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About Northwest labor press. (Portland , Ore.) 1987-current | View Entire Issue (June 5, 2009)
JUNE 5, 2009:NWLP 6/2/09 10:18 AM Page 9 ...What happened to retirement? (From Page 1) have an equal say in managing a pen- sion fund if they were obligated to contribute to it under a collective bar- gaining agreement. Those plans — which became even more tightly regu- lated by the Employee Retirement In- come Security Act of 1974 (ERISA) — have proved quite stable, because they’re required by law to have enough assets on hand to pay future pension commitments. And unlike “single-em- ployer” plans, multi-employer plans can’t easily be terminated or aban- doned when a company gets into dis- tress. And yet, even the most stable plans lost money in the stock market crash. Overall, pension plan assets declined by 26 percent in 2008, according to a March 2009 analysis of the 100 largest U.S. pension plans. And losses had a lot to do with how heavily plans were invested in stocks. Plans that had less than 20 percent of their portfolio in stocks lost an average of 6 percent, while those with 90 percent or more lost 32.3 percent of their value. [On average, the 100 largest pension plans had about 55 percent of their assets in stocks.] Oregon’s largest private-sector pen- sion plan is the Oregon Retail Employ- ees Pension Plan, which covers mem- bers of United Food & Commercial Workers Local 555 — 36,000 individ- uals, including 16,650 current employ- ees, plus 6,093 retirees. And last year its assets lost 29 percent of their book value. Local 555 President Dan Clay, who is a union trustee of the plan, said that’s going to mean benefit cuts, maybe even to current retirees. The plan is now in “red” status. That desig- nation comes from the Pension Protec- ern States Office and Professional Em- tion Act of 2006, which made aggres- sive adjustments to ERISA’s standards ployees Pension Fund were upset for how defined-benefit pensions must when trustees announced a cut-back in early retirement benefits. The fund, account for the costs of future benefit which covers current and former payments. members of Office and Professional Red status means that a pension Employees (OPEIU) Local 11, had in- fund is critically underfunded, “yel- vestment low” says a fund is “endangered,” Overall, pension plan assets losses of 32.5 percent last and “green” year, and was means the fund is declined by 26 percent in in good shape. 2008, according to a March declared in the “red” zone. In Nationwide, 38 2009 analysis of the 100 response percent of Taft- trustees re- Hartley plans are largest U.S. pension plans. solved to in- in red status and crease em- 41 percent are in ployer contributions, reduce future yellow. benefit accruals, increase the normal When plans are declared to be in retirement age to 65, eliminate some red status, trustees must make adjust- ments to the benefit formula to account death and disability benefits, and elim- inate the early retirement subsidy. Cur- for the losses. Adjustments can be rent retirees, at least, are unaffected. made in a number of ways: Employer “It’s fun to give out extras, but it’s contributions can be increased and terrible to have to take them back,” said benefits can be decreased. Typically, Local 11 Executive Secretary-Treas- any “extra benefits” trustees set up urer Mike Richards, a fund trustee. “It when times were flush are revoked. These include subsidies for early retire- makes me sick at heart to have to do it. But we have to make sure the trust sur- ment, payments for retiree health cov- vives.” erage, and disability benefits. Trustees Clay, who’s been a trustee for six also reduce the rate at which pension years, says federal rules made the cur- obligations accrue — in other words, rent crisis worse. When stock values for current workers, the formula that were rising quickly, pension funds — adds benefits for each additional year on paper anyway — had bigger bal- of work becomes a little less generous. ances than they needed to pay the The benefits that were promised for promised future benefits. But federal previous years of work may still stand, pension rules penalize “overfunded” but the promise of a monthly retire- ment check won’t grow as much while pensions, and encourage trustees to spend the investment gains in various plans are struggling to make up invest- ways — extra benefits like more gen- ment losses. erous cost-of-living increases or bonus That can cause a shock among “13th” checks to retirees — or in some workers who were expecting more. cases, letting employers lower or take Union locals around the country are a break from making pension contri- holding special meetings to talk about pensions. At one such meeting in Port- butions. Now, all those measures are making today’s pain