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.”
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