Unions push for pension return

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Unions push for pension return

While United Auto Workers members have pensions, those brought on since the 2008 financial crisis have received 401 plans instead. The union wants the auto companies to provide workers with pensions and those who currently lack them.

Ford, General Motors Co. and Stellantis are determined to consign pensions to the past, even as striking UAW members are just as eager to revive them. The fight has resonance well beyond the auto industry, with inflation inching toward a fraught presidential election cycle, and the plight of the middle class - and the financial condition of millions of retirees - is in front and center.

Labor experts don't see a return to a system of full-fledged pensions happening anytime soon, if ever, because of the massive cost associated with them. Even so, demanding pensions is a smart strategy, one analyst says, as it reminds both sides how far behind auto workers have fallen since their heyday.

If you use your retirement funds as a bargaining chip, it might lead to other sweeteners, such as more generous matching contributions to 401 funds. We're not giving up on these issues, we're going to push harder,' said John Logan, chair of the Labor and Employment Studies department at San Francisco State University.

The most common retirement plans were defined-benefit pensions from the 1980s, under which employees typically receive a guaranteed monthly income in retirement and employers took on the cost and risk. In the U.S., such traditional pensions are now rare outside of the public sector.

In the 1980s, a full-scale shift in almost every industry in the U.S. began, with companies undergoing a wave of restructuring moved from pensions to so-called 'defined contribution' plans, like 401s, where employees decide how much to contribute and companies often match funds up to a set amount. Under this model, the worker assumes all of the costs and risks, and there are no guarantees for what a person's monthly income will look like in retirement, as that is based on how much money they contribute and how their investments perform.

Now that the major Detroit auto companies are raking in record profits and CEO pay is soaring, striking workers say they deserve to get back the benefits they sacrificed to help the auto companies skirt financial collapse in the 2008 financial crisis.

This is the first time that autoworkers have tried to get back their pensions. A return to pensions was among the demands put forward in 2019, but the debate was sidelined and pensions were left out of a final deal following a 40-day strike by GM. Under current financial accounting regulations, the cost of providing a defined benefit plan is prohibitive.

The UAW would add $80 billion to each of the biggest U.S. automakers' labor costs, including a more than 40% wage increase, cost-of-living increases, a four-day work week and a boost to retiree benefits.

But Logan said that the UAW's pension demand, or some version of it, may spread to other unions, reigniting a conversation about a benefit that many thought was long gone. From the United Parcel Service, Inc. to Hollywood, he said, unions are definitely feeling emboldened in many industries right now.