I have good sources who's revelations have come true; unlimited vacation, RIF's, furloughs, etc.. Honeywell is processing how they will decrease their long term finance liability's. Yes, pension is a target. The only issue is whether they simply buy an employee out or offer an option, such as retire early with current pension or a pension buyout. The worst thing is my source has been very accurate.
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In general taking lump sum is a bad deal. Google Forbes Pension Buyout Plenty of articles on upside or downside of taking buyout depending on your personal financial and health situations
Regarding the widows pension cut. If your father was in the union and part of the Bendix "multi-payer" system they can cut payments. The truckers unions in some plans voted to cut pensions for existing payouts to avoid complete bankruptcy. The rules for single payer plans which most non-union plans are can be much different than multi-payer systems for unions even from the same company. You will have to call in for details. I am sure Honeywell brought in a lot of lawyers to study and be legal
Follow up by 1Yhty to Bendix pension question - per the Pension Benefit Guarantee Corporation that is the legal administrator of US pensions, (summary) pensions cannot be terminated by a company leaving nothing for the pensioners. If there are financial problems, then the PBGC picks up the obligation and continues pension payments although usually somewhat reduced. It could be that the Bendix pension fund administrator believes that there are so few retirees that it is no longer cost effective to continue the plan but per PBGC, they have to provide an equivalent annuity to replace the pension payments. Assuming this is a pre-merger plan, then
A plan may terminate only if the plan can pay all of the benefits it owes, and if the plan administrator has taken the following steps:
To the plan participants/parties other than PBGC:
Issued a Notice of Intent to Terminate to affected parties other than PBGC between 60 and 90 days before the proposed termination date
Informed participants that PBGC's guarantee of their benefits will cease upon distribution of plan assets
Informed participants what private insurer an annuity is being purchased from, or the names of insurers from whom bids will be sought no later than 45 days before the distribution of plan assets
Sent participants a notice that includes the benefit they earned and data the plan used to calculate the value of the benefit
Distributed plan assets to cover all benefit liabilities
As a general rule, if not law, a company cannot stop paying pension benefits as you describe. They might be able to stop medical benefits, which in this case might be administered by Blue Cross. I assume that there must be some contact information in the letter that would allow follow up. Things could be tricky since 1983 is when Bendix was "rescued" by what is now Honeywell. If he retired before the official takeover, he would be covered by one plan but might be on another if he retired after.
1Xkfp - that was a choice you made...income leveling. That's why the pension was so fat for a somewhat short employment period. Sorry that you didn't understand the numbers when you pulled the plug.
My daddy retired from The Bendix Corporation in 1983. He died in 2013. My mom is receiving his pension. She is 94 years old and lives in FL. She just received a letter today (4/22/2017) that states daddy's pension will be discontinued and her medical benefits will be shut off. She is on medicare and BC/BS....she is very confused and she read the letter to me, but it did not have her name or daddy's name on it. It just said "to the retiree or spouse of retiree" Can they cut my mom totally off from daddy's pension?
I worked for Honeywell 1989 to 2005; and retired with a pension of $1,600 a month drawing it at age 55; but when i hit 62; my social security kicked in; at $1,500 a month; so my pension dropped down to $250 a month. It made no difference if i took SS or not ; the pension was going to drop anyway at age 62. I thought i would get my pension for life; and then my SS; not so. So here i am going back to work.
Correct. The Legacy Honeywell Retirement Plan (Honeywell, not Allied), was frozen at 2015 salary levels, as of 12/31/2015. No further merit or promotion increases will increase your 35 year back-looking Average Indexed Monthly earnings, nor your "top 5 of last 10" years for the pension calculation. Thus, your pension will only grow (to a max of 35 years) based on your years of service (not your salary). For an older employee, this takes much of the sting out of a RIF when you know that nothing you can do in the future, employment-wise, will make your retirement any more sure.
If you need the pay, keep your head down, if you are secure, then get out
The correct term for "closing the pension plan, both for those still working and those that are retired and drawing their pension" is "defaulting on the pension plan". Which would draw the wrath of federal regulators.
They could freeze the pension, not accruing benefits for future employment. And I understand they have done that for some plans.
So if HON is looking to reduce their long term expenses, what stops them from closing the pension plan, both for those still working and those that are retired and drawing their pension?
No US company wants to be in the pension business. It costs too much to maintain and there's no upside to pensions when all of your growth comes through M&A.
I came under the pension plan of a company that was bought out by Hon. Last year they very quietly sent out a letter with a cryptic explanation of how my pension was being changed. A very simple set of curves were included to show the before and after benefit changes. If you just looked at the shape of the curves the change appeared to be minimal but if you did the math it was a -12% change to my benefit if I somehow survived at Hon to the age of 65.
