Summary #8
UE: Workers, Retirees
Need Pension Increases
NEW YORK – Wednesday, June 6
Presentations on pension issues by Steve Tormey and Erie retiree Ron Flowers, and company presentations on wages and disability, were the main business at the UE-GE bargaining table on Wednesday.
UE-GE Conference Board Secretary Tormey opened the proceeding with a detailed union presentation and slide show on the GE Pension. He discussed the plan’s massive overfunding, and pointed out that even during the worst years of the Bush recession early in the decade, facing a "perfect storm" of low interest rates and tumbling stock prices, the plan retained a robust surplus. Over the past five years the surplus has climbed, and may well reach new record surpluses in the coming years if stock prices and the discount rate both continue their growth. Since the company is so fond of "benchmarking" – comparisons with other companies – in its presentations, Tormey did some of his own. He showed that the net worth of the GE pension fund alone is greater than that of entire major corporations such as Raytheon, DuPont, Emerson, Whirlpool and Rockwell.
Tormey presented data supporting UE’s contention that the pension fund is a financial asset to GE that it uses to manage the corporation’s profits, manipulating when it declares profits or losses on the pension fund’s assets to maximize the beneficial effect on GE itself. The overfunded status of the fund also gives GE a competitive advantage over other companies, who must regularly contribute to their employees’ pension funds. Later in the presentation, Tormey showed GE’s conflict-of-interest in managing the pension fund. All the plan trustees work for GE and answer to Jeff Immelt.
The UE presentation showed how employee contributions continue to subsidize the fund, even while GE itself continues to enjoy a 20 year "holiday" from making company contributions to the plan. The interest rate GE pays on employees’ Personal Pension Accounts (PPAs) – recently just over five percent – is on average far below the pension fund’s own return on investment (which was 16.7 percent in 2006).
While GE hasn’t contributed a dime to the GE Pension Trust Fund since 1987, it does regularly contribute to some employees’ pensions. The GE "Supplemental Plan" provides additional high pension benefits to a select group of top GE executives (it only has around 4,000 participants). GE puts more money into that fund every year, even though such contributions are not tax exempt because the Supplemental Plan is not IRS qualified. In 2006, for example, GE donated $121 million, or about $30,000 for each of the plan’s elite beneficiaries.
Tormey then addressed problems with the GE Pension Plan – which the union later addressed in specific contract proposals. He showed that the minimum pension tables are no longer providing adequate replacement income, even under GE’s assumptions, and need to be increased. In the years 2003 to 2007, 55 percent of UE retirees went out on the Minimum Pensions.
THE RICH GET RICHER
Tormey also demonstrated the fact that the career earnings formula unfairly favors the highest-paid GE employees. He used an example of a $50,000 a year hourly worker, and two salaried employees, one making twice the worker’s wage ($100,000 a year) and the other making three times ($150,000). Yet under GE’s career earnings pension formulas, the pensions earned by the high salaried employees are more than double and triple the rank-and-file workers’. And the pension updates, far from reducing these inequities, actually make them worse, resulting in pensions for the two salaried employees in Tormey’s example that are respectively 2.43 times and 3.86 times what the hourly worker gets.
Tormey called for eliminating the lower step in the Regular Pension formula, which would result in a significant increase of $393 a month in pension benefits for a worker retiring with 30 years service. Tormey offered some more benchmarking not favorable to GE, comparing GE pensions to those in the Big Three auto companies, Boeing, the West Coast Longshoremens’ Union, and Mineworkers. He also showed that the GE disability pension supplement has been "frozen in time" for 39 years, at outrageously inadequate levels.
NOT-SO-GOLDEN YEARS
Tormey’s presentation then turned to the declining value of a GE pension to current retirees. A 1981 retiree has lost 23 percent of his or her purchasing power after all updates; a 1986 retiree has lost 33 percent; a 1991 retiree has lost 25 percent, and a 1997 retiree has lost 20 percent. Even for someone who retired as recently as 2002, their monthly GE pension check has already lost 11 percent of its buying power.
