Vanguard has been reversing its course since last week when it ended the retirement benefits program
Vanguard Group is reinstating benefits for retirees after attempting to phase out a protest that began among former employees.
Vanguard chief executive Tim Buckley said in a video message late Friday, “I sincerely apologize for the anxiety and stress this decision has caused.” “We know we missed the mark.”
Vanguard has been reversing course since last Monday when the firm told employees and retirees it was ending a longstanding retirement benefits program that allows workers to collect credits for insurance payments. Some longtime retirees and employees have accumulated more than $100,000 in such credits.
At the time, Vanguard said it was also canceling a life insurance benefit and a COBRA program meant to eliminate workers in the months right after they retire. The firm will instead offer a one-time taxable cash payment of $40,000.
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When the firm announced the benefits, dozens of retirees and employees gathered on social media, calling and emailing employees to complain.
The firm reinstated these benefits for retirees, and now, it said, it is evaluating benefits for its current employees.
Vanguard helped pioneer the rise of passive investing through low-cost index funds. In the process, the firm became an asset manager of $8.3 trillion and a major provider of retirement savings funds to millions of investors. Now, firms and other asset managers are working to cut corporate costs to maintain their increasingly low-fee business.
The firm has an unusual ownership structure in that it is owned by the people who invest in its funds. Since it is owned by US fund investors, the firm is under pressure to keep reinvestment returns for clients and reduce the cost of investments for its shareholders.
Vanguard’s proposed deduction for retirement benefits meant that the longest-serving retirees and employees would lose access to thousands of dollars of credit for insurance payments by the end of the year.
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Kate Lowe, a retired and 20-year Vanguard veteran, posted messages on Facebook groups and LinkedIn. He also contacted the Human Resources Department.
“I wanted to show them that we weren’t going soft on good night,” she said.
Last Tuesday, after the Philadelphia Inquirer reported on the change, Vanguard eased its position from day one, saying current and former employees could hold on to those benefits until 2022. On Friday, it said Vanguard benefits originally planned to be canceled would remain in place for current retirees.
“Based on feedback from the crew and retirees, we decided to re-examine our approach,” a spokesman said in a statement. “We are continuing to work through a revised approach for the remaining crew population.” He said the existing employees would get benefits at least till the end of 2022.
These programs are separate from health savings programs and 401(k) benefits. Over the years, many companies have phased out supplemental medical insurance plans for retirees. The decline of traditional workplace pension funds and a decade of low interest rates make outliving savings a major risk for millions of retirees.
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Vanguard retiree Renée Hashinger said that if Vanguard had not reinstated benefits, she and her husband would have lost about $180,000 for insurance premiums they had earned over three decades of working at Vanguard.
The retiree said she’s been sending firm emails to express her disappointment that Vanguard considered cutting retirement benefits.
“I hope they will come up with an acceptable solution for those who are currently working and will be retiring soon,” she said.