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
212-575-1580
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