians and their salaries in the future? States seem to be giving more authority and increasing scope of practice for these mid-level practitioners as time goes on.

The last time I went to the doctor I was actually seen by a physician assistant (PA) and a nurse practitioner - I never did meet a physician (this was in Florida). I think some states are letting physician assistants and nurse practitioners work independently of a physician. The receptionist at the front desk in the clinic blurted out that the "PA could do everything that a doctor can and do treatments," but said I could still see the doctor if I wanted. They were really pushing me to just see the PA.

Topic Author
RobLyons
Posts: 739
Joined: Tue Oct 31, 2017 12:55 pm

Re: A cautionary tale about pensions and wages

Post by RobLyons » Fri Jun 19, 2020 6:12 pm

TheTimeLord wrote:
Fri Jun 19, 2020 8:26 am
RobLyons wrote:
Fri Jun 19, 2020 7:32 am
We have heard you should not count pension benefits until the day you receive them, but this move has surprised some. Massachusett's largest private employer Mass General Brigham, (MGB) formerly Partners Healthcare, has decided to "temporarily" freeze all pension benefit contributions and annual pay increases to 50,000 workers, and is also cutting executive and leadership pay. This is expected to last 1 year and is the result of shortfalls due to the pandemic. Article is below.

This decision comes as a surprise to some. "MGB is the largest healthcare system and employer in New England. With annual revenues of $14 billion, MGB is consistently the most profitable healthcare system in Massachusetts. In the last fiscal year, MGB earned $485 million in income from operations – the system’s most profitable year. During the COVID-19 pandemic, MGB has received $1 billion in accelerated Medicare payments and $314 million in grants from a federal relief program. The system reported having more than $230 million in cash on hand during the first quarter."

And this comes after several major financial decisions were made...
- Last year, a $1B expansion project was announced (article below)
- This year, a $100M branding exercise changed the name of Partners Healthcare to Mass General Brigham
- MGH in Boston cared for more COVID-19 patients than any other hospital in the state by a large margin while denying hazard pay to front line workers, while other hospitals in the state paid hazard pay


The story:
https://www.boston.com/news/coronavirus ... s-pandemic

The $1B project:
https://www.bizjournals.com/boston/news ... -foot.html
You are going to have to help me on how this relates to the article. Is there any mentioned of benefits accrued not being honored or covered by the PBGC?

Guess I wasn't clear on what I meant here.. So I don't mean they are eliminating benefits accrued. Rather, pension contributions are frozen this year, and of course they could be frozen for another year or longer, especially if there is another wave or another financial down turn, or reduced indefinitely.. or eliminated altogether.
"Great parenting sets the foundation for a better world"

Topic Author
RobLyons
Posts: 739
Joined: Tue Oct 31, 2017 12:55 pm

Re: A cautionary tale about pensions and wages

Post by RobLyons » Fri Jun 19, 2020 6:32 pm

TheTimeLord wrote:
Fri Jun 19, 2020 9:42 am
Horton wrote:
Fri Jun 19, 2020 9:37 am
Don’t count on your employer to maintain their benefit programs into perpetuity without changes. The benefits you have accrued to date are typically very safe, but anything is possible with respect to benefits offered in the future.

Don’t expect dinosaurs to continue to roam the Earth.
Exactly, why would anyone being counting something that is not yet accrued and vested? This thread topic confuses me.


Have a conversation with 10 hospital employees that have and are aware of their pension. I'd be willing to bet at least 7 or 8 are banking on their pension as a major part of their retirement.
"Great parenting sets the foundation for a better world"

Topic Author
RobLyons
Posts: 739
Joined: Tue Oct 31, 2017 12:55 pm

Re: A cautionary tale about pensions and wages

Post by RobLyons » Fri Jun 19, 2020 6:39 pm

BlueCable wrote:
Fri Jun 19, 2020 9:48 am
Is this any different than my employer reducing the 401k match or making it harder to get a bonus? To me, this pension freeze is the same as any other compensation cut. Your employer has altered the terms of your employment, and you can choose to stay or move on.

This does not appear to be a case of a company cutting pension benefits that have already been earned, which is a situation that would actually warrant caution.

I guess my company does not give everyone a raise each year, so it wouldn't be such a shock to see wage freezes.

