Thursday, April 11, 2013
FOR IMMEDIATE RELEASE
CONSUMER REPORTS BECOMES SECOND U.S. WORKPLACE TO ACCEPT NEW YORK GUILD'S INNOVATIVE PENSION PLAN
NEW YORK, April 8 — Consumer Reports magazine has become America's second workplace to accept an innovative defined benefit pension plan that will guarantee its retirees lifetime incomes without exposing the company to unforeseen risk and volatility.
The "adjustable pension plan," or APP, is part of a new collective bargaining agreement between the magazine's parent, Consumers Union, and the Newspaper Guild of New York that Guild members at the Yonkers, NY-based non-profit company ratified on Friday, 203 to 31 with two abstentions. The new plan must be approved by the Internal Revenue Service before it can be implemented.
Faced with a bargaining demand by Consumers Union to "freeze" its pension plan at current length-of-service levels and leave the more than 300 employees in it with a company-subsidized 401(k) plan as their sole retirement funding vehicle going forward, the Guild proposed the APP as an alternative, and management accepted it.
"The Guild believes that the adjustable pension plan is a far better option for employees than a 401(k) alone because it provides government-insured income for life without the risk that comes with managing your own investments," said New York Guild President Bill O'Meara.
The APP made its debut for nearly 1100 employees at The New York Times in November 2012 when Guild-represented journalists, ad sales people and other professionals ratified it as part of a new contract. The Times plan is currently awaiting IRS approval, which could take several months. At The Times, as at Consumer Reports, the adjustable plan will replace a more traditional defined benefit pension plan.
The APP, which combines already-approved pension elements into a new and unique structure, was developed by Guild actuaries at Cheiron at a time when employers are being pressured to freeze or terminate their traditional pension plans because of their unpredictable nature and the risk of incurring unfunded liabilities that could weigh on their balance sheets.
The number of defined benefit pension plans in the United States has shrunk by two-thirds in the past 25 years to 38,000, leaving only about one in five private industry workers covered by them, according to government data.
Many defined benefit plans have been replace by 401(k) plans, but nearly half of all workers are not confident about having enough money for a comfortable retirement and more than half of workers 55 or older have less than $50,000 in savings, according to the Employment Benefit Research Institute's 2013 Retirement Confidence Survey.
From an employer's standpoint, the APP is not much different than a 401(k) plan. Consumers Union, for example, will contribute 6 percent of employees' salaries (about $1.8 million this year) plus another $100,000, to the plan each year. It has no further financial obligation to the plan.
For employees, on the other hand, retiring with an APP will mean a monthly check for life that is guaranteed by the U.S. Pension Benefit Guaranty Corp. But employees do incur a limited amount of risk in the APP, which is why it is called "adjustable." If the plan performs worse than projected in a given year, the benefit accrued in the following year may be less. Conversely, a better-than expected return may yield a higher benefit accrual in the following year. Either way, each year's benefit accrual becomes locked in and guaranteed with the passage of time.
At The Times, for example, employees this year will get a retirement benefit of 1.2 percent of their pay. A $100,000-a-year employee is therefore assured of receiving $1200 a year upon retirement for his or her 2013 earnings alone. If the plan's performance this year is below projections, the 2014 benefit accrual might be 1.1 percent or less. If it does better, it could be 1.3 percent or more.
Another feature about APPs is that they are much more conservatively invested than most defined benefit plans and have lower and more realistic projected rates of return.
The Guild, Local 31003 of the Communications Workers of America, represents nearly 3000 journalists, advertising, technical and financial professionals and other employees at 19 New York area news organizations, including Thomson Reuters, Time Inc., Standard & Poor's and other companies.
For more information contact:
Bill O'Meara, President
Posted by Robert Daraio at 11:31 AM