Retiree; Retirement Issues
Again Dominate Negotiations
New York – Tuesday, June 7
Negotiations resumed on Tuesday, June 7. Talks followed the giant, standing room only, multi-union rally in Erie, Pa. this past weekend and were largely focused on retirement issues. During the morning session, the union pressed its proposals for pension increases for current retirees and discussed other proposals for contract improvements for apparatus service shop employees. GE gave three presentations in the afternoon session on the pension plan, savings and security plan (S&SP) and on job and income security.
GE Retirees Suffered
Through the Great Recession
Retired GE worker Ron Flowers – representing the Retirees Association of General Electric (R.A.G.E.) – told the company that pensioners were “devastated” by the crash in GE stock prices. Flowers explained that before the crash the average stock “nest-egg” of a select group of retirees who had given their stock proxy votes to R.A.G.E., was $79,000 per retiree, but after the financial debacle fell to just $13,700 per retiree. Flowers complained, “This was supposed to be the nest-egg to protect retirees for the rest of their lives.”
To make matters even worse, he reported that the decline in stock dividends was the next piece of “devastation” for retirees. Prior to GE’s stock price crash, the average annual retiree stock dividend also plummeted. “We used to be able to use the dividend check to pay off our real estate taxes and now we have to scrounge for other ways to pay our taxes.” Flowers exclaimed, “retirees don’t have a lot of choices - we’re on a fixed income.”
The retiree’s representative quoted Jeff Immelt’s 2009 West Point speech in which the GE chairman said that: “In too many situations, leaders divided us instead of bringing us together. As a result, the bottom 25% of the American population is poorer than they were twenty-five years ago.” Flowers wondered how many GE retirees have slipped into the bottom 25 percent of the population because they no longer have a nest-egg and the purchasing power of their GE pensions has eroded substantially over time.
UE Proposes to Raise Minimum Pension Amount for Retirees
Flowers and the UE bargaining committee proposed that the company adopt a minimum pension of $34 per month, the bottom of the pension guaranteed minimum tables, for each year of service for current retirees. He reported that according to the union’s information its retiree’s proposal would cost GE only $215 million. “That seemed like a lot of money to me,” the retiree explained “until I listened to GE’s financial presentation when you talked about your profits in billions - $14 billion - and now I know it’s just a drop in the bucket.” In fact, the market value of the GE pension fund exceeds $40 billion.
Presenting the retirees’ case for a fair pension improvement, Flowers told GE that he talked with one retired GE employee who left the company in 1986 with a $793 a month pension and has only received $115 monthly pension improvement in the last fifteen years. Such retirees are suffering with big food and utility increases. Gasoline is at $4 a gallon, Flowers noted, and an increase in retirees’ pensions is critical for many retirees who Flowers said are “in trouble” keeping their heads above water. He reminded the company: “Nothing requires you legally to take care of the retirees, but it’s only right. These people built GE and the company has tens of billions in cash to do it.”
UE-GE Conference Board Secretary Steve Tormey reminded the company that UE’s proposal to increase minimum pensions for retirees helps people at the bottom of the income ladder. He told GE that we need both a minimum pension for current retirees and cost-of-living increases to protect their purchasing power in the future. “The sources of retirees’ income is drying up,” and he reminded the company that “interest rates are terribly low for savings accounts that retirees depend on.”
UE President John Hovis recognized GE’s occasional past pension improvements. “I don’t want to underestimate the needs of retirees and I am not going to say in some cases that the company has not moved in the right direction. I want to say that whatever has moved the company before should move you again now,” said Hovis. Like Tormey and Flowers, Hovis explained that the need for retiree increases is necessitated by the decline in personal savings and the effects of inflation.
Additional Improvements For Future Retirees
UE bargainers also proposed that improvements be made to post-65 retiree medical plans. The post-65 Medicare Plan for Pensioners (MCPP) which supplements Medicare Part A (hospital) has eroded in value. The Plan benefits have increased minimally in recent years while the shortfall GE retirees face in paying the Medicare Part A deductibles has grown rapidly. Tormey asked the company to contribute more to help cover the shortfall. The union also proposed increasing coverage for extended hospital stays and skilled nursing care. “We have not made improvements on those items since 1997. Retirees are particularly vulnerable and need help on these items,” Tormey stated.