I'm not complaining at all about the decision, just sharing the story. And I'd say reducing a 401k match is much less financially impactful than a full year of frozen pay and pension contributions. Not as drastic as cutting benefits that were already earned. So you make a great point there
"Great parenting sets the foundation for a better world"

anakinskywalker
Posts: 475
Joined: Sun Aug 24, 2008 8:20 pm

Re: A cautionary tale about pensions and wages

Post by anakinskywalker » Fri Jun 19, 2020 6:41 pm

Morford wrote:
Fri Jun 19, 2020 4:16 pm
:idea:
anakinskywalker wrote:
Fri Jun 19, 2020 2:50 pm
JonnyB wrote:
Fri Jun 19, 2020 1:21 pm
MathIsMyWayr wrote:
Fri Jun 19, 2020 12:12 pm
Any illusion of job security or rosy future benefits such as pension is just an illusion. No employer can guarantee such things in the real world. It is not the fault of the employer. It is simply not sustainable. Any guarantee for the future is nothing but kicking the can down the road. I like a job security and a cushy pension, but the reality cannot support such a fantasy.
There's no fantasy about it. Actuarial tables are quite accurate, even projecting out decades. An employer can know with quite precision exactly how much money they need to pay out and when.

The problem comes when employers fail to fund their pensions adequately given the accurate information they are provided. That isn't a failure of the pension system. That is a failure of management.

Many of the pension problems occur because managers cut their pension funding when times are good, relying on stock market increases. And likewise they cut funding when times are bad because they say they can't afford it now. That's just bad management.

Saying that pensions are a fantasy is just providing an excuse for larcenous managers.
Larceny is human nature. That's why pensions are a terrible idea and 401ks are a much better approach.

People should be able to control their own destiny.

Anakin
I’m very, very happy to still be accruing benefits in my company’s now closed and well-funded pension plan. I also participate in our 401(k), but when the market tanks 20% the company gets hit in the pension vs. the employee with the 401(k).
I'm glad it's working well for you. I consider myself lucky to not have to rely on someone else's creditworthiness for my retirement security. I prefer the control I have over my destiny with 401ks.

I don't mind markets tanking either. When markets tank I rebalance and/or keep buying low.

Anakin

Blue456
Posts: 726
Joined: Tue Jun 04, 2019 5:46 am

Re: A cautionary tale about pensions and wages

Post by Blue456 » Fri Jun 19, 2020 9:07 pm

X528 wrote:
Fri Jun 19, 2020 6:02 pm
Blue456 wrote:
Fri Jun 19, 2020 5:21 pm
X528 wrote:
Fri Jun 19, 2020 9:18 am
KlangFool wrote:
Fri Jun 19, 2020 8:15 am
Folks,

We have a healthcare bubble and a college bubble. The bubbles have to burst sometime.

KlangFool
People primarily associate bubbles with costs (healthcare costs, real estate and tuition).

Does this apply to physician/nurse salaries (for the healthcare bubble) and professor salaries (for the college bubble) too? Are salaries in these professions going to decrease. American doctors in the U.S. are the highest paid in the world I think.

Regarding the college bubble:

https://johntreed.com/blogs/john-t-reed ... om-scratch
They are higher paid for a good reason. My student loan is $450,000 and it took me 12 years to become a physician. If you decrease my salary, I will just move to Canada and let you see a nurse practitioner instead. Most likely I will retire in 15 years and this will be right when I am about to be at my experiance peak. No, I will not have a mansion, a Lamborghini or even Mercedes Benz. I will live in a small house and drive a Honda. But at least I will not have to deal with the corporate nonsense and government metrics. A lot of young physicians who graduated with me are looking into the same, FIRE and call it a day. We are burned out and public still thinks that we are millionaires.
Physician pay is not the problem here, it is the corporate world that cares more about money than your health. Patient satisfaction scores more than patient outcomes. And of course the government, that cares more about useless metrics requiring me to click 100 times per visit than me actually spending more time with you. There has been entire industry created to exploit physicians and patients.
potatopancake wrote:
Fri Jun 19, 2020 9:40 am
With the amount of debt, years of training, and low pay during residency, physician pay should not be decreased. A family medicine doctor in 2019, on average, generates 2.1 million dollars for their hospital system and earns, on average, total compensation of $247,000 (incl. benefits and bonus). This salary is after incurring an average of > $200,000 student loans and seven years of post-college training.
You have not taken into account 7-8% interest on federal loans for both graduate and undergraduate and then 3-7 years of post graduate training during which those loans are not being paid.
How are the "mid-level" healthcare professions (e.g., physician assistants, CRNAS, nurse practitioners, etc.) going to affect physicians and their salaries in the future? States seem to be giving more authority and increasing scope of practice for these mid-level practitioners as time goes on.

