And Another One Bites The Dust

Another one bites the dust
Another one bites the dust
And another one gone, and another one gone
Another one bites the dust…

Thank you, Queen, for the perfect opening to this blog post. With FedEx’s announcement earlier this week that all future employees would only be eligible to participate in the company’s 401(k) plan, we have yet another example of a major US company moving employees from the safety of a defined benefit plan to an employee self-directed, variable retirement benefit structure. Are we supposed to be happy for those employees?

“In a memo to employees, first reported Monday by The Wall Street Journal, FedEx human resources executive Judy Edge said, “As we continue to evolve FedEx retirement benefits to remain competitive, we recognize that more and more people understand the value of a 401k structure.”” Baloney! Sure, there are certainly some Americans that like the portability of their retirement benefit, but for a majority of American workers do they really understand that they will have to fund, manage, and then disburse this “benefit” with little to no training?

FedEx is reporting that the company contribution will be 8% for those that contribute 6% or more. Let’s see for how long this contribution level lasts. The next economic downturn will have company officials scrambling to find potential savings and this payment is a great source of future savings.  Furthermore, you are eliminating a benefit that is professionally managed to one where every Tom, Dick, and Jane is asked to become a portfolio manager. Are they still going to allow opting out, the de-escalation of contributions, loans, and premature withdrawals? Then this is nothing more than a glorified savings account.

Corporate America doesn’t want to be in the retirement game and, they certainly don’t want the pension liabilities and contribution expenses impacting their financial statements. Can we just have some corporate official stand up and be honest about this? With little real wage growth in this country for the last 2+ decades, it is very difficult for many Americans to fund this benefit. It isn’t a matter of lacking discipline. It is a matter of lacking the financial wherewithal. This “benefit” may be portable, but an anemic account balance isn’t going to do much for you whether you stay with one company or move to 10 different ones!

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