By Gene Achziger

Local 37082 treasurer

This is a report on drugs, sex and debauchery at the 2007 Newspaper Guild Sector Conference and Communications Workers of America Convention in Toronto, Canada in July

It isn’t really, but if I’d said this is about the Pension Protection Act of 2006, you’d have already tuned out. But please don’t. It ain’t sexy, but rule changes that go into effect Jan. 1, 2008 could drastically affect your future retirement

Because many major employers dumped their pension responsibilities on the Pension Benefit Guaranty Corporation, the system was about to break. The PBGC is a government-created independent agency that guarantees employees’ pensions in the event their employers go bankrupt or out of business. Unfortunately, some companies, like airlines, found a way to stay in business specifically by dumping their pensions. This influx threatened PBGC's stability

So Congress tightened the funding rules for single-employer pension plans (those most likely to go under). The new pension law also provides incentives to encourage multi-employer plans to switch to defined contribution plans, of which the most common are 401(k) plans

Both The Seattle Times and Seattle Post-Intelligencer maintain the soon-to-be-discouraged single-employer plans. In the P-I’s case there is potential for a double whammy because the plan is under funded and will incur even tougher funding requirements and mandated benefit restrictions

The end result for both companies will be more cost volatility and variability. And I think they will come after us to change our plans when contract negotiations open up next spring. Change offers both potential and risk and we’ll need to be on guard to maximize the potential and minimize the risk

Both companies now offer defined-benefit plans, which guarantee a set amount of money payable monthly upon retirement until death. When many of these plans were established, life expectancy after retirement at age 65 was about five years. It’s now 30 years and many employers are trying to rid themselves of such long-term obligations

They are doing this by convincing their employees to accept such defined contribution plans as a 401(k). Under defined-contribution plans, the company's obligation stops at contributing to your retirement savings rather than sustaining your retirement income. When the money is gone, it's gone and workers are left to guess—and worry—about how long the money will last. Will workers find their bank accounts empty at the very time they are vulnerable to the ravages of old age

What the companies are really doing is shifting the risk from the employer to the employee. And they try to sell these plans by telling employees that by accepting the risk, individual employees will have the potential to make more money if we invest that money ourselves. It almost sounds alluring, until you read the statistics

The reality is that an overwhelming majority of us lack either the time or knowledge to maximize those funds. We wind up with less money and more headaches than under a defined-benefit plan

The companies often offer a "match" to their employees' 401(k) contributions. The match is often equal to the amount they contibute to existing defined-benefit plans. The match sounds inviting when accompanied by tales of huge money-making potential

But it isn't.

Here's why.

Risk. You have just as much chance of making bad decisions with your retirement nest egg as you do making good ones. Most of us are not financial wizards. Potentially, you could end up in the poor house in your dotage

Obligation. Companies shed any long-term responsibility for your sustainability after your money-earning potential has expired

Cost-savings. Companies know that a number of employees (for a multitude of reasons) cannot or will not contribute enough to their 401(k) plans to earn the employer match. This saves the company money. So instead of having an annual payment into its employees' defined-benefit plan (say $100,000), the company probably will only have to pay maybe half that because the employees don't or can't make their contribution.

To head off conversions of defined-benefit to defined-contribution plans there was much talk in Toronto as to how we can work with our employers to stabilize both our current defined-benefit plans and the employers’ costs. One solution is multi-employer plans which more widely spread the risk of maintaining defined-benefit plans. The emphasis of the Toronto discussions was on creating win-win situations, but it’s going to take a lot of work to convince both our members and employers that the long-term benefits vastly outweigh any short-term gains.

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