The last time I went to the doctor I was actually seen by a physician assistant (PA) and a nurse practitioner - I never did meet a physician (this was in Florida). I think some states are letting physician assistants and nurse practitioners work independently of a physician. The receptionist at the front desk in the clinic blurted out that the "PA could do everything that a doctor can and do treatments," but said I could still see the doctor if I wanted. They were really pushing me to just see the PA.
It is simple math. It is cheaper for insurance company to pay nurse practitioner for your visit $30 than to pay to the physician $100. A nurse practitioner with 1/10 the training and 1/5 the loans is also more likely to accept lower pay. A large corporation that owns hospitals makes more money when they can have nurse practitioners and PAs do the job of physicians. Their salaries are cheaper. Which means a nice big bonus to the CEO, COO, CMO and all the other Cs.

BernardShakey
Posts: 75
Joined: Tue Jun 25, 2019 10:52 pm

Re: A cautionary tale about pensions and wages

Post by BernardShakey » Sat Jun 20, 2020 12:36 am

X528 wrote:
Fri Jun 19, 2020 9:18 am
Regarding the college bubble:

https://johntreed.com/blogs/john-t-reed ... om-scratch
[ quote fixed by admin LadyGeek]

Really ? [Rude comment removed by admin LadyGeek] Half the article is him telling me what he has done. Oh please...
A key to investing is having a well-calibrated sense of your future regret.

simmias
Posts: 244
Joined: Sun May 17, 2015 4:18 pm

Re: A cautionary tale about pensions and wages

Post by simmias » Sat Jun 20, 2020 6:01 am

BernardShakey wrote:
Sat Jun 20, 2020 12:36 am
Really ? [Rude comment removed by admin LadyGeek] Half the article is him telling me what he has done. Oh please...
Despite all of his assertions to the contrary, he is definitely not a good writer.

MathIsMyWayr
Posts: 1792
Joined: Mon Mar 27, 2017 10:47 pm
Location: CA

Re: A cautionary tale about pensions and wages

Post by MathIsMyWayr » Sat Jun 20, 2020 6:57 am

simmias wrote:
Sat Jun 20, 2020 6:01 am
BernardShakey wrote:
Sat Jun 20, 2020 12:36 am
Really ? [Rude comment removed by admin LadyGeek] Half the article is him telling me what he has done. Oh please...
Despite all of his assertions to the contrary, he is definitely not a good writer.
One will have no trouble in finding any garbage which suits his taste on the internet.

Morgan22
Posts: 56
Joined: Thu Oct 29, 2015 12:30 pm

Re: A cautionary tale about pensions and wages

Post by Morgan22 » Sat Jun 20, 2020 9:31 pm

RobLyons wrote:
Fri Jun 19, 2020 7:32 am
The system reported having more than $230 million in cash on hand during the first quarter."
This is only about 60 days worth of expenses. That's scary territory for a healthcare system. I don't blame them for trying to cut costs any way possible to survive during this time.

Topic Author
RobLyons
Posts: 739
Joined: Tue Oct 31, 2017 12:55 pm

Re: A cautionary tale about pensions and wages

Post by RobLyons » Sat Jun 20, 2020 9:59 pm

KlangFool wrote:
Fri Jun 19, 2020 8:15 am
Folks,

We have a healthcare bubble and a college bubble. The bubbles have to burst sometime.

KlangFool

Could you explain further?
"Great parenting sets the foundation for a better world"

KlangFool
Posts: 16639
Joined: Sat Oct 11, 2008 12:35 pm

Re: A cautionary tale about pensions and wages

Post by KlangFool » Sat Jun 20, 2020 10:04 pm

RobLyons wrote:
Sat Jun 20, 2020 9:59 pm
KlangFool wrote:
Fri Jun 19, 2020 8:15 am
Folks,

We have a healthcare bubble and a college bubble. The bubbles have to burst sometime.

KlangFool

Could you explain further?
RobLyons,

It is very simple and obvious.

A) The wage growth, in general, has not kept up with inflation.

B) The healthcare cost and college education cost consistently exceed inflation.

With (A) and (B) together, you have an unsustainable bubble. It is just a question when it will burst.

