Pension Benefits Prevalent At Union Bargaining Table

January 27, 2003 (PLANSPONSOR.com) - With only 9% of collective bargaining agreements void of any pension or retirement savings options, pension and retirement benefits will once again be major issues at the bargaining table in 2003.

Collective bargaining agreements overwhelmingly include provisions for pension benefit plans, granted by 78% of companies’ current labor settlements, with defined benefits representing a more popular option than defined contribution or cash balance plans. Tax-deferred savings plans have also gained a foothold in union contracts, represented by 68% of contracts establishing retirement savings programs for their bargaining-unit employees, according to Washington-based legal publisher BNA’s survey of companies with contracts expiring in 2003.

Plan Variety

Defined benefit plans still rule the roost of the contractual pension program available to bargaining-unit workers, with 68% of the surveyed establishments’ contracts providing these plans. Coming in a distant second were the 31% offering defined contribution (e.g. profit-sharing, employee stock purchase, thrift savings) options for union-represented workers.

Unchanged from 2002’s responses is the number of firms’ offering cash balance pension plans, a plan in which the company contributes a set proportion of an employee’s pay and guarantees that it will grow at a specific rate. The 2003 survey showed only 10% of the firms’ current agreements offer cash balance plans.

In addition, 22% of unionized employees have multiple pension plans at their disposal, offering both defined benefit pension plans and defined contribution programs. The survey did not inquire whether employees are permitted to participate in more than one type of pension plan.

Overall, the single option is still the most prevalent; with over half of the surveyed establishments provide a single pension option for bargaining-unit employees.   Of these, 47% offer only defined benefit plans, with only 9% providing defined contribution programs alone.

Other Options

Thirty-seven percent of 2003’s respondents are providing pension benefits through multi-employer pension programs, up from the 31% responding similarly a year ago. According to the survey, employers are seeing merit to offering a joint pension plan in reduced administrative expenses, as well as offering greater portability of benefits to individual enrollees.   The enrollees are often members of the same local, national, or international union.  

Multi-employer pension plans are more common among nonmanufacturing companies and organizations with 1,000 or more employees. Approximately half of nonmanufacturing establishments (48%) and companies with large unions (55%) participate in joint pension plans, compared with roughly a quarter of manufacturing companies (23%) and 29% of firms negotiating with smaller unions or locals. All but one of the surveyed construction companies (94%), 45% of government facilities, and 41% of responding health care organizations are enrolled in multi-employer plans.

As with single employer pension plans, joint arrangements remain more likely to offer defined benefit programs than defined contribution plans. Among responding employers with collaborative plans, 83% provide defined benefits for their bargaining unit employees, with only 42% offering defined contribution options.  

Tax-deferred

Nearly seven out of 10 expiring labor settlements (69%) offer 401(k) plans or similar retirement savings options for union-represented employees. Tax-friendly savings plans remain especially prevalent in the manufacturing sector, where 79% of current contracts offer tax-deferred retirement accounts, compared with 61% of agreements with nonmanufacturing firms.

At most surveyed organizations, tax-deferred retirement accounts apparently are intended to supplement, rather than replace, pension benefits. Of the employers whose contracts promise tax-deferred savings plans, 47% also offer a defined benefits program, 25% offer both a defined benefit and defined contribution plan and 8% a defined contribution plan. Only 20% of the responding establishments with 401(k) plans or similar tax-deferred retirement savings plans do not extend any other pension benefits to bargaining-unit employees.

Among responding organizations with contractual 401(k) plans, 58% supplement employee contributions to those funds. Matching contributions remain far more prevalent among manufacturers (71%) than in nonmanufacturing companies that offer tax-deferred retirement savings programs (44%). On the other end of the scale, none of the eight responding government institutions with tax-deferred savings plans make any contributions to workers’ accounts.

These matching arrangements are not entirely uniform across bargaining agreements, but most responding employers match some portion of the first 3% to 7% of earnings that workers contribute to their retirement savings accounts. Reported matching percentages range from 10% to 100%, with most respondents indicating that their organizations contribute $0.50 cents on the dollar, up to a specified limit.

Outlook

Not surprisingly, the survey found more resistance from management in 2003 to offering better pension benefits, with only 32% of responding labor relations professionals open to raising pension benefit levels for bargaining-unit workers.   The 2003 response represents a marked decline from the 48% of management negotiators open to raising pension levels the previous two years. Despite the sharp decline, prospects for improvement in contractual pension benefits are still much better than for many other benefits, such as health insurance and paid leave.

Employees in the manufacturing sector stand the best chance of securing more generous benefits. Forty-five percent of manufacturers surveyed expect to be spending more on pensions under the terms of their new bargaining agreements, compared with only 22% of all other employers. The bleakest outlook came from educational institutions, with none of the 17 responding institutions expecting to boost pension payments in their 2003 contracts, most likely due to the fact that more than seven out of 10 educational facilities projected financial losses in 2002.

While pension benefits may increase at quite a few firms, the basic characteristics of most firms’ contractual pension programs will remain intact. Only 9% of the surveyed employers plan to modify, add, or discontinue any pension plans in their 2003 contracts.   Similar results were seen in expected changes to tax-deferred retirement programs available to bargaining unit employees. Just 8% of all responding employers plan to modify, add, or discontinue any tax-friendly retirement savings provisions in their 2003 contracts.

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