Conference 7.286::digital

    A bit on the "skimpy" side, if you ask me.  
    
    And what of "medical"?  

    Check the numbers. Even if you work with what a services weenie like me
    makes, there's not enough money around to kick out 20,000 of us.
    
    Fred

    re: .2
    
    But this relieves the corporation from its obligation to one day pay a
    pension to these employees.  I would assume the money would come
    directly from the pension fund.  There is one, isn't there?
    
    	Steve

    As far as I know, that would be illegal in England. Maybe so in other
    European countries?
    
    Dave.

    
       First of all, the number is some sort of joke, right? The average
    dweeb would get a whole $15 grand or so, but if they were to wait
    till retirement, the number'd approach $100K per most actuarial tables..
    
       Second, I don't know if they could legally do this, except maybe by
    a volunteer offer...and I doubt that based on the number in the basenote
    that anyone would be so inclined to jump for it.
    
       If they did the thing like the original SERP, though.....the only
    big expense would be the payment to the National Guard that they'd have
    to call out for crowd control... I'd be really surprised to see anyuone
    who'd be eligible on a 2nd SERP who wouldn't be fighting for a place in
    line...
    
       JMcD
       

    How about a little working example:
    
    Assumptions:
    
    	1.  Employee has been on the job full time for 15 years
    	2.  Base salary is $5,500 per month gross = $66,000/yr.
    	3.  Employee is 35 years old
    
    Equation:
    
    		$5,500.00 x 1.15 x 15 = $94,875.00 lump sum
    
    Operational assumption:
    
    	Employee take the $94K and deposits it directly into a 401K or
    	Tax free IRA fund thuse eliminating the capital gains tax they
    	would incur
    
    	Employee leaves $94,875 in the fund earning a compounding interest 
    	rate of 7.5%.  Question: how much is in the fund at age 55?
    
    	Answer:  at 7.5% compounding for 20 years with an initial $94,875
    	on the front end yields a future value of:
    
    			$2,014,503.47 at age 55.
    
    Can someone please direct me to the line?
    
    BJ

      
       O.K....and since most of us work on an ANNUAL salary basis, with a
    WEEKLY paycheck, how would they calcualte the MONTHLY salary?? By
    incorporating a new formula that does not really exist today? By using
    a 4-week month or a 5-week month??
    
      There also would probably be some cut-off age such as the last SERP
    had...
    
      

    
    how does all this affect a DECeeee who is not 100% fully vested in
    the pension? i mean who has been in DEC less than 5 years?

    thanks,

    \bye
    \nasser

    .8
    
    Just multiply your weekly pay by 52 and then divide by 12. This would
    determine your monthly pay.

    re: .8
    Oh how about yearly salary / 12 for a monthly salary.  Not very
    difficult.

    I'd be with .7 if this was real.  I've worked here for a bit over 10
    years, this deal would allow DEC to buy me out of my pension for about
    one years salary.  I am 31 years old, if I invested one years salary
    for 24 years I would be very comfortable retiring at 55. Plus I would
    most likely have a pension from my next company(s).  
    
    Sign me up.
    
    -Bruce  

    
    YO!  Where is the money supposed to come from?  This rumor
    has no basis in fact. If the company started buying out
    35-year old professionals, instead of using the cash to
    fund operations, the company would not be around long.
    
    Repeat after me: it is wishful thinking.
    
    Glenn

      Re .12
    
       Glen,
    
       Not so fast...the money that would be used for this is already
    there--in the retirement fund. Retirement money does NOT come out
    of operating capital.. The retirment funds MUST be maintained at a
    certain level based on the number of vested and retired people per law.
    
       TFSO money, on the other hand, DOES come out of corporate funds, as
    you can see everytome they issue a report and note something like
    "provision for restructuring" or some such annotation..
    
      JM

    
    Ok, so the rumor is that they're just going to offer to
    buy out my pension obligation?  It's not part of kicking
    my sorry butt outta here?  I think this whole thing (and 
    since it's all a big rumor, I'll just shut up after this
    reply anyway) is somehow "tied" to a (rumored) voluntary TFSO -- 
    and I don't think the company will do it (anything voluntary, that
    is).  'Course, I've been *way* off before (hell, I thought we'd 
    be profitable by now :-)).
    
    Glenn 

    Just to follow up on the math side of things...
    
