June 15, 2006
The last year has seen an unprecedented assault on defined benefit pension plans. That trend appears to be continuing. There are two issues presently that you should know about.
Department of Energy
On April 27, 2006, the DOE announced it will no longer reimburse contractors for the cost of providing defined benefit plans for new workers hired after March 1, 2007. Instead, the DOE says they will reimburse for only costs from “market based” contribution plans. They also did the same to the employees’ health care costs.
This directly affects approximately 200,000 workers – many of whom are USW members. This new policy would result in the elimination of pension and medical plans for USW members who have built these benefits up over many years. The DOE is mandating the only permissible form of pension and health benefits is a defined contribution plan, where the workers are required to assume all the risk – and there is real risk involved!
This policy change means the DOE is telling employers they can no longer offer their employees a true pension plan. These actions by the DOE are part of an attempt to roll back decades of USW negotiated benefits.
And if they get away with it, other government agencies will follow suit.
Pension Reform Legislation
The pension bill Rapid Response has been dealing with over the past few months is still tied up in the conference committee that is charged with taking the bill that passed in the Senate and combining it with the bill that passed in the House of Representatives to come up with one bill that can be made law. Rapid Response has weighed in with the conferees through a targeted action, and that USW activity could be one of the driving forces behind the delay in getting a bill finalized, since we did not support this legislation, but rather tried to make it the least damaging bill possible.
There are many complicated issues still unresolved, but a proposed compromise currently in the works to deal with how companies fund their plans could be really bad news for plans that offer early retirement benefits.
Larger USW employers would have to pay more money faster into their pension plans – and if they don’t meet this target – all pension benefit accruals will be frozen and some sponsors may be forced to terminate their pension plans. Also at risk in these talks is the PBGC guarantee for “shutdown” pensions. This is a benefit currently guaranteed by law that is in danger of being taken away from older workers who currently have protection in the event of plant shutdown or company reorganization.
Rapid Response may ask you to take action on one or both of these issues in the near future. USW Rapid Response (412) 562-2291
http://www.uswrr.org
