Word: pensions
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Dates: during 2000-2009
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...Until three years ago, the UAW's bargaining strategy was driven by a "no-concession" policy, though it did limit wage demands in exchange for richer pension and health-care benefits. Over the last three years, however, the union has reluctantly rewritten contracts with Ford, General Motors and Chrysler LLC, often over the strong objections of many union members...
Ultimately, many companies will have to boost contributions to their pension plans to recover from this year's loss. How that occurs is partly governed by the Pension Protection Act. But experts say some companies will lobby for Congress to relax some aspects of the act, arguing that being forced to significantly increase contributions to pension plans may force them to file for bankruptcy. When President Bush signed the Pension Protection Act in 2006, companies won cost-savings concessions, such as the ability to use a higher interest rate in computing lump sump pension payouts. But the savings from those...
Barring relief from Washington, pension plan sponsors may revert to benefit cuts. Here's how that might work: A typical pension plan formula is based on an individual's ending salary, multiplied by a variable, such as .015, and then multiplied by the number of years of service. So an employee earning $150,000 a year, at age 60, with 30 years of service, would have the following formula: $150,000 x .015 x 30, which equals $67,500 annually in pension payments for the rest of her life. To reduce costs, a company can reduce that middle variable from...
Some companies may eliminate, or freeze, pension plans altogether. On Wednesday, for instance, AK Steel, a leading automotive and appliance industry supplier based in West Chester, Ohio, announced it would freeze defined benefit pensions plans for salaried employees and replace with a defined contribution benefit plan that includes about 3% of a worker's annual salary. "Unfortunately, this extraordinary global economic downturn requires significant and rapid measures to reduce our costs in light of sharply lower order levels from our customers," James L. Wainscott, AK Steel's CEO, said in a statement...
...worth noting that barely half of the companies that Mercer examined reported sponsoring a so-called defined pension plan: Simply put, it's becoming a relic, as companies scale back retirement options to shave one of the most expensive employee costs...