    7.5% coumpound interest for 20 years yields 4.25 time the original
    pricipal. ie if $100,000 is invested the result is $425K, not $2M+
    
    The trick here is that the company (I think by law) must assume a 4% or
    so appreciation. Thus since our benefit plan is known as a "defined
    benefit plan" the smaller the % appreciation assumed the larger the
    amount there must be in the fund.
    
    If we assume that you can beat 4% then the company could actually save
    money by giving you say only a fraction of the amount set aside for
    YOUR pension. 
    
    example.
    Suppose your pension benefit is such that you will get $1K/mo at
    retirement - which is 10 years away. At retirement there is $300K in
    "your" account. (4% x $300K = $12k/yr) Lets ignore depleting it to zero
    at age 78 for now.
    
    Anyway, to get $300K 10 years from now you need $202K now at 4%. If you
    assume that you could get say 7% then you would only need $152K. 
    
    The question thus is: Would you take $175K if it was offered under the
    above example. If so at 7%, 10 years from now you would have $344K AND
    the company would have saved $27K NOW. Again, since its a defined
    benefits plan it means that the company can then put LESS in this year
    for those employees that are left.
    
    Complicated, but I think thats how it all works.
    
          Tony
    

Where can you get a 7% real interest rate (i.e. after inflation) with
bet-your-retirement-income risk levels?

And what will your pension be, based on the following:

Current age:    40
Retire at:      62.5

Digital is bankrupt/gone.

Lee

     Re .14
      
      No argument that it's just a dream...anything that would be that good
    HAS to be nothing more than fantasy...
    
      I also agre that it has "been discussed", and lot's of other creative
    ideas have most likely been discussed as well... However, I think I'll
    play the lottery tonite, because the odds are bettter...
    
      JMc

    rep .17
    Its BEFORE tax remember - it would be an IRA rollover, tax deferred.
    Inflation is always there either way and does not factor in, its part
    of any interest rate.
    
    Tony
    

    i believe that if the numbers in .0 are correct, and this is more than
    yet another rumor (which i don't believe it is), the VAST majority of
    employees, past and present, should take the money and run.
    
    lee roth had it right in .18. dec may not be a viable entity when you
    retire. you should really be looking to managing your retirement
    proactively more than ever before. that means work. but i doubt that
    "letting the company take care of me" is really a viable approach
    anymore. my rules are simple. get as much of my retirement monies under
    MY direct control. 

    Then, of course, we could also surmise:  
    
    The Company offers a lot of folks a deal to "get out".  The deal is a
    LOT less than they'd like... but the corporation is betting a buncha
    folk will take it anyway "just to get rid of the stress of being here".
    
    A bit cynical, perhaps?
    
    anyway..... I'm 53.  Not 35.  And I don't make anywhere NEAR the 66K in
    a previous note.
    
    If I were 35, and had my full career
    ahead of me... I'd bail if given such an opportunity... 
    
    but at my age?  not such an easy decision.
    
    tony

    This is almost scary... Someone posted a note in DIGITAL_INVESTING
    about a meeting to which they were invited wherein changes to the
    SAVE plan going into effect 1/95 was to be discussed.
    
    There was some speculation as to what the changes might be; Mine was 
    that Digial was going to offer some kind of a pension buyout tied in 
    with the SAVE program changes (perhaps matching payments?). That is,
    my speculation was that Digital was going to try to switch from a
    defined benefit to a defined contribution plan...
    
    Given the accounting rule changes that occurred wrt future pension
    costs, I wouldn't be surprised if this was coming down the road...
    
    Dave

    I won't profess to be current on pension obligations/laws, but IF my
    understanding IS accurate, I would be surprised if Digital did NOT do
    this. Simply put, I seem to recall that our pension plan is
    SIGNIFICANTLY OVERFUNDED based upon projected returns & future
    obligations. If Digital were to "dissolve" the defined benefit program,
    establish a defined contribution program, wouldn't the "left over"
    funds in the pension program after distributions belong to the
    corporation? We might be talking about a perfectly legit way for the
    company to add $100s of Millions to the coffers.
    
    

    I was listening to moneyline last weekend, and a caller discussed 
    what his company (a telecom co.) was doing with their pensions - 
    he'd been with them 34 years, and was offered a pension buyout of
    234K - not to retire, just buyout his pension - it appears the 
    telecom co. was trying to move from defined benefit to defined
    contribution as mention previously in this string.  Could this 
    be what DEC is looking at doing?

