Another nail in the DB coffin
U.S. Steel lockout at Hamilton plant over pensions another harbinger of the end of private-sector defined benefit plans — so how will retirement be funded?
Nov 8, 2010
By Todd Humber (email@example.com)
Anyone searching for yet another sign the defined benefit (DB) pension plan is an endangered species — and almost extinct in the private sector — need look no further than Hamilton.
Just after 7 p.m. on Sunday, Nov. 7, U.S. Steel padlocked the gates at its Hamilton plant, locking out 900 workers in a labour dispute that hinges on the company’s DB plan.
According to published reports, the company dropped its demands for concessions on vacation time, benefits and cost of living allowances. But it has refused to budge on the pension issue.
U.S. Steel wants the current DB plan closed to new hires. New employees would fall under a defined contribution pension scheme. And the company also wants to stop indexing payments for current retirees.
The union has refused to take management’s proposal to a vote, even though the terms offered by U.S. Steel are similar to those accepted by workers at Lake Erie Works earlier this year following an eight-month lockout, according to the Toronto Star.
How the Hamilton lockout will conclude remains to be seen, but it will be very surprising if U.S. Steel caves on the pension issue. While it’s not yet possible to count the number of private-sector firms with DB plans with your fingers, that day is not long off — for better or worse. It won’t be long before the only organizations that offer gold-plated pension plans are in the public sector. And as deficits rise, and a bitter electorate ushers right-leaning governments into office, even public sector DB plans might be endangered.
The demographics problem facing recruiters as the baby boomers begin to retire en masse is nothing compared to the financial nightmare facing actuaries and employers that have to bankroll pension costs for this burgeoning group of retirees.
So what’s the solution? If the private sector is unwilling (or unable, depending on whom you choose to believe) to bear the costs of worker retirement and taxpayers are loathe to foot the bill, where will the money to sustain workers in their golden years come from? DC plans have replaced DBs in many organizations, but who out there with a DC plan feels entirely confident about their retirement prospects?
So where can employees turn for help? This looks like a role best suited for the venerable Canada Pension Plan, as many experts have touted. Giving workers the ability to sock more money away during their careers, and getting higher CPP payments in return, looks appealing.
Sure, employers will have to contribute more. But an extra couple of bucks on employees’ paycheques is going to be a lot easier for a CFO to swallow than ensuring a DB plan is fully funded well into the future.
Todd Humber is the managing editor of Canadian HR Reporter, the national journal of human resource management. For more information, visit www.hrreporter.com.
Todd Humber is the publisher and editor-in-chief of Canadian HR Reporter, the national journal of human resource management. Follow him on Twitter @ToddHumber