Lone Star Steel to Launch DB Plan

July 25, 2005 (PLANSPONSOR.com) - A Texas steelworkers union has agreed to a new three-year contract with Lone Star Steel Co. that expands the company's pension program and health-care benefits and adds a profit-sharing program.

BNA reported that the contract okayed by the United Steelworkers Local 4134 at the Lone Star, Texas facility, raises wages 9% and creates a new defined benefit plan – a move that flies in the face of a growing national trend of employers freezing their DB programs in favor of a K plan.

The new defined benefit plan features a $50 multiplier, an amount that is more than double the “substandard” multiplier of the plan frozen in 1996, John Patrick, lead negotiator for the USW bargaining team and subdistrict director in USW District 12, told BNA. Lone Star will reallocate the contributions it previously had been making to the 401(k) plan, shifting them to the new defined benefit plan.

Lone Star Steel employees have in the past received profit sharing at the company’s discretion, but the benefit has never been part of the contracts’ provisions. Under the profit-sharing plan in the new contracts, company profits will be shared according to a formula based on the number of hours an employee works during the period. In 1996, USW had agreed during contract negotiations to the company’s proposal to freeze the existing defined benefit plan, making it unavailable to new employees hired after June 1, 1996. Instead, Lone Star offered a 401(k) plan with company contributions.

The new contracts also extend existing retiree health care benefits to cover the spouses of retirees as well until age 65. Under the new contracts, workers will pay slightly higher deductibles and be subject to higher maximum out-of-pocket expenses than they paid under the previous 2001-2005 contract. Premium contributions will increase 10% in each year of the contracts beginning Jan. 1, 2006.

The agreements cover some 1,100 production and maintenance workers at the company’s main mill in northeast Texas and 55 workers at the warehouse eight miles away.