Newspaper Union Moves To Block Pension Merger

April 10, 2008 ( - The largest union of The Philadelphia Inquirer and Daily News is suing the newspapers' owner for merging two employee pension plans without its consent.

The Newspaper Guild of Greater Philadelphia has charged that one plan is severely underfunded and would endanger the health of the second pension.   According to Reuters, District Judge Berle M. Schiller has granted a temporary restraining order in the case of The Newspaper Guild of Greater Philadelphia against Philadelphia Newspapers LLC, a unit of Philadelphia Media Holdings.  

The judge said that, while the pensions have merged, the funds haven’t been commingled.   The lawsuit, filed last week, said the merger’s only purpose was to bail out the underfunded North Broad Street plan “without regard” to the participants of the Guild’s healthier pension fund.  

The union has accused the company’s trustees of violating federal employee benefits laws and breaching their fiduciary duty by “failing to perform a detailed analysis of the impact on the participants of each plan,” according to the Reuters report.

However, the company has argued in separate court documents that it had the right to merge the pensions. The Guild had until the end of 2007 to find a multi-employer pension with which to merge. Failing that, the company said, it had the right to take over the plan – and directed a merger with the North Broad fund.

Merger Impacts

Philadelphia Newspapers said both pensions benefit Guild members. The company also said it did perform an analysis of the merger’s impact, and accrued employee benefits will not be reduced.

As of March 1, the Guild pension plan was fully funded with assets of $193 million and liabilities of $180 million covering 2,344 members. On the other hand, the North Broad pension, with nearly 900 members, was just 39% funded as of January 1, 2007, according to the report.  

Under new federal pension rules, the company would have had to add $8 million to the North Broad plan to enable lump-sum severance payments to retirees or terminated employees at a time when it is fighting falling advertising and classified ad revenue.   However, merging the two pensions would stop the North Broad fund from being insolvent, according to the report, citing court documents.