Re: .24

The pension plan is held in a trust, the Digital Equipment Corporation
Pension Trust.  The money can only be used for the plan participants and
beneficiaries.  If Digital were to terminate the plan in an attempt to
use the excess for non-retirement purposes, i.e.  to use for operations,
there would be significant tax implications.

There are two reasons for the tax consequences:

1.   Some if not all of the money may be have made with
     "pretax" money; I suspect the overfunding may have been
     as much tax-avoidance (much like contributing to an IRA) as
     providing for employees. Thus the IRS would want the
     taxes that would have been paid  and

2.   The IRS will exact a penalty for of this money if used for
     non-retirement purposes.

Though not a perfect analogy, it's like try to use your
IRA money. The IRS wants the taxes and the 10% penalty.

Gim

    Re .26
    
    OK, agreed. If an individual is in "desperate" financial straits, and
    had *LOTS* in his/her IRA, do you think the individual would withdraw
    the funds, paying taxes and penalties???

>    OK, agreed. If an individual is in "desperate" financial straits, and
>    had *LOTS* in his/her IRA, do you think the individual would withdraw
>    the funds, paying taxes and penalties???

Depends on how desperate they want to be after they've exhausted their IRA.

Better to borrow money if at all possible.

-steve-

    And if the individual had just borrowed $1.5 Billion over the last year
    or two...

    As I understand it, the reason companies are making the shift from
    defined benefit to defined contribution is due to accounting rule
    changes that require them to acrrue money for things like future
    medical benefits. If anyone is so inclined, go back and read note 
    2015, which is where Digital took a ~$500 million hit for this.
    
    Dave

>    Its BEFORE tax remember - it would be an IRA rollover, tax deferred.
>    Inflation is always there either way and does not factor in, its part
>    of any interest rate.

Before taxes is obviously much better than after taxes, but inflation cuts
the real amount of your retirement income regardless.  Historic real interest
rates are considerably less than 7%.

    We are getting out of the I.R.A. "time bomb" using a process called SWIP.
    
    Our financial advisor indicated that this fairly new process allows one
    to withdraw about 7% of the balance each year.  You will pay tax on
    this new "income" but there is no penalty!.
    
    You need to contact your CPA or tax advisor for the details.
    
    -IRA (not to be confused with I.R.A.)
                                    

as long as we are blue skying here...

If the company cashed everyone out of the retirement plan in order to
establish some sort of matching funds SAVE plan and there was money left
over from cashing people out, could the company use the remaining funds for
the matching funds?  That would relieve the company of spending money on
the retirement fund/save plan for some period of time.  Would that prevent
the company from having to pay taxes and penalties?

Does anyone know how much money the company spends per quarter on the
retirement fund? 

	Joe

Re: .32

>     We are getting out of the I.R.A. "time bomb" using a process called SWIP.
>     
>     Our financial advisor indicated that this fairly new process allows one
>     to withdraw about 7% of the balance each year.  You will pay tax on
>     this new "income" but there is no penalty!.
>     
>     You need to contact your CPA or tax advisor for the details.

There has always been a process where you can withdraw, prior to
retirement, money from an IRA without penalty (but you do need to
pay taxes). The stipulation is that the withdrawl amount last over
your remaining lifetime.

Re: .33
                
From the annual report:

	Note G - Postretirement Benefits

	It has been the Corporation's policy to make tax-deductible
	contributions to the plans in accordance with local laws.
	Contributions are intended to provide not only for benefits
	attributed to service to date but also for those expected to be
	earned in the future.  For the U.S.  pension plan, there were no
	contributions in the fiscal years 1993, 1992 or 1991 due to the
	full funding limit of the Omnibus Budget Reconciliation Act of
	1987.  

    Re.34 Re.33
    
    	It is the same in Great Britain, DIGITAL Equipment Company Limited
    has paid nothing into the Pension Fund for 3 or 4 years due to the
    Pension Fund being up at (or very close to) its legal maximum value.
    
    				Malcolm.

    Note 265.0 in DIGITAL_INVESTING (type ADD ENTRY NYOSS1::DIGITAL_INVESTING 
    to add this to you list of conferences) by STAR::BUDA describing " a 
    etirement/pension meeting sponsered by an outside firm Digital hired".
    
    It seems related to the topic in this string.