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Feb. 5, 2009
To All McClatchy Employees:
Today, McClatchy is announcing significant changes to the retirement programs we offer employees. These changes include freezing the company’s pension plans and temporarily suspending matching contributions to our 401(k) plans.
These are very difficult announcements to make. Some of these changes are part of the ongoing realignment and standardization of our benefit programs that began shortly after the Knight Ridder acquisition in 2006. Other changes are necessitated by the current and prolonged economic challenges we are facing and are necessary to keep McClatchy financially strong and viable in the short and long term.
The freezing of our pension plans – which include The McClatchy Company Retirement Plan and the Knight Ridder Pension Plan – will be effective March 31, 2009. Your pension benefit grows each year based on years of service and your pay. As of the freeze date, employees will stop earning additional pension benefits. However, you will keep the entire pension benefit you may have earned prior to the freeze date. Although your pension benefit will be frozen, your continued employment after the freeze date will still count toward vesting and early retirement requirements. McClatchy is committed to honoring all of its existing pension obligations.
Pension programs were introduced decades ago for employees who anticipated spending their entire careers with one employer. Today’s workforce is far more mobile. More and more companies are focusing their efforts on 401(k) plans that are portable and potentially preferable for a changing workforce. Many of our digital competitors and media peers either do not offer traditional pension plans or are discontinuing their programs.
Freezing the pension plans also helps mitigate the need for large, future pension contributions by McClatchy. Pension plans are volatile and subject to the unpredictability of financial markets, at times requiring large cash contributions to make up for asset losses. Large pension contributions could ultimately jeopardize McClatchy’s ability to compete and restrict our ability to innovate and reinvest in our newspapers and digital operations.
The temporary suspension of matching contributions to our 401(k) plans – which include the Knight Ridder 401(k) Plan and the McClatchy Money Shelter 401(k) Plan – will also take effect on March 31, 2009. Suspending the 401(k) match helps us manage through the near-term economic challenges.
We have every intention of reinstating the company match as soon as it becomes financially feasible, and we are hopeful that the match can be restored as early as 2010. We encourage you
to continue making contributions to your 401(k) accounts in the interim as these retirement benefits become significantly more important given the pension freeze.
Over the next few months, McClatchy will be restructuring its 401(k) program. As indicated above, McClatchy currently administers two separate 401(k) plans – each with different plan designs, administrators and investment options. We are in the process of consolidating these two plans into one, new 401(k) program under one administrator and with a common lineup of investment options. We expect the new plan to provide greater equity among all McClatchy employees.
We are still working through the details and anticipate having a new 401(k) plan in place by mid-summer. Although the company match is temporarily suspended as of March 31, once reinstated it will equal 66.67 percent of the first 6 percent of before-tax contributions. The new 401(k) plan will also offer a profit-sharing component with supplemental McClatchy contributions for the years the company grows operating cash flow. Employees will continue participating in their existing 401(k) plans until the new program is operational later this year.
I wanted to share some of these new 401(k) plan details with you today to reaffirm our intention of restoring the company match and to let you know that the restructured 401(k) plan, over the long run, may help offset the impact of the pension freeze.
For those employees whose benefits are covered by collective bargaining agreements, the company is contacting union leaders to discuss these changes with them directly.
McClatchy continues to evolve and move forward thanks to the talent, dedication and hard work of our employees. You are the foundation for the success we’ve enjoyed in the past and the success I’m confident we will realize in the future. We will continue to evaluate all of our employee benefits to make sure they remain competitive and attractive to present and future employees.
I realize many of you will have questions regarding today’s announcements. Attached is a Q&A to provide some immediate background and information on the pension freeze. You should contact your local human resources department with additional inquiries or send an e-mail to corporate at
[email protected]. You will receive more information on all of these changes in the weeks and months ahead.
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