CWA Battles Employer Assault on Pensions

Organized labor was the driving force behind the tremendous growth of employer-sponsored pension plans from the 1940s to the 1990s, with the number of Americans covered by pensions rising as more workers gained bargaining rights. Yet, today, with union membership in the U.S. at 12 percent, its lowest level since the early 1930s, Americans' retirement security is in crisis (see chart below).

In recent years, employers have been terminating traditional ("defined benefit") pension plans at an alarming rate. Since 1985, the number of such plans fell from 112,000 to just 28,000 today and the number of workers covered has dropped from 30 million to 16 million. (Three-quarters of workers with traditional pensions are union-represented.)

Often these days, it is not financially troubled companies that are dumping pensions, but some of biggest of the Fortune 500. Last year Sears, Hewlett-Packard, Lockheed Martin and Motorola terminated their pension plans, as did telecom giant Verizon for its management and non-represented employees, who also lost retiree health coverage.

Replacing traditional pensions in favor of 401(k) plans where workers contribute, often substantially, to their retirement savings, fattens the corporate balance sheet by eliminating future benefit liabilities — a pleasing sight for investors.

The impact on workers can be devastating. When IBM switched its 140,000 employees to a scaled-back pension in 1999, it assured workers that the new pension would be "more flexible" and have a minimal monetary impact. "I'll never forget the phrase they used," recalled Jim Mangi, an IT specialist with 18 years at IBM. "Management said the impact would be 'cost neutral.'"

For Mangi, then 33, "cost neutral" meant a 42 percent reduction in the value of his pension at retirement. For others, it meant a 50 percent reduction. Many discovered they would have to work an additional 10 years or more to make up for what IBM took away.

The move created a firestorm and IBM employees, many with 15 or more years' service, contacted CWA about organizing a union. They formed a nationwide organization, the Alliance@IBM/CWA Local 1701, and eventually succeeded in narrowing the scope and impact of IBM's pension switch. They also spurred the beginning of a national dialogue on corporate pension practices and abuses that continues to this day.

For union workers, a favorite corporate scheme has been use of the bankruptcy process to throw out their collective bargaining agreements in order to dump pension obligations. United Airlines did just that last year, handing its pension liabilities to the Pension Benefit Guarantee Corporation (PBGC), the government's pension agency. The impact meant a 50 percent reduction in retirement benefits for two thirds of AFA-CWA's 18,000 flight attendants at United.

AFA-CWA sued to block the move. It also urged Congress to prevent the pension's takeover pending a thorough review. The workers took their message to the public, demonstrating at airports throughout the country. Together, the actions put tremendous pressure on the airline which eventually agreed in negotiations to AFA-CWA's bargaining demand to establish a replacement defined-contribution pension, or 401(k). The workers' old pension was taken over by the PBGC, but their new pension, coupled with benefits from their old pension, will allow them to recover a significant share of their losses.

Pensions of public workers also are under attack. CWA is now fighting to preserve the pensions of 50,000 New Jersey state workers. State legislators, seeking to stem taxpayers' anger over rising property taxes, sought to blame the workers' benefits for the state's financial problems. Legislation was introduced to slash workers' pensions and effectively terminate pensions for all new state workers.

Months of lobbying and mobilizing by the workers — culminating in a massive rally by 15,000 CWA public workers at the Statehouse in December — persuaded lawmakers to withdraw the anti-pension measure.

Just as this issue went to press, the workers reached a tentative agreement with the state that preserves pensions for all current and future state workers.