Asian carmakers shift costs to retirees

[roteague]

"GEORGETOWN, Ky. -- For the last quarter-century, Toyota, Honda and Nissan have strived to appear to American consumers like homegrown companies.
They built a string of manufacturing plants in the South, employing tens of thousands of local workers. They hired American designers. They spent millions on ads to tout their growing roots in communities across the country.

"Being a good corporate citizen starts with hiring lots of good citizens," one Toyota ad says.

Yet as they built up their operations, the Japanese "transplants" have worked hard not to resemble an American car company in one vital respect -- how they treat their retirees."

http://www.detnews.com/apps/pbcs.dll...605200422/1148

[marinerbc]

At Honda, a 60-year-old retiree with 10 years of service would typically pay $345 a month for health care; a 62-year-old retiree with 25 years at the company would pay $70. Toyota also requires retirees to pay part of their premiums, based on years of service.

In general, these retirees are cut off from the company health plan when they turn 65, and receive instead a lump sum with which they can buy supplementary insurance to Medicare. Honda is alone among the big three Japanese carmakers to still offer a defined-benefit pension guaranteeing a monthly check to newly retired workers in the United States.

At Toyota, a worker's pension consists of an investment account in which the company deposits the equivalent of 5 percent of a worker's earnings each year, typically around $3,000 to $3,500. An employee can supplement that with a 401(k) plan, and the company matches contributions up to a maximum of 4 percent of the worker's income.

For the company, these retirement packages carry no uncertainty. But they do for workers, whose nest eggs depend on their contributions and the financial markets.

Charming I'm sure, to know that your offshore employer is looking out for you so well.

[banzai79]

I'm curious to see how the 401K generation turns out. I know of no other developed nation that relies on this sort of method for such a large percentage of the population, and even in America we haven't had massive numbers of people be forced to rely on 401's yet. An interesting social experiment if nothing else I guess.

[adaca]

Right here in Silicon Valley where I work, 401K is the norm rather than the exception. Personally, I prefer it that way since I get to manage my own money and my own investments, and if I turn out to be inadequate at it, I can only blame myself. Furthermore, as it is my own money, I won't have to be paranoid about any future changes in a common pension scheme.

I have also originally come from a country that runs such a scheme on a national basis - Singapore where you contribute 20% of your income and your employer matches with up to 16%.

I can't see any drawbacks. From an employee perspective, the main issue is that the employer matches a large enough portion of your contributions. So in my mind, it's not so much about pension vs 401K, than how much the employer is contributing into your retirement scheme, be it 401K or pension plan.

[osv_alero]

The 401k plan is a great way to keep our stock market strong in a somewhat artificial way.

[jvanleuvan]

The main difference between 401K and a Pension (As far as I KNow) is who shoulders the burdon of risk. If you have a pretty good 401K but all of a sudden the ecconomy takes a dive and inflation goes way up (Cost of Living Index with it) Or health care costs might skyrocket, or you might live to 110, your 401K might run out too soon and you'll be pennieless. But with a pension the Company takes on the risk. Meaning, if anything goes wrong your still covered. ( that is what sorta happened to GM, thier health care coverage promises were made before healthcare costs really skyrocketed in this country, they took the Hit so the retireees didn't have to)

[1BadPig]

So what good is a pension if the company who bears the burden of risk is no longer around?