The union also presented its demand that the company establish vision and dental programs, not covered by Medicare, for post-65 retirees. And noting that hourly employees are much less likely to purchase long-term nursing care insurance (27,000 exempt retirees get the coverage while only 4,000 hourly retirees signed up), UE negotiators suggested that the company should establish a partial company co-pay to help with long-term care assistance to our members, who are not in the same income class as most exempts.
At this point in the conversation, GE spokesman John Gritti sparked a heated interchange by saying: “You’re almost forcing me to talk about how many hourly people in Erie earn more than $100,000 per year.” President Hovis and Local 506 Business Agent Wayne Burnett responded: “The company is always asking us to work all kinds of overtime. Now, it sounds like you’re being critical of the very people who worked all of the overtime to get out the orders.” Burnett added , “I would like to see the data from 2009 when the bottom dropped out and 1,400 people were laid off. How many people were earning $100,000 then?” Tormey reminded GE that it has imposed a hiring freeze in Ft. Edward and “pushes” overtime instead of hiring needed personnel.
Concluding the union’s proposals on retiree medical issues, Tormey reminded GE that it had received a substantial windfall from government reimbursements of Medicare D (prescription drugs). UE proposed that the company cover diabetic supplies under the Pensioners Prescription Drug Plan (PPDP). He also called for GE to open enrollment for optional post-65 GE medical plans. Many retirees who enrolled in private “medicare advantage” plans may want to return to GE plans, but are unable to unless an open enrollment is offered.
Apparatus Service Shop Proposals Discussed
Toward the conclusion of Tuesday’s morning session, Steve Tormey and Harold Spencer, Local 1009 in Anaheim, CA raised several proposals specific to apparatus service shops.
Spencer reported that the lead worker on an outside job is supposed to be paid two steps more than the highest paid person he or she is leading. However, because some service shops have a higher rate structure, employees who are designated as leaders sometimes earn no more than workers from other shops that they are supposed to lead. Tormey added: “Our position is that the intent of the contract is clear; leaders should have two steps higher rates than all workers they lead, not just the workers from their shop.”
UE also proposed that meal money for Apparatus Service shop workers be increased from their current $36 per day to the per diem rate established by the IRS, which is substantially higher than the GE rate. “In different cites,” Spencer told GE, “you pay more for food – and if you don’t believe me just walk down the street here in New York City.”
The Union proposed raising the current safety shoe and tool allowances for apparatus service workers. Additionally, UE proposed that the company pay for annual eye-glass exams since these GE employees are often compelled to get new prescription safety glasses each year, yet the eye exam is only paid for once every 24 months.
The two final apparatus shop proposals dealt with pay practices while workers are assigned out of town. Apparatus workers who are stuck on a job-site during a weekend layover are guaranteed just 4 hours pay when no weekend work is available for them on-site. “We’re stuck away from home in a hotel room. We’re not there because we want to be away from home,” Spencer explained. UE proposed that the company pay eight hours straight-time for both weekend days when it has no work to offer out-of-town apparatus workers. Finally, the union proposed that for each 21-day period that an apparatus worker is out-of-town on assignment, they should be given a day off with pay. The current practice provides for one day off without pay.
GE’s Three Afternoon Presentations
GE’s three presentations consumed most of the afternoon. Mike Gorman, GE’s pension specialist offered the first presentation on GE’s current pension plan. Gorman had just commenced his presentation in which he characterized the plans as both “sound” and a provider of good income replacement for retirees, when UE President Hovis responded: “It’s a good plan, it pays well, and we don’t know why you’re trying to get rid of it [for new hires].”
Continuing his presentation, the GE pension manager reviewed the two methods for calculating pensions - the “guaranteed pension” (which is largely based upon service) and the “regular pension” which is based upon what he referred to as “annual income slices” which increase our pension calculations during periods of higher earnings. Combined with employee savings and Social Security benefits, the GE pension plan provides between 70 and 80 percent of workers’ pre-retirement earnings that retirement experts cite as the basis for a “comfortable retirement.”
Gorman also reviewed how the two different forms of early retirement “serve to bridge the gap to social security.” The GE presenter told UE that, depending upon workers’ retirement levels, GE pension benefits provide between 39 and 41 percent of pre-retirement income, Social Security provides 23 to 39 percent, and Savings and Security Plan investments provide 12 to 20 percent.
