So when does the defined benefit pension plan get cut or changed?

Received the same postcard but I am not anywhere near approaching 55.

Something's up.

 

Live as long as you can and make the bastards pay big time.

 

What happens if you elect not to take the lump sum? Will the pension just proceed as normal and expected? Or will they come back with a poorly rated annuity that you must take? Or can they come back with an even lower lump sum?

Is there an expected formula to use to determine if the lump sump is fair compared to other companies?

The fact they are offering this and there is a very short time frame to make a choice, this makes me think they are doing this just to show they made the offer for lump sum, so that those who don't take it can be subjected to whatever deal they offer, which I suspect will be less than the lump sum.

I read an article online where someone was offered a lump sum from her company, and she compared it what kind of annuity could she get in the hopes for it to fill the gap that the pension would have, and the lump sum was something like 20% or more lower than needed. She decided to not take the lump sum and let the pension play out. But we don't know in the future what the company will come back with if you don't take the lump sump, I suspect whatever it is it won't be as good as the lump sum.

Anyone ever studied the fine print in the pension, can they basically do whatever they wish in the future?

 

According to the postcard, if you do nothing the regular rules for the pension will apply.
The postcard also said that they would mail the stuff on or about the 18th and the selection window opens on the 24th but I've received nothing in the mail to date.

 

Many companies no longer want the pension responsibility for the future. It seems companies are offering lump sums to retirees after they have been collecting a traditional pension for ten years or so. I know Merck has always offered the lump sum. You had to take it and that was it. Everyone has specific financial requirements. Some people might go through the money or make a poor investment choice. It is a major financial life decision for sure.

 

I tool a lump sum payment years ago from a company I was with for 12 years. After I left that Div. was sold off then driven into bankruptcy so that the new owners could avoid all the pension and benefit obligations or at least "renegotiate" them. I was VERY fortunate to have take the money but that was just one circumstance.

 

The package from the JNJ pension arrived today. It offered as a lump-sum which turned out to be about equal to the Lifetime pension option annually times 10. I don't know if that works out to be that case for others. It also offered an annuity which is much less than the original JNJ pension. Looks like taking the lump-sum is a better idea.

 

Is the original JNJ pension still an option, or has that been permanently taken away?

Wouldn't the original JNJ pension be the best option, assuming you and possibly a spouse live for more than 10 years?

 

The documents say the original JNJ pension is still available, which is the best option. If they broke their "promise" of the pension they have been promoting for years, I'm very concerned about doing nothing and being unpleasantly surprised by what they come up with next. Nothing stopping them from coming back later and forcing a change like the lower paying annuity in its place. I can imagine that coming at the worst time, like just when you retire or while you are retired finding out the fixed-income you planned and depended on has drastically change.

 

The original JNJ pension is insured by the PBGC. If your annual pension is less than the PBGC limit of $60,000/year, you should be covered to that limit if JNJ goes bankrupt or can't afford to pay your pension.
http://www.pbgc.gov/wr/benefits/guaranteed-benefits.html

 

Thanks for the response and the link.

My thoughts weren't if JNJ goes bankrupt, but in a pure corporate cover your ass move, they are setting us up that if we don't take the lump-sum (which we only have 30 days to do), that they could come back next year or sometime in not to distant future and say they are converting the pensions to an annuity. An annuity like they are offering now which according to my pension statement is much lower than what I would have gotten on the original JNJ Pension. If people complaint that's unfair or some lawsuit, they could defend themselves by saying they offered you the lump-sum before, but you didn't take it. I can't imagine many taking the annuity they offer now, so this could be a gambit to get you to take the lump-sum or do nothing where you get a more terrible deal forced on you in the future.

I'm not an attorney, accountant, investment advisor and certainly not an expert on pensions, but these are my concerns and thoughts of the situation that must be decided on in 30 days.

I saw a Forbes article where the author faced this situation but decided to stay in the pension than take a lump-sum considering buying an annuity on her own would do worse than the actual Pension. But what the article failed to address was the concern of the company coming back letter to forcing you into other options which are worse.

