The Newspaper Guild of New York reports on current labor negotiations with the New York Times. The Times, in the face of economic reality it is facing in running its business, is proposing a freeze of the defined benefit pension plan for its employees.
While I personally think such steps are reprehensible, they are the reality of this day and age and a step many private employers have taken. They do so because such plans are costly, liabilities are large and subject to fluctuation in interest rates and funding is subject to the whims of the stock market. Promises are easy to make, paying for them is another matter.
But there is some irony in such a proposal from the New York Times. The Times was not sympathetic to actions by various governors trying to address the same issues at the state level and in many cases not nearly as aggressively as the Times has proposed.
NYT blogger Paul Krugman saw the state issue as a scam claiming state workers paid sufficiently toward their pensions because they did so through low wages, ignoring the fact that states still didn’t have the cash to fund generous pension promises.
You can be as liberal and socially conscious as you like. You can sympathize with union workers, you can seek to provide a safety net for every human being on the planet, but sooner or later all those promises and good wishes run smack into reality. Those promises must be affordable now and in the years ahead and they must be paid for by a broad base of participants in society. Anything less simply does not work.
There are many who have learned this truth the hard way. General Motors, Greece, California, New Jersey, Wisconsin … and the New York Times come to mind.
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QUINNSCOMMENTARY 
Dick, as I have said over and over and over, pension promises without funding are mere dreams. Pension promises without funding are mere dreams.
Simple fact is that it is almost 50 years since Studebaker failed, and we are closing in on the 40th anniversary of ERISA. Despite clear and convincing knowledge about the need to fund pension plans, to fund the promises made, we are still in a situation where private plans, on average (and averages can be deceiving), are not 100% funded, where the PBGC has an unfunded liability (not sure about how they calculate that) of over $20B, and multiemployer plans are even less well funded, and bringing up the rear are the public plans.
Looking at page 51 of the NYT 10k for 2011, it shows that their pension plans, qualified and non-qualified are 65% funded. How does that happen? It happens because management commits to more than it is willing to fund, and, as is the situation here, the leadership for represented employees accepts those promises, but fails to insist on funding. The old “trust but not verify” process.
How is it that the top 100 corporate defined benefit pension plans are only 85% funded (Milliman, March 2012) – and that is up significantly from just a few months ago due to investment results? In fact, the funded ratio of the Milliman 100 pension plans was 79.2% in 2011. The aggregate pension funding deficit had increased $95B to $327 billion. OPEB contributed an increase of an additional $5.2B in unfunded liability – meaning that balance sheets took a $100B hit in 2011.
How is that?
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How very right you are, private employers are bad enough, but the states are a disaster. It is reprehensible.
Dick
Richard D Quinn Editor
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