Lockheed-Martin machinists on strike ... pension for new employees at issue

As promised, so as to end thread-jack of Romney board (for which, admittedly, I am partially responsible) ...

http://www.star-telegram.com/2012/04/23/3906594/no-movement-to-end-lockheed-strike.html

Main point of contention is a switch to a defined-contribution (rather than a defined-benefit) pension plan for new workers. My argument on the other board was that it's silly to strike over this because defined-benefit plans are going, going, gone ...

 

One of these days defined contributions will be too.

We shouldn't fight that either.

 

Splitting the union is a great strategy for management.

 

Defined contribution's totally different. Easily bargained over, easily budgeted for, easily accounted for. All you're really bargaining over is compensation. Plus, it has the wonderful quality of conforming to the matching principle in accounting: In exchange for your labor in period X, in that same period I pay you Y1 dollars in outright compensation, and I contribute Y2 dollars into an investment account that you control. If your labor is worth Y1 + Y2 dollars to me (and if you can't command any better than Y1 + Y2 dollars elsewhere), we have a deal. If you think my company's such a promising firm, you can always invest those dollars in my firm, but you can also look elsewhere for better, more diversified returns. If it's a defined benefit plan, you have no choice but to invest everything in my firm and its prospects.

 

Along with paying anything more than minimum wage (oh, they're getting rid of the minimum wage laws too). Don't fight that either.

 

Ask some of the Boomers who are still working because their 401k's tanked in this recession just how great a defined contribution is. All you need to do is look at the wording. One has the word "benefit" and one doesn't. If they wanna' do anything they should compromise and go to a hybrid model, with some local health care professional unions have agreed to recently.

 

Yeah? And how 'bout all those boomers who saw their defined benefits fall to near-nothing in a bankruptcy reorganization? Put another way: What is it about a "defined benefit" plan that makes it more secure than those investments made in a defined contribution one?

 

There's always going to be risk associated ... bankruptcy, martian attack, whatever. I'll still try to negotiate a defined benefit over a defined contribution every time.

The other thing I'd point out is that pensions (in private industry) are covered by ERISA laws and ultimately the Pension Benefit Guaranty Corporation.

 

I assume Lockheed's proposal guarantees that the employer will now and forever match the first 3 percent or 6 percent of an employee's contribution.

Because no company would ever take away that match.

 

Whatever match is agreed to in this contract will be for only the duration of this contract. No forevers about it. The only way a company could get out of such a contract is to do it through bankruptcy, which is EXACTLY the same way it could walk away from substantial obligations under a defined-benefit plan.

I'm still waiting for someone to explain how defined benefits plans -- which tie the long-term financial position of employees to one particular firm -- are somehow more secure than defined contribution plans.

 

Didn't read any of the other thread, but will concur with the first post that DB plans are a thing of the past. You can try if you want, but companies are just not going to make this a negotiable item when they've run the numbers and know they can't continue to support it. The expense for a large company can be a staggering amount, and as Ragu notes, can lead down the road to Ch 11.

If this is just for new hires, Lockheed employees are fortunate--many more companies have frozen benefits for existing employees as well.

Should be noted that all this came about when they changed the accounting rules on how the present value of the pension expense had to be calculated and what portion was recognized in each current accounting period. Although logically there's merit to how the expense recognition was changed, the beancounters are the ones who really initiated all the activity of companies shutting these plans down, or at least freezing them.