L.L. Bean has terminated the defined benefit plan and is offering a voluntary buy-out. Of the roughly 5,000 full-time employees, there are about 900 who are eligible to take a lump-sum distribution. To be eligible the employee must be at least 55-years-old with a minimum of 15 years at the firm. No layoffs have been announced because the company believes that they are going to get the 10% reduction in force through this buy-out – good luck!
It was not announced what the “average” 15-year veteran, aged-55 would get when taking the lump-sum, but since that individual would have another 11+ years until they are eligible for Social Security, probably not enough to justify taking the lump-sum, as DB plan payouts are predicated on tenure and salary. An employee terminating employment prematurely is going to negatively impact their future retirement earnings. Furthermore, how many employees are capable of managing this lump-sum windfall?
Lastly, it was stated in the article that DC contributions would be ramped up, but for how long? These contributions are not contracts, and future contributions will be predicated based on the business’s fundamentals. Oh, and employees will have greater flex-time. How much can you buy with flex-time?