While the bottom rung of GE’s guaranteed pension tables currently provides a $33 monthly multiplier (which is multiplied by years of service), there are 3,626 GE retirees whose monthly pensions are based on an $18 multiplier, unchanged since 2000. The median monthly GE pension for current retirees is a stingy $625. The cost to retirees of GE’s health plans further impoverishes rank-and-file retirees, who pay $197.50 a month for single coverage under the three retiree plans, $395 a month if they include a spouse.
RETIREES MADE GE #1
Tormey then introduced Ron Flowers, retired former member of Erie Locals 618 and 506, former officer of Local 618, former member of the UE-GE bargaining committee, and now president of RAGE, the Erie-based Retirees Association of General Electric. Ron said that in his current role he is "up close and personal with the problems the retirees have," including problems with the administration of GE retirement benefits and the erosion of those benefits. "GE is the largest and most profitable company because of the employees and the former employees," he said. "You still benefit from the work of your retirees."
Flowers illustrated this point by discussing the success of the Erie locomotive business over the past 30 years. In the 1970s, GE had just 15 percent of the locomotive business; General Motors’ Electro-Motive Division had 85 percent. GE launched the PAR 800 program with the bold intention to close the competitive gap. As the plant photographer, Flowers said, he documented the development of the new locomotive and the changes in the production process. "The people on the shop floor re-engineered that locomotive," he said. "They’d show the engineers where their designs were wrong and how it needed to be done." Flowers was reminded of the results a few days ago, when he watched GE CEO Immelt on C-Span, bragging about the success of the locomotive business and how GE plans to invest more in Erie.
"Now, GE is number one in the locomotive business and making huge profits. The workers in the plant made that happen. I don’t remember ever seeing (former GE chairman) Reginald Jones out there putting bolts into a locomotive, or Jack Welch running a welder. The workers who are now retired did that. Now we are in trouble. The world is passing us by. You have the wherewithal to solve the problem."
Ron Flowers then passed on messages to GE from the Erie retirees. He describe how many of them on pensions of a few hundred dollars a month, and in many cases with real estate tax bills of $2,000 a year. He read comments from some of the members of RAGE:
Joe Tullio, age 93, retired 30 years ago and was the oldest retiree on the bus from Erie to the GE stockholders meeting in April. "It can’t be any plainer than we put it at the stockholders’ meeting.
We need a raise," said Joe. Bernie Dietz, retired 20 years ago. His question to GE: "How long are they going to sit on that pile of money? It seems almost vindictive."
Don Bryant, who’s been retired for 25 years, said. "I’m going further behind all the time, everything is going up. My real estate taxes doubled the last time. I hope I can keep the house."
Bernice "Bea" Biernik, retired 10 years ago. "It makes me sick when I see how much money is in the plan, just sitting there, when it could be doing so much good." Valerie Wallace, retired for 20 years, said, "I have less money because of how everything is going up, and no raise in years. How do they expect us to live?"
Flowers said 85 percent of the retirees active in RAGE are getting pensions benefits based below the current $33 minimum multiplier. Some are getting as little as $8 a month for each year of service. He presented the retirees’ three proposals to the company:
- Raise the minimum pension multiplier for all GE retirees to at least the current $33 minimum (or higher if union negotiations increase the minimum.)
- Provide a structural increase to the pensions of all retirees.
- Provide cost of living adjustments (COLA) to GE pensions.
"Do this and you’ll never see us again," Flowers told the company negotiators.
GE’s chief negotiator John Gritti thanked Ron for his presentation and for all his service to the company. While repeating GE’s position that UE does not represent retirees and therefore the company will not negotiate over current retirees’ issues, he told Flowers, "We’ll take your message back" to GE executives.
Frank Fusco, Local 506, talked about the lasting legacy of the retired workers, "I see the retirees every month when they meet in our union hall. Their work still pays dividends to GE." Rudy Gomez, UAW, concurred on the lasting contributions of past GE workers. "Every time we save you an hour in a production process, that hour is saved forever." Lynda Leech, Local 618, added, "Our retirees gave us their knowledge and taught us their work ethic. They deserve a lot better than they’re getting right now."
