In plain words what does this mean? pensions were paid into and I don't see how they can be unfunded now. Is it like I've paid into SS all my life but it might not be there in 2 more years?
9 replies (most recent on top)
Keep in mind also that the PBGC already has a claim on the "hidden" assets of SHC. The PBGC and SHC reached an agreement this Spring. As someone explained below, in the event of bankruptcy, the PBGC can force the company to make good on these obligations. The PBGC will get paid before shareholders get anything.
All in all the pension shouldn't be a big worry for employees. The very likely loss of jobs in the coming year or two is the bigger concern.
Thanks for the answer! I have co workers that are part time that have gotten their pension . lump sums, sometimes over two years. I wanted to make 40 full time but will go part time if I can get it,even if I have to take half at a time!!
39 going on 40, you must quit in order to get your pension. Get on the website and call the pension fund. I have been with Sears for 18 yrs, and when I turn 55, I can quit and get my pension. But please do call the pension fund. Your 401(k) is safe, but if you have Sears Stock in your 401(k), you need to move it around, get it out of there. It is not safe in a Bankruptcy.
One other thing. The demise of social security is greatly overstated. If worse comes to worst, then social security won't disappear--checks will keep coming. It, like the Sears pension, is underfunded. If it runs out of money, then they will still pay 77% of what you are owed. But our government can just simply increase the tax on working people, or run up a bigger deficit.
The alarmist headlines are misleading. The fund is projected to run out of money if people continue to live longer lives, start collecting at earlier ages, the fund's investments don't earn as much as they should, and fewer people join the labor force. The truth is, these are all just guesses, and the forecasters are just giving the worst case scenario (that's what they are paid to do). So go ahead and retire when you want, and plan on collecting from Social Security.
Also, make sure you sign up for medicare when you turn 65. Absolutely make sure you do that.
The last reply is a good explanation. I'm less optimistic about the ability of the government to cover these obligations in the long term, but that's a different issue. For the time being employees are covered. But all employees of SHC need to be preparing for the loss of these jobs.
What the underfunded pension means, is that Sears will be unable to give all of the pension recipients the full amount of money owed to them when they retire, and start drawing on their benefits. When beneficiaries start to collect, the fund pays them the full amount they are owed. So if you have a benefit of $2000 per month, you get all $2000. But eventually, the money will run out, and if the fund does nothing to prevent that, then at that point, both current and future recipients will receive nothing.
There is a government-managed corporation, called PBGC (Pension Benefit Guarantee Corporation) that is looking out for workers, to ensure that does not happen. They can force a company to make good on their obligations (making them pay in, or seize assets to make sure they do). If a company stops operating, then they can take over the pension fund and seize its assets (making payments to the current and future beneficiaries). But there is a catch to that as well--if you are owed more than the maximum pension benefit per month ($5011.33 per month), then you will only receive the capped amount ($5011.33 per month). If you receive less than that, you will be unaffected--you will continue to receive the full amount of your pension.
Additionally, now that the PBGC is paying the funds, then they are guaranteed by the government, and will never run out. Every company with a pension pays a tax that goes into the PBGC fund. And both the plan assets (from Sears/Kmart) and those taxes from all companies, go into making those payments to retirees. So everyone who is entitled will receive all (or for rich people, most of) what they are owed. Given that you are working in a store, you are probably not rich enough to be affected, so you should be good.
Go ahead and work as long as you can for this withering company, and don't worry too much. When you retire, you will have your pension, social security, and savings to live on. (Some folks will also wring their hands about the state of social security, but that is not due to run out until 2032 or later. And the government has the ability to raise taxes on the not-yet-retired to fix that. So don't worry.)
But do go to 88sears, and get a pension benefit estimation, and sign up for and log into / to see how much you will be getting in social security benefits.
get an employment attorney and make sure you file for pension claim when Sears declares bankruptcy.
39 years still working full time,wanted to get to 40! Can I collect my pension or do I need to retire or go part time.
Means the fund is short of its target to pay out pensions- as a result of poor fund performance and underfunding by Sears. This year alone Sears has to make a $400 million payment to it but that won't address the $2.1 billion (probably more now) gap.