Pensions are becoming less and less common in America, and now it looks as though the employee pension systems for Fannie Mae and Freddie Mac will be terminated. The Federal Housing Finance Agency (FHFA) acting director has commented on the termination of these plans.
These government-sponsored enterprises provide more than $5.5 trillion in funding for the U.S. mortgage markets and financial institutions. Effectively, they make up all the conforming loan market. The statement was short, but Fannie Mae and Freddie Mac employees likely will not think the statement is short AND sweet.
FHFA Acting Director Edward J. DeMarco said:
Today, FHFA directed Fannie Mae and Freddie Mac to terminate their defined benefit retirement plans effective December 31, 2013. Terminating the defined benefit retirement plans eliminates risk to Fannie Mae and Freddie Mac and helps to conserve their assets on behalf of taxpayers, one of our main priorities as conservator. The plans previously were closed to new entrants. Fannie Mae and Freddie Mac employees will be able to elect a pension annuity or roll-over their benefits into another retirement vehicle such as an IRA or 401K. Freddie Mac and Fannie Mae will continue to provide competitive benefits for their employees through their defined contribution plans.
Many in the public will be glad about this, some may not be happy and most probably never will even read about it. It has to come with at least some irony that this statement was made during National Save for Retirement Week.
Yahoo! Finance shows that there are more than 12,000 combined employees at Fannie Mae and Freddie Mac, but we have not verified any recent headcounts at the companies.