High Pensions and 401K's

This morning I realized that some actions may be more tied to us WWII Baby Boomers than I thought. We are considered to be the group born between 1946 and 1963 (some say 1964 – I think they are using school years and getting the group that graduated in 1982). Anyway we have had big impacts on this economy. I think we have had another one.

In 1986 the Tax Reform Act changed the number of years that one had to be at a company before being vested in the pension plan. It was 10 years. The act said that in January 1989 all of those with 5 years would be vested or the company could choose to vest people by percentages from 3 through 7 years (something like 30% after 3 years and finally 100% after 7 years).

It was shortly after this that the 401k’s came on the scene and companies began dumping the defined pension plans. I have one of these defined pension plans. I checked the documentation recently. It will not pay a lot but it may buy some groceries if I want until the maximum time before drawing since I was only in it 9 years.

Anyway, this morning I noticed the timing of this change. The Baby Boom had gotten into the market place. Changing jobs every few years was common. Many of us did not have any pension plan and were already in our 30’s. The government must have realized how many of us may not have a pension and be dependent with longer living times after 65.

I also think that companies began to realize the liability that they were going to have with pension funds and wanted the change. I am now determining how this helped companies go forward without this liability on them.