Tormey reminded Gorman that his projections were somewhat rosy. The 40% income replacement provided by GE pensions only comes after 35 years of service. Many GE workers select surviving spouse options which lower their actual pensions and Gorman’s calculations did not reflect those projections.
In summing up his assessment of the pension, Gorman told the UE bargaining committee that even though the plan has become slightly underfunded, its overall status is “sound.” He continued, “it’s a well funded trust.”
GE’s Savings and Security Plan (S&SP)
Denise Faggella, GE’s Manager of Savings and Security gave its second presentation on Savings and Security and termed the plan “part of a competitive retirement package, which offers a broad array of investment options.” The GE Manager spent a good deal of time touting the investment tools and resources since 2009 when GE contracted with Fidelity Inc. to manage S&SP’s account and investment options.
Commenting on Fidelity’s new administration of the S&SP plan, Tormey told the company that it was no accident that the plan was subcontracted once a group of current and former GE employees filed a $40 billion lawsuit against the company for alleged mismanagement.
Wayne Burnett, Local 506 Business Agent echoed Tormey’s concerns, stating that “most of the people I know were worried about this plan [when Fidelity Inc. started administering S&SP]. Harkening back to the morning’s discussion on supposed high wage-earners, Burnett sarcastically remarked: “I wanted to see how much I still had from the $100,000 I never earned during my 37 years at Erie GE.”
Tormey cautioned the company that S&SP investments have been very “volatile” for our members. In 2006, the average hourly employee’s account was valued at $72,000. That amount bottomed out to $41,000 during the recession and now is now back up to $56,000. Tormey concluded the discussion on Savings and Security stating, “My point is here to show that we have great volatility in comparison to the sound and secure pension benefits presented by Mr. Gorman. It’s clear that there is a lot more jeopardy with S&SP than with the GE pension plan.”
GE’s Attack on SERO
The afternoon’s last GE presenter, Barbara Beckmann, Manager of Job and Income Security laid the groundwork for GE’s attack on SERO. While emphasizing that GE’s job and income security program had served its function of providing layoff benefits, insurance continuation, and a means of job and career transition during layoffs, plant closings, subcontracting, and discrete product line shutdowns, she also showed a slide calling for the elimination of SERO! On the slide, GE claimed that each use of SERO costs the company $340,000 on average.
Hovis and Tormey both reminded GE that SERO came about because the company steadfastly has refused to provide any real job security in the contract. As a result, we negotiated items like SERO which provide income security when jobs are lost, but not true job security. Now GE is complaining about the costs. Tormey also noted the company had in the past used voluntary SERO’s, unrelated to job loss events, as a way to establish supposed no-layoff policies during organizing drives in non-union facilities.” Responding to GE’s claim that SERO costs too much, Tormey said: “Please understand this, we want to make it expensive for the company to close plants. When it’s convenient to you to transfer work or close plants, SERO doesn’t seem expensive to be much of an impediment to GE because you’ve been closing plants for thirty years and more.”
“The company has always benefitted from SERO and it has worked well for us,” President Hovis recounted. When GE spokesmen Gritti said that the largest users of SERO were workers in Erie, Local 506 Business Agent Burnett responded: “What would you expect, you laid off 1,400 people.”
Tormey concluded the job and income security discussion by telling the company that the main participants in SERO, workers from age 55 to 60, are “vulnerable.” “People are going to be in a very difficult situation without SERO. There aren’t a lot of alternatives, so we ask that you consider that fact.”
Negotiations will resume on Wednesday morning June 8, when the UE gives the company a comprehensive presentation on pensions.
UE was represented in Tuesday’s session by President John Hovis, Conference Board Secretary Steve Tormey, Secretary-Treasurer Bruce Klipple, Wayne Burnett and Roger Zaczyk of Local 506, Mary Stewart-Flowers of Local 618, Scott Gates and Angel Sardina of Local 332, Harold Spencer of Local 1009, Ron Flowers of the Retirees Association of General Electric, and International Rep. Gene Elk. Political Action Director Chris Townsend represented UE at the IUE-CWA bargaining table. Also participating on the UE committee were Rudy Gomez, Wayne Reynolds, and Patricia Morris-Gibson of the UAW, Tom O’Heron of the IAM, Mike Barrell of the Steelworkers, and Randy Middleton of the IBEW.