Career Management Monday, October 27, 2008

By Scot Herrick | Cube Rules Commentary

Oct 27

After a long weekend of being on the receiving end of a “Distributed Denial of Service Attack,” it is tough to get back to draining the swamp, so to speak.

There has been some news for our careers, though. Here is some of it:

With the credit crisis and the 40% reduction in the stock market, it should be no surprise that pension programs are taking a big hit:

US corporate pension funds are getting slammed by the stock market’s downturn, squeezing profits and prompting some employers to drop their pension plans or make other cuts to offset losses.

Just last week, defense giant Lockheed Martin Corp. cut its earnings forecast, citing higher pension costs; its retirement investments had dropped 25 percent this year. Boeing Co. estimated its pension fund was down 20 percent this year, likely forcing it to pump in $100 million more. And Raytheon Co., based in Waltham, said it plans to boost contributions to its pension fund by an extra $94 million next year, partly because its pension fund has shrunk 20 percent since January.

S&P 500 companies started the year with $63 billion more in pension assets than they needed to meet future payments. But after this year’s market debacle, Silverblatt said, they will probably end the year in worse shape than in 2002, when pensions were underfunded by $219 billion.

Not well understood is that when pension plans are not fully funded, companies are supposed to pump in additional money to the fund to make it solvent. What happens if the company doesn’t have the money? They don’t fund the pension plan – hurting you – or they stop having pension funds.

Pensions are one thing. 401(k)’s not being funded? This is relatively new:

American workers, forced to look on helplessly as the value of their 401(k)’s sink in sync with the Dow, now have something else to worry about. On Wednesday, General Motors told its nonunion employees that starting next month, it would stop matching their contributions to their 401(k) plans until business conditions improve.

The company contribution to your 401(k) is the largest return on investment you can usually make with your money. If you put in 6% of your pay and the company matches that with 3%, you are making 50% on you money. Tough to beat. Unless there is no match.

What is happening here is that companies are forcing more and larger payments on their employees. Whether it is increased cost for health care, other benefits, or removing pension programs, employees are being hit with larger costs to maintain their standard of living from the companies they work for.

If you are searching and just found Cube Rules, you may wonder why these types of financial matters apply to career management. It’s a good question. If you, as a knowledge worker, have a solid financial footing, you are better prepared for these types of changes in the market – including if you get laid off. Financial security gives you confidence in the job market and at home to do the right thing for your career. Without it, desperation is soon to follow.

Cubicle Warriors learn from their environment. Let’s have a good week.