Retirement is supposed to be the grand reward waiting at the end of a long career full of hard work, though hard work in no way logically guarantees that one will be able to retire. In addition to standard compensation derived from employment, retirement benefits from employers like a 401(k) plan with matching are meant to serve as an additional incentive to come work at a company or remain there for prolonged periods. The pension has largely been replaced by the 401(k), although the former term might still be familiar even to those who have never received or worked towards receiving one. What exactly is the distinction, and why would many companies offer the 401(k) over a pension? Here I will examine the basic nature of one retirement setup and the other as related to why employers might forgo pensions for their own benefit on top of probably exploiting workers in their regular wages or salaries as addressed elsewhere.
With the 401(k), the employee is given the freedom, and the burden, of choosing the investment risk level and the percentage of their pay that goes into the plan. Depending on market factors, the amount inside the account can oscillate, though it allegedly trends upward across longer periods of time. The employer can match up to a given percentage at one percent for each percentage the employee contributes. It is just that this might come with time-based limitations on how long one must work at the company before the employer match is permanently transferred to the worker. In other words, if a company has a vesting period of three years, you have to either wait that full duration in order to truly keep any of the employer match or you will have to wait that amount of time to fully keep it. Depending on the company, there could be partial vesting each year prior to that threshold.
One genuine benefit of 401(k)s, still, is that they can be migrated (or "rolled over") to the 401(k) of a new employer so that it follows a worker from job to job. On the contrary, a pension remains with the company of origin: and if the company fails, one's retirement would be affected. Why would 401(k)s have reached such prominence when pensions were popular during a portion of the 1900s? With a pension, the employer has to give a set amount in retirement each month until the death of the retiree. It does not matter if the investments go poorly during the employee's working years so that the employer loses money from this arrangement; they have to eventually pay the pre-specified amount on a monthly basis after the worker's retirement. The company bears the risk of managing the investments, and the retiree might live a long life, so having the employee contribute a portion of their own direct earnings with or without an employer match can save the company an immense amount of money. Once the 401(k) match is made, the employer has nothing to do with the money in the account other than potentially reclaiming some of it if a worker leaves before the vestment period ends.
Ultimately, forgoing pensions in favor of optional, employee-managed 401(k) plans saves or can save companies money, which in turn is used as another way to minimize the reward to employees for their labor and loyalty while placing more risk on their shoulders--though it is policies like this that undermine the incentives to remain loyal to companies at large to begin with. An organization could also strategically "lay off" people who are reaching the vesting term to protect the company from having to permanently transfer ownership of the vested portion of retirement contributions. As long as they do not do it for particular discriminatory reasons, there is nothing illegal on American law about merely letting people go abruptly and without a valid reason under at-will employment. There is no need to go this far to save more money than a pension would require, however. 401(ks) can still easily benefit a company's retained finances more than pensions.
Functional "worship" of the bottom line is more and more overtly what many companies will prioritize over people inside or outside the organization. The pandemic era saw companies celebrating record profits while refusing to pay workers more from the value they helped generate (or even to pay them truly livable compensation), and layoffs have become routine because times are so ostensibly difficult for executives looking to continually boost profitability--although the exclusive way to keep doing this is to exploit consumers or employees, as otherwise only a finite amount of money can be obtained from a finite consumer base on a planet with a finite human population. The delusion of pursuing endlessly higher profit is highly stupid even when the timeframe is year after year rather than each fucking quarter. Placing more instability into the lives of workers as they prepare for their retirement by emphasizing 401(k)s over pensions is just one of many ways an exploitative company could try to shortchange the employees it relies on.
No comments:
Post a Comment