worse. If the land May 6, participants in the West- funds had held on to the investment gains, their assets might have still lost value, but from a higher starting place. “People tend to want to smooth losses,” Clay said, but they don’t look at gains as something that should be smoothed.” For the most part, workers can fered $400 to cover a change in pay pe- leave it up to union and employer riods. “We will meet with our stewards to trustees to worry about how to make determine what the issues are, then up pension funding shortfalls. Not so we’ll proceed from there,” Richards with the much-ballyhooed 401(k)s. Even before the crash, there were seri- said. OPEIU Local 11 members at NW Natural reject contract Workers at NW Natural rejected the company’s five-year contract offer May 28 and are now working without a contract. About 700 workers at the gas com- pany are represented by Office and Professional Employees Local 11. The contract vote was 206 to accept and 230 to reject. Local 11 Executive Secretary-Treas- urer Mike Richards said he will meet with shop stewards June 8 and try to meet with the company June 15 or 16. Richards said the rejected proposal contained guaranteed cost of living ad- justments ranging from 1 to 6 percent; no co-payments for health insurance for the first two years of the pact, and then no more than 3 percent premium- sharing after 2011, based on a cost of living adjustment. The proposal also guaranteed no layoffs for workers hired before April 1, 2004 (approximately 75 percent of the workforce), and it of- JUNE 5, 2009 ous problems with 401(k)s as vehicles to secure retirement: high fees, a ten- dency to cash out savings before re- tirement to cushion economic shocks like layoffs, and inadequate balances. [For workers to turn a 401(k) into a modest annuity that pays out $20,000 a year, they need to retire with a bal- ance of about $260,000. But most bal- ances aren’t anywhere near that. The average balance for a worker nearing retirement is around $60,000. And that was before the crash.] But the stock market downturn has exposed 401(k)s biggest flaw for all to see — all the investment risk is borne by the individual. Just before the stock market crash, more than 70 percent of the assets in 401(k) plans were in the stock market, according to figures from the Federal Reserve. Stock prices have plunged by more than 40 percent from the market’s peak in November 2007. “For too many Americans, 401(k) plans have become little more than a high stakes crap shoot,” said Congress- man George Miller (D-Calif.), who chaired a Feb. 24 hearing of the House Subcommittee on Health, Employ- ment, Labor, and Pensions. “If you did- n’t take your retirement savings out of the market before the crash, you are likely to take years to recoup your losses, if at all. We are realizing that Wall Street’s guarantees of predictable benefits and peace of mind throughout retirement was nothing more than a hollow promise.” Given the woes of private pensions, Social Security has never looked better. “When you consider the trillions that employees have lost in retirement investments,” Miller said, “thank goodness we didn’t get suckered into gambling Social Security funds at the Wall Street casino.” Chase is backing union members with the Union Plus ® Mortgage Program — a home purchase and refinancing program exclusively for union members, their parents and children. • FREE Mortgage Assistance Benefit If you are unemployed or disabled. • A wide variety of mortgages Choose from fixed rate, adjustable-rate, and low- or no-closing costs options. • Special Lending First-time homebuyer and less-than-perfect credit programs. • Savings on closing costs Zachary Zabinsky • Social Security • SSI - Disability Claims Member-only savings on new purchases and refinance. It all adds up to more home-buying power. Contact your local Union Plus Mortgage Specialist Call Bob Krueger at: 503-490-0459 Personal Attention To Every Case Working For Disability Rights Since 1983 NO FEE WITHOUT RECOVERY 621 SW Morrison, Portland 503-223-8517 NORTHWEST LABOR PRESS Union Plus is a registered trademark of Union Privilege. Eligibility for mortgage assistance begins one year after closing on a Union Plus Mortgage through Chase Home Finance. This offer may not be combined with any other promotional offer or rebate, is not transferable, and is available to bona fide members of par- ticipating unions. For down payments of less than 20%, mortgage insurance (MI) is required and MI charges ap- ply.All loans are subject to credit and property approval. Program terms and conditions are subject to change with- out notice. Not all products are available in all states or for all loan amounts. Other restrictions and limitations apply. ©2008 JP Morgan Chase & Co. 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