What HON can or might do regarding pensions, buyouts, etc. depends on where you live, when you hired in, etc., so there isn't one answer for all. Best guess on changes is that they will follow what they did some years ago in Aero regarding retiree health benefits - at that time, they said if you want to keep them, you have to retire by the end of this year and tell us months in advance.
Can Honeywell circumvent giving an employee that is of retirement age their current pension plan?
I don't really understand this. Does it mean we could we possibly end up with a choice to take the buyout and if you don't accept it, then you have up retire from Honeywell? Thanks in advance for reply to enlighten.
I took the lump sum payment from another company that gave me the option, and I'm glad I did. Can invest it wherever/however I want, will have it to leave to my children upon death, and will be able to adjust my plan to minimize the effects of inflation. I'm 55 and still have a ways to go before retirement, but the lump sum worked for me. Just my thoughts.
I don't have an IRS link, but I believe that the IRS just sets a framework of how to calculate such as life expectancy tables, how to use discount rates and the like. Most lump sum evaluation sites are geared to evaluating something with less transparency than the Honeywell retirement site. It tells you exactly how, in accordance with IRS rules, it calculates the various monthly payouts and lump sums using life expectancy tables and the plan's current assumptions on rate of return which in my case started with a low rate and than went to 6%. There are accounting rules on rate of return but companies (and governments) have had the freedom to assume some pretty aggressive rates for the reasons that you cite. Even 6% is on the aggressive side since pensions are supposed to supported by conservative assumptions. It is possible that Honeywell might offer buyouts higher than the plan for some accounting reasons that I couldn't fathom, in which case an evaluation site would be useful if Honeywell didn't reveal how it got the number.
Thanks for the other information. Do you have a link to the IRS Rules? This was something I found after reading the 2 previous. Seems that rate is important and I don't know where Honeywell or IRS uses.
The discount rate in particular is significant, because in higher interest rate environments, the higher discount rate translates directly to a higher internal rate of return that must be achieved, and similarly means that the lump sum pension amounts shrink; as a result, it becomes harder and harder to replicate the pension payments with a portfolio-plus-growth in higher rate environments. By contrast, though, lower discount rates will be associated with larger lump sums… which means in today’s lower interest rate environment, the discount rates have been especially favorable for producing larger lump sums that have easier-to-clear hurdle rates for the portfolio. For instance, the chart below shows the Federal GATT (General Agreement on Tariffs and Trade) rate, commonly used in many pension plans to calculate pension lump sums, which is at historic lows right now.
This question is a bit off topic from pension but i appreciate the questions and comments on this thread. Does anyone have info on benefits during severance period? I've heard that medical coverage continues as if you are employed, but what about short/long term disability, life insurance (both comp and GUL) dental, vision, 401k contribution/match?
First, there are many different pension plans within Honeywell depending on hire date and company, so do not take any details in posts below as applicable for you. The Honeywell web site for retirement will do an excellent job of showing different scenarios for you.
But here are some generalities applicable to all. First, Honeywell has been funding the pension plans better than many companies, but the plan is still not fully funded. It is a benefit to Honeywell's paper earnings to reduce pension liabilities with buyouts and changes offered to current employees.
Second, pension payments are taxable. If you take the lump sum (with your spouse's agreement), it is also taxable unless you roll it into an standard, not Roth, IRA. We did this, so we now have what amounts to a self-managed pension whose taxable payout is dictated by our investments.
Last, the lump sum is calculated according to IRS rules, although Honeywell gets to pick, or rather use, the current assumptions for the specific plan. For us, those were just a couple per cent growth for a couple of years but 6% fund growth after that. So, we need to get returns on our lump sum IRA to match that assumption. That won't be easy, but since my wife is considerably younger, we decided that inflation over her life expectancy is our biggest concern and we want the flexibility to deal with that.
PS - luckily I was able to retire earlier this year per our planning, not Honeywell's.
I guess my point about medical is that paying out of pocket for it, COBRA or whatever, will eat up my monthly pension amount fast. Just wondering if that incentive could be offered again. And yes I know they dropped that long ago for retireees
Retiree medical was taken away years ago. It was an incentive to retire early and from that year on no retiree medical.
However I believe you can take Cobra which means you still have the crappy Honeywell medical, dental and vision for 18 months. You pay FULL honeywell cost but at least you know you have insurance for at least 18 months giving you time to shop around. Think you can look up what it will cost on theHoneywell website or your w2 from last year if I remember correctly.
Maybe ask HR?
( sorry about that last joke about HR helping an employee.)
There are no retiree medical benefits anymore. That was cut several years back.
Here's a question: if they offer the full pension at early retirement will that include medical insurance until Medicare? Although we have such crap insurance anyway, not any better than catastrophic coverage really but my financial advisor said that the issue of medical is the only reason I can't retire until 65. Currently 59 years old, 20 years here. Have saved well in my 401k.
I would think medical would be a big ?? here?
