Consumer Reports magazine has accepted an innovative defined benefit pension plan that will guarantee its retirees lifetime incomes without exposing the company to unforeseen risk and volatility.
The “adjustable pension plan,” or APP, is part of a new collective bargaining agreement between the magazine’s parent, Consumers Union, and the Newspaper Guild of New York that Guild members at the Yonkers, NY-based non-profit company ratified on Friday, 203 to 31 with two abstentions. The new plan must be approved by the Internal Revenue Service before it can be implemented.
Faced with a bargaining demand by Consumers Union to “freeze” its pension plan at current length-of-service levels and leave the more than 300 employees in it with a company-subsidized 401(k) plan as their sole retirement funding vehicle going forward, the Guild proposed the APP as an alternative, and management accepted it.
“The Guild believes that the adjustable pension plan is a far better option for employees than a 401(k) alone because it provides government-insured income for life without the risk that comes with managing your own investments,” said New York Guild President Bill O’Meara.
The APP made its debut for nearly 1100 employees at The New York Times in November 2012 when Guild-represented journalists, ad sales people and other professionals ratified it as part of a new contract. The Times plan is currently awaiting IRS approval, which could take several months. At The Times, as at Consumer Reports, the adjustable plan will replace a more traditional defined benefit pension plan.
The APP, which combines already-approved pension elements into a new and unique structure, was developed by Guild actuaries at Cheiron at a time when employers are being pressured to freeze or terminate their traditional pension plans because of their unpredictable nature and the risk of incurring unfunded liabilities that could weigh on their balance sheets.