Retirees face reality — the redux

Posted on July 16, 2013 by


From Zerohedge:

A few hours ago First Data Corp., a KKR portfolio company, announced that it will suspend 401(k) contributions to employees and replace cash bonuses with stock “as part of its new chief executive’s strategy to return the credit-card processor to profitability.” The move was announced to all 24,000 employees of the Atlanta company in an internal memo Monday.

How big is the impact of this stunning move?

WSJ explains: “The pay overhaul takes effect Jan. 1 and will save the company about $60 million in cash next year. The yearly total is expected to grow to $100 million by 2017, equivalent to less than 1% of First Data’s overhead-related costs in 2012.”

…But that’s not all: as part of the cost-cutting initiative, rank and file workers will be forced to see the world through banker eyes: i.e., forego cash payments in exchange for a stock-based bonus.

My husband’s employer used to do full matching, but they cut it in half unless you invest 6% of your gross income. And you can’t liquidate the account unless you leave the company.

Cutting back like that is bad enough, since most workers figured that money in when calculating their compensation. (It is an effective pay cut.) But now a large company is planning on simply printing its own money in the form of stocks, in lieu of paying in government-printed money. But the government still gets something out of it, because — unlike cash savings — selling the stocks will result in capital gains taxes. It’s a scrip-based bonus system, that effectively ties them to the company because they can’t spend their bonus without damaging the worth of their bonus.

Here’s your bonus. Thank you for not spending it.

Welcome to your gulag state. Now get back to work, bitchez!