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2001
2001
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2001 |
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Molding A Secure Retirement
Moore, who has 39 years seniority, says workers need fixed income for security in their retirement. “The average working individual doesn’t have time to become a knowledgeable investor.” A year ago, Moore and other members of UAW Local 429 almost lost their defined-benefit pension plan when their employer proposed cashing it out and rolling the money over into their 401(k)s. Like many small plants, New Haven Foundry felt burdened by the accounting, investment, and reporting requirements.
To deal with company concerns and protect their members, the Local 429 bargaining team fortunately found an answer that kept them out of individual accounts just as the stock market was beginning to drop. Their solution? The National Industrial Group Pension Plan, a UAW-backed, multi-employer plan that preserved their retirement security and helped them win the first increases in many years. For the work they do, the Local 429 members deserve the best retirement possible. “Our plant is a foundry. It’s real sandy and dirty work. We’re hot in the summer and cold in the winter,” says Jerry Sanders, bargaining chair of UAW Local 429 at the foundry. And it’s dangerous work. Two workers have died in the small facility
in the last 18
The foundry is old. It’s been part of New Haven since 1927--former UAW President Walter Reuther once serviced the plant--and many of the workers have been there for decades. UAW Local 429 President Robert Moses has worked there for 44 years where he poured iron for 35 years. When Moses started, the pension was $3.25 per month per year of service, and in 1974 the UAW negotiated a 25-and-out retirement program. By 1977 the pension formula had increased to $10.25 per month per year of service. But then hard times hit. By 1980 the company was losing money. It looked like it might shut down the foundry. So to save money the company appealed to the federal government for a waiver so it could stop making further payments to the pension plan. Additional waivers were requested and granted, and as long as waivers were granted, the company and union couldn’t negotiate any further pension increases. In 1997 the company proposed setting up a 401(k) plan for the New Haven workers. The company agreed to match $200 on the first $400 per year that a worker contributed. The UAW has negotiated 401(k)s with the Big Three and other employers as savings plans to supplement defined benefit pension plans. But decades of experience have convinced UAW bargainers that defined benefit plans offer workers the security they need to plan a secure retirement. In 2000 negotiations, New Haven Foundry management proposed getting rid of the defined benefit plan altogether. The old plan would be cashed out, and Local 429 members would move their assets into their 401(k) plans where they would be responsible for their own investment decisions. UAW Region 1 Director Ken Terry suggested that the local look into the National Industrial Group Pension Plan, a multi-employer plan with almost 70,000 participants, and 345 employers which is endorsed by the UAW, Steelworkers, and other unions. This plan covers 8,000 active UAW members in 62 locals who work for 109 different employers in 15 states. As a multi-employer plan, trustees are drawn half from management and half from unions. The UAW’s two trustees on the plan are UAW Vice President Elizabeth Bunn and Chuck Gayney, director of the UAW Social Security Department. The basic benefit level is negotiated separately by every participating union and employer.
The NIGPP is fully funded and conservatively invested. The plan holds nearly $900 million. Between 5 percent and 10 percent of those assets are in real estate with the balance equally split between equities (stocks) and fixed income investments such as bonds. At first, management at New Haven Foundry was apprehensive, but the UAW showed them that they could participate in the NIGPP at a lower cost than the old plan. “That’s what sold them,” said Robert Evans, UAW international representative in the Social Security Department. UAW Local 429 members realized that splitting up their old plan into separate 401(k) accounts would not provide huge amounts of money. Their negotiating team successfully raised the monthly pension formula. With hindsight, Local 429 can see they did the right thing in rejecting
a 401(k)-style plan. Since last spring, the U.S. stock market has lost over $4 trillion in value. Even savvy investors--excepting those dotcom executives who cashed out--have lost money as the S&P 500 tumbled 27 percent and the NASDAQ dropped 65 percent from a year ago. What will the stock market do in the future? Who knows for sure? As the exuberance that followed the Federal Reserve’s decision to lower interest rates in mid-April showed, the market still could go up. However, even after the losses of the past year, stocks remain high compared to other bear markets. Defined benefit pension plans have been investing in the stock market, too. But their experience led many plans last year to reduce their exposure to the market. It’s difficult for individual investors to match the performance
of the professionals who manage the defined benefit plans. Fortunately
for the workers at New Haven Foundry, who had the good sense to take good
advice, the overall drop in the stock market hasn’t impacted their
retirement.
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