The private sector boasts how it has replaced employees' defined benefit pension practices with 401(k) plans, which are pushed by Wall Street. But a Bloomberg News story dated Thursday (February 13) is extremely disturbing. It shows how large employers are holding back on both the amount and the timing of 401(k) matching funds, and dragging out vesting schedules.
And look at which companies are doing it: one is Oracle Corp., the software firm. Its chief executive, Larry Ellison, is one of the nation's richest persons, worth $41.8 billion. The company's performance has been lagging. Last year, shareholders rejected a fat pay package for Ellison. The poor dear had to take an 18 percent pay cut — to $78.4 million per year.
Another company that is squeezing employees' 401(k)s is Wall Street's JPMorgan Chase. Last year, its chief executive, Jamie Dimon, was given a 74 percent raise to $20 million after criminal and regulatory probes cost the mammoth bank $23 billion in settlements.
Bloomberg points out that Wall Street has been claiming for the past 30 years that 401(k)s are a big improvement over pensions. "It hasn't worked out that way," says Bloomberg. The median balance in 401(k) and individual retirement accounts for households headed by people ages 55 to 64 was a mere $120,000 in 2010, according to a Boston College study. That would provide only $4800 a year, assuming seniors withdraw 4 percent annually.
Mike Alfred, who heads San Diego's BrightScope, which ranks retirement plans, is quoted in the article saying, "Top executives with high compensation likely don't care what their company contributes to a 401(k), but for employees in the ranks it can mean the difference between financial security and scarcity in old age."