KlangFool

User avatar
1789
Posts: 1516
Joined: Fri Aug 16, 2019 3:31 pm

Re: A cautionary tale about pensions and wages

Post by 1789 » Thu Jun 25, 2020 9:50 pm

KlangFool wrote:
Fri Jun 19, 2020 8:15 am
Folks,

We have a healthcare bubble and a college bubble. The bubbles have to burst sometime.

KlangFool
I wish both burst tomorrow. BTW, i am ready to pay more taxes for both if they tell me they would be very affordable.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

User avatar
Spinola
Posts: 251
Joined: Fri Nov 16, 2018 1:32 pm

Re: A cautionary tale about pensions and wages

Post by Spinola » Thu Jun 25, 2020 10:59 pm

This is not a singular case, I am aware of other colleges freezing retirement contributions, reducing salaries and furloughing and laying off workers. This is not over.. There will be a ripple effect if two of the largest employment groups in the country start having issues. Queue the layoffs in K-12 education next.. [Political comment removed by moderator oldcomputerguy] I expect rough times ahead.

Grt2bOutdoors
Posts: 22559
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: A cautionary tale about pensions and wages

Post by Grt2bOutdoors » Fri Jun 26, 2020 1:16 am

stan1 wrote:
Fri Jun 19, 2020 8:21 am
A local university affiliated hospital is running 5 minute TV ads explaining how safe it is to have elective procedures done.

Another large local medical group has cut physician pay by 50% and laid off a lot of staff.

My neighbor, who operates a solo dentist practice with his wife as the business manager, shrugs his shoulders and says "just gotta do it".

People who thought they were in a high paid, recession proof job are finding this time is different.
It’s not different but then again, they probably never read The Great Depression - A Diary by Benjamin Roth. They should read the chapter about the doctor who earned a dollar, that was his earnings for an entire day.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Grt2bOutdoors
Posts: 22559
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: A cautionary tale about pensions and wages

Post by Grt2bOutdoors » Fri Jun 26, 2020 1:21 am

Morgan22 wrote:
Sat Jun 20, 2020 9:31 pm
RobLyons wrote:
Fri Jun 19, 2020 7:32 am
The system reported having more than $230 million in cash on hand during the first quarter."
This is only about 60 days worth of expenses. That's scary territory for a healthcare system. I don't blame them for trying to cut costs any way possible to survive during this time.
Two ways to build up reserves - less spending and careful long term planning. Who were the board of trustees and who was the CFO? They should be shown the door. It’s a case of thinking that the good times last forever - a sign of an inexperienced board and a CFO who was too optimistic and lacked real experience.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Grt2bOutdoors
Posts: 22559
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: A cautionary tale about pensions and wages

Post by Grt2bOutdoors » Fri Jun 26, 2020 1:47 am

RobLyons wrote:
Fri Jun 19, 2020 6:39 pm
BlueCable wrote:
Fri Jun 19, 2020 9:48 am
Is this any different than my employer reducing the 401k match or making it harder to get a bonus? To me, this pension freeze is the same as any other compensation cut. Your employer has altered the terms of your employment, and you can choose to stay or move on.

This does not appear to be a case of a company cutting pension benefits that have already been earned, which is a situation that would actually warrant caution.

I guess my company does not give everyone a raise each year, so it wouldn't be such a shock to see wage freezes.

I'm not complaining at all about the decision, just sharing the story. And I'd say reducing a 401k match is much less financially impactful than a full year of frozen pay and pension contributions. Not as drastic as cutting benefits that were already earned. So you make a great point there
That’s not accurate - Pension benefits earned can not be cut or taken away. Unearned benefits however can be.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

User avatar
Fomalhaut
Posts: 9
Joined: Tue Oct 01, 2019 10:53 am

Re: A cautionary tale about pensions and wages

Post by Fomalhaut » Fri Jun 26, 2020 1:58 am

BernardShakey wrote:
Sat Jun 20, 2020 12:36 am
X528 wrote:
Fri Jun 19, 2020 9:18 am
Regarding the college bubble:

https://johntreed.com/blogs/john-t-reed ... om-scratch
[ quote fixed by admin LadyGeek]

Really ? [Rude comment removed by admin LadyGeek] Half the article is him telling me what he has done. Oh please...
I get concerned when people [(removed) --admin LadyGeek] insinuate they might know what is non-marketable bull and what is not. Opinions like that is, IMO, why some high schools don't teach art classes anymore.

Post Reply