UE Pushes Hard on Pension
Issues; GE Presentations
Compensation and Benefits
New York – Wednesday, June 8
Negotiations resumed on Wednesday morning, June 8 for a full day session. The sole business of the morning session was a comprehensive pension presentation given by UE-GE Conference Board Secretary Steve Tormey. After a short lunch break, GE gave four presentations - wages and compensation, paid time off, disability, and life insurance and other benefits.
Union Examines GE Pension
Plan Funding and Assets
UE’s comprehensive pension analysis was divided into four sections; GE pension plan funding, plan problems, the “golden years,” and proposed union solutions to plan shortcomings and deficiencies.
Despite the fact that GE pension plan assets dipped somewhat during the recession, Steve Tormey told the company that the plan - with more than $44 billion in total assets - has “weathered the storm [of the financial crash] in remarkable fashion.” He compared the GE plan to the total assets of sixteen Fortune 100 companies - including Boeing, Lockheed, Honeywell and Caterpillar - and presented a slide showing that plan assets are greater than the total company assets of all but five of these large corporations.
Pension plan assets and obligations to participants are roughly equal today, and plan investment returns have bounced back nicely after the stock market crash in 2008. “Pension plan assets,” Tormey remarked, “give GE a competitive advantage when compared to almost all other major U.S. manufacturing companies.” Unlike other manufacturing corporations that sunk $3-4 billion into their plans, GE made no contributions to its plan - again a major competitive advantage - since 1987.
There are great financial advantages to a pension plan of this size, Tormey said. Professional management spreads risk over hundreds of thousands of pension plan participants and investment decisions are more flexible and efficient than an individual could possibly make in a 401(k) plan or defined contribution plan.
In response to complaints by GE spokesman Gritti that the pension plan was suffering from declining interest rates, UE President Hovis remarked: “If interest rates are that low, then a 401(k) defined contribution plan is the worst place for GE workers to have their retirement funds saved.”
Tormey then criticized GE for maintaining a special “supplemental plan.” The plan only has 3,200 participants - all highly paid executives - but has assets of $4.4 billion. He noted that the company hasn’t made any moves to discontinue the executives’ lucrative extra pension plan, but is brazen enough to demand elimination of the defined pension plan for new hourly hires.
A Sound Pension Plan -
With Some Shortcomings
Following up on GE’s pension presentation of the previous day, Tormey showed how the plan’s two formulas - guaranteed minimum pension and career earnings - are inadequate for most hourly workers. Most hourly workers (68 percent) retire under the guaranteed minimum pension, which now has an average pension value of about $56/per month for each year of GE service, or less than $1,700 per month for a retiree with 30 years of service. The career earnings formula discriminates against hourly workers. Tormey called for a new formula based on a straight 1.9% accumulation rather than the 1.45%/1.9% split formula presently in effect. Tormey then told GE - “there should be democratization of the career earnings formula” which is fairer and easier to understand and calculate.
The GE Conference Board Secretary also illustrated other problems with the pension plan. Despite the fact that GE’s plan has greater assets and is better funded than most corporate plans, its benefits are exceeded by those of several other companies or industries. GE’s pension multiplier is significantly less than Boeing ($80), the Longshore union plan ($150), Mineworkers union plan ($69.50), and Steel ($85-$100).
Disability pensions are also problematic for GE workers. Disability pension supplements of $75 per month for Social Security eligible disabled workers have not increased since 1968. Similarly, the maximum benefit for a Social Security ineligible disabled worker has not increased since 1976 when a $150 month supplement was established.
Tormey warned the company that, despite some of the plan’s shortcomings for our members, 401(k)s are not the solution. He quoted a 2011 Wall Street Journal report which said that “the median household headed by a person age 60 to 62 with a 401(k) account has less than one-quarter of what is needed in that account to maintain a standard of living in retirement. A staggering $1 trillion in 401(k) plans was lost through the 2008 financial debacle, and even with some improvements in such accounts since then, he reported, those plans have not recovered to their pre-recession levels.
Our Golden Years?
