No. of Recommendations: 0
"I read about companies supplementing their pension funds through buying annuities.
Seems like a way of increasing costs without asking the contributors."

Some companies bought their retirees an annuity at the retirement point. That ended all future pension obligations - and got them 'off the books'.

My former employer was one that did it. However, they ended the pension plan about 1990 or so when the law changed, which required all pension funds be 'fully contributed each year', and started a 401K. If you had less than (years plus age =55), you got your 'pension money' dumped into your 401K as company stock you couldn't sell till age 55. If you exceeded the '55' you could retain your pension. On the date you retired, they'd buy an immediate annuity for you,not inflation adjusted. The company was off the hook.

I suspect many other companies had similar plans. That way, they didn't have to worry about COLAs and inflation , or bad years of earnings where they still had to pony up bucks for the pension plan no matter what.....for retirees.

The quoted sentence seems to be a different thing that the response.

When I retired, my former employer (Motorola) had already stopped offering a pension for new employees a few years earlier. Of course the pension plan continued for all us the were already in the pension plan. And when I retired I indeed got my pension payments for several years.

Then they decided to get rid of their pension headache and decided to get it off the books. In 2014 Motorola handed it over to Prudential and it converted to a group annuity. Out benefit amount did not change--good thing! Moto said, “Our retirees’ benefits are not changing, just who provides them,” IIRC, they handed to Prudential the Plan funds of $3.1B plus another couple billion in cash.
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.