Pensions aren't dead yet: "Our fight's not even close to being finished"
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Pensions were left for dead, but their obituary might've been written too early.
Why it matters: Defined-benefit pensions have plummeted in recent decades as employers shifted more investment risk to their workers, in the form of 401(k)-style defined-contribution plans.
The big picture: UAW president Shawn Fain plans to make a fight to restore traditional pensions a cornerstone of the union's next collective bargaining effort with General Motors, Ford and Stellantis.
- The union won record raises from the Detroit automakers in 2023 contract talks but did not win back the pensions it was seeking.
- "Our fight's not even close to being finished," Fain told workers in a town hall in September.
By the numbers: In 1980, 46% of private-sector workers were covered by a pension plan, according to the Georgetown University Law Center.
- By 2023, that was down to only 11%, according to the Pension Rights Center.
The intrigue: IBM "shocked the retirement world" in late 2023 by relaunching a version of a defined-benefit pension, according to the National Institute on Retirement Security.
- It's not the old-school pension plan in which the employer fully funds the plan on its own without contributions from the worker.
- Instead, it's a "cash balance plan," in which the employee makes contributions and the employer guarantees a certain annual rate of return, which qualifies as a defined-benefit pension under federal law.
- If the plan exceeds that promised rate of return, the employer and employee share the rewards. If the plan falls short, the employer absorbs the difference.
- "In a sense, what a cash balance plan does is it offers a degree of peace of mind," said Anthony Randazzo, executive director of the Equable Institute, a nonprofit that advocates for sustainable retirement planning.
The cash balance model can also serve as a recruitment and retention tool while carrying less risk than an old-school pension, he tells Axios.
- "If the UAW is successful in actually getting something called a pension, it's going to look like one of those," Randazzo says.
Flashback: UAW members hired after 2007 don't have traditional pensions like their more senior colleagues because the union agreed to give them up when the automakers were sinking into financial disrepair.
- Now that they've returned to profitability, Fain wants pensions back and doesn't like the fact that older UAW members have them while younger ones are on defined-contribution plans.
- "Two workers doing the same job side by side, shoulder to shoulder — one's promised a dignified retirement and the other is left to fend for themselves," he said. "That's not solidarity, that's not justice and it's not the future of the UAW."
- He added: "Ending retirement tiers will be the defining fight of 2028," when the current contracts with GM, Ford and Stellantis expire.
- Stellantis and Ford reps declined to comment. A GM rep did not respond to a request for comment.
Friction point: Pension costs were a significant factor in GM's and Chrysler's 2009 bankruptcies.
- GM, for example, owed $100 billion to pensioners when it filed for bankruptcy protection in 2009, according to the Brookings Institution.
- But Fain rejects the premise that the automakers can't afford traditional pensions.
- "This is about power, because every dollar stolen from retirement security didn't just vanish — it went straight into the pockets of CEOs and Wall Street," Fain said. "That's the broken system we're here to fix."
The bottom line: The return of pensions isn't a fairy tale.