Good info. As you imply, depends on the lump sum amount. Most lottery winners take the lump sum and I would too. You get about 1/2 of the annuity total but can invest it now. If Honeywell only did 6 years, that wouldn't work
Yes, Honeywell will only do it if it benefits them so look at the numbers carefully yourself and with a trusted advisor.
I don't think it will be a pension times 6 years, that makes no sense and would get government attention. However no on puts anythig past this company.
If fair, what they should do is use the actuarial tables for your expected lifetime or spouse for the number of years you can expect to receive amounts. Simple one is if you choose the spouse gets 100% which is the default per Gov. Otherwise the spouse has to sign away for any other type of payment.
and then discount the expected pension payout over those years. The KEY will be what Honeywell uses for that rate (expected inflation) since a percent or two can vastly change the amounts.
/ Percent is discount rate.
The buyout MAY in some cases be better if you expect high inflation in the coming years. Most pensions are static and do not grow with inflation. You COULD be better off with the cash and investing it.
I also wonder if you take the cash if you can put some or all of it into a ROTH IRA so it grows tax free. Just a lot of questions so it goes back to run the numbers and talk with a trusted adviser. It's only getting harder to plan for retirement, sigh.
There is a comment about possibly taking pension at 53? Not aware that can be done, but there are about 10 or so different pension plans and you really have to dig into each to see how they work. So maybe 1 has an option to take a really early retirement pension. I just went through this, Honeywell says full retirement is 65, retire anytime sooner and you get less $$ because of the fewer time worked but also there is an early retirement penalty. Early retirement age I was told / read is 55. I actually was on 2 separate plans. From what I learned for me, if I retire before 55, I can not take any pension until I am 65. If I retire at 55, I can start taking early retirement pension. IF Honeywell lays you off, and you have a pension, but you are not 55 yet, you may still be able to start pension at 55. The plan states how many months prior to 55 you get laid off, you can still start pension payout at 55. For me it was 18 months. W/O this rule Honeywell could just lay off people who are close to 55 to avoid possible pension payments for 10 years. I was laid off at 54 1/2 and had to file a dispute with Honeywell because they told me no pension. It took about 1 1/2 months but they said I was right, then they miscalculated my amount about 50% and I had to file another dispute. Took about 3 month, now I am getting proper amount, and they paid the difference of the under payments for first 3 months.
My opinion is any pension buyout is only being done because it would benefit the company. They are looking for people in a jam that need the money now. I would not recommend taking it if you have an option. Also, I recommend anyone who can should consider taking pension as early as possible and then maybe get a job somewhere else - unless you love your job or don't want disruption. Honeywell wants everyone to wait as long as possible to take pension so they don't have to pay now. Just look at difference between pension amount 55 vs 65, then take the amount at 55 and times by 10 years and figure out how old you will be to actually break even by waiting until 65. Plus you will have some of the money sooner, when you are younger.
I understand. I ran my numbers last year. I guess I'm just in that age bracket that puts me on a very slippery slope. Buyouts are a way for a company to 'de-risk' with no doubt. For the recipients, it is very dependent on your personal situation as to which would be best, both have plus and minus. But you are right, over the long haul in real dollars, a buyout is generally much less. If this is accurate, a buyout could only be offered to those who are not in paid status at the moment. According to IRS Notice 2015-49, effective July 9, 2015, pension buyouts cannot be offered to those already receiving benefits. Looks like this would only apply to those of us who are active employees. I've been hearing this rumor for a while. Hoping if there is a change it is announced soon because it can drastically change forward planning.
I don't know for sure. I am 60 yo with 35 years service but this wasnt figured on that, it's a ball park calculation but if you look at the numbers, you wouldn't come out ahead under the new plan.
The good thing is, you'll /we'll be given time to run the numbers to see which works best at the time. I'm good to go and will keep my current plan.
You can call the One Sourse and they will run your numbers now and any other age you wanted to know about. It takes about 8 weeks to get the report.
Any speculation, or knowledge, on how this would be calculated? For instance, 20 years of service but not quite 55 years of age. The monthly pension benefit is substantially different if retiring today, vs age 55, vs age 60, etc. For instance, retiring today at age 53 would reduce my benefit by 2/3 of what it would be at age 55. I understand the 6 years, but at what age - normal retirement age (62/65) or at your age right now? Thoughts?
I vetted this with HR last month and off the record said that if they change the pension, they cant just change over or turn Off current plan and go to the new one. They must give time ( unspecified amount) for old timers to leave under the current plan.
Neither he or the people that do the retirement figures have heard anything they will admit too.
My sources are telling me the buy out option will get you about 6 years of your now monthly benefit.
So if you expect to make 3000/mo. pension, multiply times 72 mos. and that's the lump sum. Approx. 216k compared to retiring at 62 yo at 3000 /mon until death ( no survivorship) gets you about 828k if you live to 85yo so you can see why they wan to change the plan.
Get ready to hit the door running.