PENSION PROPOSALS
The afternoon session began with Steve Tormey presenting the union’s pension proposals. The union called for substantial increased benefits under both the career earnings and guaranteed minimum formulas. UE proposed eliminating mandatory employee contributions, and basing minimum pensions on the highest three years’ earnings, whether consecutive or not. Pat Rafferty, Local 506 and Ed Baran, Local 751, said this is sometimes needed because employees are affected by layoffs and lean years in cyclical businesses.
Tormey also proposed increasing the bottom of the guaranteed table, "even if it results in higher wage replacement rates," because the lowest-wage workers may need to replace more than the 70 to 80 percent of earnings that GE targets. The union proposed to count disability leave as time worked for pension qualification. When Tormey said that reducing the early retirement age below 60 would solve the company’s SERO window problem, GE’s John Curtin replied, "We like age 60 for current employees." To which Tormey responded, "Well, keep it going. What’s good for the goose is good for the gosling."
UE proposed increasing the regular early retirement supplement, the disability supplements, and the $350 special supplement. Also, the union called for eliminating reductions for disability pensions and lowering the eligibility requirement to 10 years. In calling on the company to recognize the union as the bargaining representative for GE retirees, UE pressed for a substantial increase in retirees’ pensions and COLA on present and future pensions.
The union called for a pension service "buyback" opportunity, and Pat Rafferty described why this is needed in relatively rare situations when GE re-employs former employees.
GE ON WAGES, DISABILITY
Jennifer Edwards made GE’s presentation on wages, in which the company again took credit for the wages and benefits that the union has dragged out of them over the years. "You don’t have to convince us that we’ve done a good job over 70 years of bargaining," responded John Hovis at one point. "But the question is what our members need today, and what GE can afford to provide." The presentation lumped together every conceivable employment cost – including government mandates like Workers’ Comp and Social Security and assessments of "hourly costs" of retirement benefits – to arrive at a "total compensation" figure of $53.64 an hour. "To the average GE worker, telling them that they’re making $53 an hour is not reality," commented Steve Tormey.
Tormey also pointed out that wages and compensation as a percentage of total GE revenues have declined. "The name of the game in GE is not what you pay per hour, but how many people you employ." If you look at unit labor costs, it’s clear that with higher production and profits from a smaller labor force than in past decades, "GE is a very high value-added manufacturer."
The most significant admission in Edwards’ presentation was that, notwithstanding GE’s often-repeated assertion that the current contract brought workers 17 percent higher wages, real wage growth in this contract was only 4.6 percent – slightly over one percent a year. Tormey said, "We don’t negotiate wage increases just to tread water," adding that any GE manager who delivered such meager returns to the company would be in big trouble.
GE’s Kathy Sanchez then made the company’s presentation on disability benefits. Most of this covered ground on existing benefits that was already well-known to the UE bargaining committee. Her slide presentation only became controversial near the end, when it summarized the changes imposed on salaried new hires in 2005, and which GE now hopes to inflict upon union members.
One slide showed that a 54-year-old employee with dependents who became disabled in 2007 would be hit with a 37 percent pension reduction, and lose all post-65 health coverage. Tormey called the changes "carnage." Frank Fusco commented, "A 54-year-old man or woman working in the shop could become disabled at any time. A 37 percent reduction in their pension is a death blow."
UE was represented in Wednesday’s bargaining by President John Hovis; Secretary-Treasurer Bruce Klipple; Conference Board Secretary Steve Tormey; UE Director of Organization Bob Kingsley; Scott Gates and Bruce Reese, Local 332; Marcia Barnhart and John Payne, Local 731; Lynda Leech, Local 618; Bill Wossum, Local 1010; Pat Rafferty and Frank Fusco, Local 506; Ed Baran, Local 751; and Ron Flowers, president of RAGE, the UE Local 506/618 retirees group. Also participating on the UE bargaining committee were Tom O’Heron of the IAM, Bob Roberts of IBEW, Rudy Gomez of UAW, and Mike Barrell of the Steelworkers. Chris Townsend, UE political action director, represented UE at the IUE-CWA bargaining table.
Bargaining resumes Thursday morning.