The Vanguard Group is cutting retiree benefits in the wake of a $1.2 billion loss last year, reversing course on a plan to phase out the program after it was lauded by some retirees.
The Vanguard Rolls Back Plan to Cut Retiree Benefits is a story about how Vanguard has rolled back its plan to cut retiree benefits. Read more in detail here: retirement.
After an effort to phase away retiree perks sparked outrage among former employees, Vanguard Group is reinstating them.
“I truly regret for the worry and stress this decision has caused,” Vanguard CEO Tim Buckley said late Friday in a video statement. “We’re quite aware that we missed the target.”
Vanguard is reversing its decision from last Monday, when it informed employees and retirees that a long-standing retirement benefit scheme that enabled workers to accrue credits for insurance premiums was being phased down. Some retirees and workers who have worked for the company for a long time have accumulated more than $100,000 in such credits.
Vanguard also announced at the time that it was eliminating a life insurance benefit as well as a Cobra program designed to help employees get by in the months after their retirement. Instead, the company would give a $40,000 lump sum taxable cash payout.
When the company revealed the benefit changes, hundreds of retirees and workers took to social media, as well as calling and emailing colleagues to express their dissatisfaction.
The company restored these benefits for retirees, and it is currently reviewing the perks for current workers, according to the company.
Through low-cost index funds, Vanguard helped pave the way for the growth of passive investing. During this time, the company grew to become a $8.3 trillion asset manager and a significant supplier of retirement savings funds to millions of people. To maintain their growing low-fee business, the company and other asset managers are now trying to reduce corporate expenses.
The company has a unique ownership structure in which the individuals who participate in its funds own it. The company is under pressure to maintain reinvesting profits for customers and reducing the cost of investing for its shareholders since it is controlled by US fund investors.
Through low-cost index funds, Vanguard helped pave the way for the growth of passive investing.
The Wall Street Journal’s Ryan Collerd took this photo.
With Vanguard’s planned cutbacks to retiree benefits, the company’s longest-serving retirees and workers may lose access to tens of thousands of dollars in insurance payment credits by the end of the year.
Kate Lowe, a Vanguard retiree with more than 20 years of experience, wrote comments on a Facebook group and on LinkedIn. She also contacted the department of human resources.
She said, “I wanted to show them we weren’t going lightly into the good night.”
After the Philadelphia Inquirer reported on the move last Tuesday, Vanguard softened its stance from the day before, saying that current and past workers may keep their benefits until 2022. It was announced on Friday that the perks Vanguard had intended to eliminate will be preserved for existing retirees.
“We chose to adjust our strategy based on crew and retiree input,” a spokesperson said in a statement. “For the remaining crew population, we’re still working on a new strategy.” Current workers, she added, would be able to retain their benefits at least until the end of 2022.
These programs are distinct from health-savings accounts and 401(k) plans. Many businesses have dropped supplementary medical insurance programs for retirees throughout the years. Outliving funds has become a greater danger for millions of retirees due to the collapse of the conventional employment pension fund and a decade of low interest rates.
Renee Hashinger, a Vanguard retiree, claimed that if the benefits had not been restored, she and her husband would have lost $180,000 in insurance premiums collected over the course of her three decades with Vanguard.
The retiree stated that she has been sending the firm emails expressing her dissatisfaction with Vanguard’s consideration of reducing retiree benefits.
“I’m hoping they come up with a reasonable answer for people who are working now and will shortly retire,” she added.
Dawn Lim can be reached at email@example.com.
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