A friend of mine who retired from Lucent was presented with either a lump-sum, annuity or let the pension stay as it was. He was already retired and the annuity offered was actually $100.00 a month more than what the Lucent pension was paying him. With the JNJ annuity being offered being so much lower than the original JNJ Pension, it concerns me of more bad news if I stick around with the JNJ Pension. He said, "If I were you, I'd take JNJ's lump-sum and invest it in your IRA and do what you can to make it grow by the time you would normally take it at age 65".

All the annuity options start making payments to you from JNJ starting December, 2016, and it would be treated as income which means it would be taxed. The Lump-sum can be rolled over into an IRA and avoid the taxes and penalties if under age 59 1/2 now, not having to pay tax until you take it out. I guess you could do a ROTH IRA and pay the tax on it now. Not sure what is best in that regard either.

There are no guarantees in any of this it seems.

 

Make no mistake about it, J&J will continue to make significant changes and reductions in benefits to both current and former employees. I think those currently covered or grandfathered for future coverage under the retiree medical plan are in for huge changes. The "point" system they developed for those grandfathered was designed intentionally to allow them to change the value of the points when purchasing retiree medical. You will see the cost of retiree medical get to a level that pushes covered individuals to purchase in the open market/federal exchange programs. J&J recognizes that their ability to maintain profit margins and continually increase shareholder value as the healthcare industry gets squeezed by more federal regulations that control pricing has only one solution and that is to cut costs wherever possible. They have reduced the employee bonus opportunities, increased the cost of their health benefits, eliminated the pension plan for new employees, and discontinued offering retiree medical as a benefit for new employees. More cuts will follow making working for J&J no different than any other organization.

 

Your J&J pension is federally taxed and the money is taken out before you receive it each month. You are responsible for state tax if your state taxes pension income. Some states (Florida and New Hampshire for example) do not state tax pension income. Everyone I know who retired from this organization took the pension at 62 when they left. Very few take it at age 65 because no one lasts here anymore. As far as the medical: luckily I made it to Medicare and my friend told me his medical retiree obligations did not go up for 2017 except for his dental. There is an initiative in some states for people who receive pensions to forfeit social security since it is not sustainable. J&J is for profit like most companies and it will do what is financially best for them but yes, expect changes and nothing is forever. Some people are holding on for golden pensions and retiree medical and they (in the future) may be unpleasantly surprised.

 

The original J&J pension is an annuity. In fact, all traditional pensions are an annuity. These could be more word games from J&J to confuse you.

They may be tricking you with the annuity numbers to fool you into taking the lump sum. The annuity value may be different today compared to the original J&J pension value based on how they calculate your expected social security benefit, which may have changed since you terminated your employment with J&J. You can contact J&J to ask how they calculated your expected social security benefit with the annuity and the old "pension". I believe you can adjust that expected social security benefit based on your life circumstances since your employment with J&J ended.

J&J is also required to pay insurance premiums to the PBGC for all current & former employees pensions. Federal law prohibits employers from taking away what you have already earned in terms of pension value. If an employer is unable to adequately fund their pension fund, then the PBGC will kick in and take over. But once you take a lump sum, that protection is gone.

 

Is this new change for all new retirees going forward in all J&J operating companies?

 

You should go over to the Janssen thread and read all the posts by the "crown jewel reps" who are now soiling their underpants over the changes coming. They thought they were invincible, but they were sorely wrong.

 

Be advised that a pension guaranteed by the PBGC does not always guarantee the same benefit if the benefit exceeds the limits by law. Here is a link to FAQ's regarding the PBGC.

http://m.pbgc.gov/pages.html?jsp=wr&lp=pages&url=http://www.pbgc.gov/about/faq/pg/general-faqs-about-pbgc.html

 

Being a former finance person I'm quite sure the lump sum they are offering is less than the future value of the pension. That said, if I was offered a lump sum that was 10 times the annual pension payout I would probably take it if I could put it somewhere that was tax sheltered, for no other reason than the peace of mind it would give me knowing I wasn't at the mercy of any potential future pension changes.

 

Who has earned a pension greater than $60,000 in yearly benefits? Very few. Those are the only folks possibly facing a risk when the J&J pension fund goes bust. Everyone else's pension is fully insured by the PBGC.