Bargaining Tactics for Pensions

The retirement system in our country is under attack. Everyday we hear of large corporations terminating their defined benefit pension plans and replacing them with 401k or other defined contribution plans that will provide employees with a lower standard of living when they retire. . . .

The retirement system in our country is under attack. Everyday we hear of large corporations terminating their defined benefit pension plans and replacing them with 401k or other defined contribution plans that will provide employees with a lower standard of living when they retire.

In every recent United Electrical Workers (UE) negotiation, whether in the private or public sector, the workers have faced demands to pay more for health insurance and to take cuts in their pension plans. Our response has been to step up our educational programs for members on how to bargain, fight for, and defend pensions and health insurance.

Stewards are crucial in preparing for negotiations on pensions. Stewards must play a key role in making sure the members understand how their pensions work, why making the employer put money into the pension plan is important, and how much money they will need to retire with.

For many members, pensions are not an immediate issue, their own retirement being maybe 20 or 30 years in the future. Today they are faced with paying rent, car payments or mortgages, buying children food and clothes, or making health insurance payments.

Many employers understand this and try to play the long term off against the short term. The problem is that, for the most part, each year that no pension improvements are made is lost forever.

TIPS FOR BARGAINING

When it comes to bargaining, prepare in advance—far in advance. Discussion with the members about the importance of improving their pensions should not wait until negotiations start.

Retirement experts like to talk about the three-legged stool of retirement, each leg representing one third of your retirement income. One leg is social security, one leg is an employer-funded pension, and the other leg is your own savings. They also estimate that workers will need 70 percent of their pre-retirement earnings to live on while retired.

As our incomes hopefully grow through negotiations, so must our pensions grow, so that they will provide their share of the three-legged stool.

If you have a defined benefit pension plan (DB), ask the employer for a copy of the annual Form 5500 they must file with the IRS. This will show you how well your pension is funded, or how much it is underfunded. These forms can also be downloaded from www.freeerisa.com.

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Besides negotiating an increase in your pension plan formula, you can also negotiate that the pension plan will provide joint and survivor options with no reduction in your monthly pension benefits. When you elect to leave part of your pension to your spouse after you die, normally your monthly pension is reduced to pay for this benefit.

DEFINED CONTRIBUTION

If you have a defined contribution plan, (DC) try to negotiate increases in the employer’s contributions. Defined contribution plans are not as secure as DB plans, because DCs are dependent on the ups and downs of the stock market, and employers are not responsible for making up lost funds.

The UE estimates that workers will need from 12-15 percent of their income going into a DC plan, over a long period of time, in order to provide enough money for them to retire on.

Do not agree to company stock as the employers’ contribution to your pension plan. Remember Enron. The employer should pay all administrative costs of a DC plan.

If the employer demands terminating a defined benefit plan and starting a defined contribution plan, resist at all costs. If you cannot, consider the following:

By examining years of 5500 reports you can find out how much your employer has actually put into the pension plan. From there you can get a rough estimate of how much per hour the plan has cost. Don’t settle for any less from a 401k or other DC plan.

In our experience, employers often offer 401k plans that will cost them 50 percent less then they were spending on a defined benefit plan.

Because almost all studies have shown that current defined contribution plans provide inadequate pension benefits, people are beginning to recognize that more is needed. The Pension Protection Act of 2006 (which will adversely effect most DB plans) includes new pension plans called Hybrid Plans. They are part defined benefit and part defined contribution. Do some research—they would probably be better then the 401K plan your boss is offering.

The final task of the stewards is to educate the members about the need for a national retirement system in this country.

David Cohen is an international representative for UE living in Massachusetts.