Along with UE retiree representative Ron Flowers, Tormey questioned how retirees were doing in their “golden years – our time to enjoy our life.” Tormey showed how a typical GE worker retiring in 1986 had a monthly pension benefit of $518. That benefit was increased to $705 per month as a result of a series of small increases granted by the company. However, even with those increases - when adjusted for inflation - the pension benefit is only $358.
Other slides illustrated the experience of 1991, 1997, and 2002 retirees and indicated that those retirees suffered similar devaluation in their pension benefits. Tormey commented that it was time for GE to protect pension with a cost-of-living-allowance (COLA) so that retirees don’t suffer steep cuts in the value of their pension.
Making matters even worse, retirees have become subject to increasing medical costs which further eats away at their fixed income. Post-65 retiree insurance costs, according to a slide shown by Tormey, has more than doubled since 2000. “The cost of Medicare Part B and what a GE retiree pays for an optional post-65 plan means that a retiree with spouse has $451 per month sliced off of the pension benefit,” he noted.
Pre-65 retirees earning over $60,000 per year at retirement have suffered a big hit since their medical contributions are based on their final earnings as active employees rather than on their pension amounts. Tormey noted that under “Health Care Preferred,” medical contributions for these retirees have risen $673 per year. “Under the company’s Health Choice proposal,” he reported “pre-65 retiree contributions would amount to $2,200 per year under Option 1, an annual increase of $1,524 for vastly inferior coverage.”
Making matters even worse, Social Security benefits in the United States are inadequate when compared to other developed nations. Another slide illustrated that of 33 developed countries only 7 countries provided lower national pensions than we do in the United States. Tormey said, “We’re near the bottom of the list and retirees depend on the company for badly needed improvements.”
Prior to providing the company with our solution to the pension crisis, Tormey “accentuated” the positive results from 2007 bargaining and noted that there had been a significant expansion and restructuring in guaranteed minimum tables, the establishment of $70,000 earnings threshold before the pension plan requires employee contributions, and two SERO windows which together “worked well for us and the company.”
Tormey also suggested that the company must address the “negatives” - those items that were not addressed in the 2007 contract - including changing the career earnings formula, stopping the insurance cost-shifting to pre-65 and post-65 retirees, and increasing disability pensions.
At the conclusion of his presentation, the UE-GE Conference Board Secretary outlined UE’s pension proposals to the company. The proposals include making the plan non-contributory, improving the career earnings formula and raising the guaranteed minimum tables so that the higher 1.9% multiplier applies to all employees. UE also proposed full unreduced pension benefits after 30 years of service with no age requirement. Supplements for disability pensions should be substantially increased and the service requirement for this benefit should be reduced to ten years instead of the current fifteen year requirement.
Referring to yesterday’s presentation by Retired Association of General Electric Employees (RAGE) representative Ron Flowers, Tormey outlined UE’s proposal to require that the minimum pension benefit for current retirees be raised to $34. In concluding the union’s pension presentation and proposal, he noted that this proposal would increase pensions for thousands of retirees most in need since they are at the bottom of the GE pension ladder.
Presentation on GE Wages
Kendell Visinsky, GE Manager of Compensation and Benefits, began the afternoon session by saying that UE-represented hourly workers had received real wage increases [wage increases less than inflation] of 22 percent in the eleven years since 2000 . Responding to her calculation, Tormey told the GE manager: “That’s really only 2% per year even by your figures, and would have been much worse but for unexpectedly low levels of inflation over most of the period.
Wayne Burnett, UE Local 506 Business Agent, continued to attack GE’s effort to paint our members as high wage earners, saying our “wages are a far cry from the $100,000 you keep on dragging out” in these negotiations. Burnett also reminded the GE presenter that in 2009 when “the bottom dropped out” in Erie, our average wages also dropped.
GE’s wage presenter also attacked UE overtime and shift premiums and claimed that those additional wage issues added more than twelve percent to GE’s labor cost. Tormey pushed back and asked Ms. Visinsky if it is cheaper to use overtime if the alternative is hiring more workers. Randy Middleton from the IBEW answered “in relation to new hires overtime is always cheaper than hiring new employees.
