Heinz ‘derisks’ pension plan
By Teresa F. Lindeman, Pittsburgh Post-Gazette | |
McClatchy-Tribune Information Services |
The
A few months ago, the company -- which was acquired for more than
Then the mailbox delivered another blow from Heinz. The company doesn't want to manage his pension plan anymore. "At Heinz, we are committed to being the best food company in the world and pension plan management is not our core competency," said the letter dated
Like many other companies before it, Heinz is planning to shift the pension obligations off its books -- a process called "de-risking" by organizations like the Pension Rights Center, an advocacy group on retirement issues in
Some experts see it as a logical move that will give Heinz relief from a volatile obligation that needs regular infusions of cash. They think the step might even offer a more secure guarantee that pensions won't be threatened if Heinz ever runs into trouble or ends up in bankruptcy.
The Pension Rights Center has concerns, arguing that both offering people lump-sum buyout offers and transferring pensions to insurance companies in the form of annuities could open retirees up to new risks. Individuals may not be prepared to invest the sums properly to make the money last, and they'll no longer be backed by the
For its part, Heinz believes the changes to its U.S. and Canadian pension plans will protect retirees' benefits while helping the company. "The value of pension benefits earned to date under these plans will not be affected by these changes," said
He, too, noted that Heinz isn't a trailblazer on this issue. "Many companies have recently made similar changes providing greater flexibility for plan participants and more efficient operations for plan sponsors whose core business is something other than managing and delivering pension benefits."
Heinz has significant pension obligations, according to information in regulatory filings made in the months after the sale to a joint venture of
In a filing earlier this year, Heinz indicated it had defined benefit pension and other post-retirement benefit plan obligations of
The company said it maintains retirement plans for the majority of its employees. The defined benefit plans are mainly for domestic union and for foreign employees, according to a regulatory filing. Defined contribution plans -- a term that generally refers to 401(k) plans and individual retirement accounts that both employees and the company contribute to -- are offered to most of the company's nonunion hourly and salaried employees.
The changes outlined in the letter sent to
Effective
Most benefits in the plan have been frozen since 1992, "meaning many participants have not been accruing any benefits in these plans for more than 20 years," the company said.
Heinz has also merged two other plans, known as Plan B and Plan C, which cover both active and former employees covered under collective bargaining agreements, said
In the case of
Participants can expect to receive a lot more letters and updates as Heinz works its way through the
In buying annuities, Heinz will be required to choose an insurance company large enough to securely handle the size of its plans. When GM made the move a couple of years ago, the sheer size of the pension plans limited its options.
In the past when an insurance company failed -- a rare enough thing that the Pension Rights Center uses the term "unlikely" -- plan participants have been able to get help from the courts if they proved their employer didn't properly vet the annuity supplier, said
"The only way for a company to truly relieve themselves of the liability is to go through this process and dot their i's and cross their t's," he said.
It's all confusing and confounding to
He understands that companies have to make decisions to help their businesses. He thinks the passage of the Affordable Care Act helped spur the decision by Heinz to end his health care insurance a few years ago and switch to a health payment. But when that payment was cut, it left him scrambling, which he is doing again in response to the pension change.
As for company management, he said, "All you people involved in doing what you are doing to retired pensioners consider this: Eventually it will happen to you."
Free legal advice for individuals concerned about their pension, profit sharing or retirement savings plans is available to
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