According to a memo from the Newspaper Guild to Times staff, when negotiations started in February 2011, management wanted the traditional defined benefit (DB) pension plan frozen and replaced with a defined contribution (DC) plan. However, under the tentative agreement, the current pension plan will freeze at the end of 2012 and be replaced at the beginning of 2013 by the new Adjustable Pension Plan (APP).
The APP is awaiting Internal Revenue Service (IRS) approval, which the Guild said it expects the plan to receive.The company will pay at least $7 million into the APP beginning next year, and thereafter a similar amount under a formula, the memo said. All accrued benefits in the current plan will remain in place. As before, the APP will be overseen jointly by Guild and Times trustees.
Under the APP, accruals will be adjusted annually so that the APP is always properly funded. This could result in either a higher or lower than planned accruals, although given the APP's conservative investment strategy, lower accruals are unlikely. Each employee's annual accrual becomes locked in. At retirement, the yearly accruals are added up to compute a government-insured retirement benefit that is paid monthly.
If the IRS fails to approve the APP by July 31, 2014, the plan will revert to a defined contribution plan in which the company will contribute 3% to each employee's 401(k) account, and make additional matches based on employee contributions.In September, the Times Co. announced it is offering lump-sum pension payments to retirees in an effort to reduce its DB plan risk (see “Times Co. Offers Pension Lump-Sums”).