UE President Hovis attacked the premise of the GE presenter’s wage argument, commenting “The fact is that GE still makes $42,000 in profit per worker.”
GE spokesman Gritti complained that the company is worried about competition from competitors like Caterpillar. Wayne Burnett responded: “Let’s not compare Caterpillar and GE now. Caterpillar is not competitive with us now. Maybe we’ll need to talk about Caterpillar some time in the future, but that time isn’t now.”
When Gritti said that Erie hasn’t had a real competitor for locomotives in 25 years, Hovis responded: “Your production process suffered as a result. GE got really sloppy.”
Conference Board Secretary Tormey accused GE of inflating its total wage costs by including costs mandated by federal law - like social security and worker’s compensation and told the company: “I suppose at some time you could also add the cost of the employee parking lot to our total compensation.”
After GE presenter Visinsky claimed that UE hourly employees earn $6 to $14 an hour more than the average U.S. manufacturer, UE President Hovis unapologetically explained: “We’ve done a very good job of representing our members and we’re very proud of it.”
Gritti asked UE bargainers how GE could compete with other companies with the kind of wage growth it has experienced over the last 11 years. Tormey replied first for the union: “The name of the game for GE is not how much you pay, but how many you pay to produce the product. Concluding the discussion on wages, Hovis told GE that UE members in Erie produced 350 locomotives with 7,500 workers in the 1980’s, but are now producing 915 locomotives with 3,600 people. “We’re producing almost three times the number of locomotives with less than half of the people.”
Disability Benefits Discussed
Kathy Sanchez, a GE benefits representative gave an informative presentation on GE Disability benefits and outlined the different programs that are available when workers are injured. Ms. Sanchez explained that GE assists employees in their return to full time work activities depending upon the employees wishes.
The only controversy in this presentation was sparked when Steve Tormey asked whether GE has a policy of allowing injured workers to return to work on a voluntary basis when they are ready to do so. Sanchez answered affirmatively, but then was interrupted by GE spokesmen Gritti who commented: “I live in the real world. Especially with workers compensation issues, we bring workers back even if it’s just to stuff envelopes.” Agreeing with Gritti, Local 506 Business Agent Wayne Burnett stated: “They track us down and bring us back to work.”
GE Life and Other Insurances
In a manner similar to its disability benefits recap, GE presenter, Michael Millot, outlined current GE life insurance and survivor benefits. When the GE presenter provided a slide listing those benefits, Tormey asked why the company had omitted the $50,000 retiree life insurance which is a current benefit for UE members. Millot couldn’t explain the omission and GE spokesmen Gritti defensively claimed: “We have no hidden agenda.” [GE has already eliminated retiree life insurance for salaried employees hired since January 1 of this year.]
Paid Time Off, Work,
Life and Education Programs
GE’s fourth and last afternoon presentation was given by benefits representative, Janine Rouson who reviewed vacation and holiday allotments governed by the National Contract, as well as sick and personal days, bereavement, and military leave. Ms. Rouson also reviewed GE educational benefits, scholarships, and educational loans, as well as loans and grants during personal financial emergencies, and federal or state disasters. There was no need for any rebuttal to this non-controversial presentation on the part of the UE committee.
Separately from the main UE table in the afternoon, Local 1009 Chief Steward Harold Spencer, Anahiem, Ca. participated in the Apparatus Service Shop discussion at the IUE-CBC table at the nearby London hotel. Spencer helped explain a number of contract demands pertaining specifically to the apparatus shops, including a proposal to create 15% wage differential for work in nuclear facilities, and demands for annual eye exams as well as improvements to shoe, tool, and per diem allowances. The service shop session consisted of UE’s Spencer along with IUE and IBEW representatives.
Negotiations ended for the day after the last GE presentation and will resume Thursday, June 9 for a half-day session.
UE was represented in Wednesday’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 participated in the morning session but attended an afternoon discussion at the IUE table on apparatus service shop issues (see above), 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.