Pensions demand by union members

Pensions demand by union members

While United Auto Workers members who were hired prior to the 2008 financial crisis have pensions, those brought on since then have received 401 plans instead. The union demands that auto companies provide pensions to new employees and those who currently lack them.

Ford Motors, General Motors Co. and Stellantis NV are determined to consign pensions to the past, even as striking UAW members are just as eager to revive them. The fight has resonance beyond the auto industry, with inflation lingering as the U.S. enters another fraught presidential election cycle, and the plight of the middle class - and millions of retirees - is front and center.

Labor experts do not expect a return to a system of full-fledged pensions happening anytime soon, unless ever, because of the enormous cost associated with them. Even so, demanding pensions is a smart strategy, some say, as it reminds both sides how far behind auto workers have fallen since their heyday.

By using 401k funds as a bargaining chip, it could lead to other sweeteners, such as more generous matching contributions to 401k funds. We're not giving up on these issues, we're going to push harder, said John Logan, head of the labor and employment studies department at San Francisco State University.

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

A full-scale shift in almost every industry began in the 1980s, as companies undergoing a wave of restructuring moved from pensions to so-called 'defined contribution' plans, such as 401s, where employees decide how much to contribute and companies often match funds up to a set amount. Under this model, the employee pays for the cost and all of the risk. There are no guarantees for what an individual's monthly income will look like in retirement, since that is influenced by 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 be refunded the benefits they sacrificed to help the auto companies skirt financial collapse in the 2008 financial crisis.

It isn't the first time autoworkers have tried to get pensions back. 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 standards, the cost of offering a defined benefit plan is prohibitive.

According to people familiar with the companies' estimates, restoring pensions and granting the UAW's other original demands - including a more than 40% wage increase, cost-of-living increases, a four-day work week and a boost to retiree benefits - would add more than $80 billion to each of the biggest U.S. automakers' labor costs.

But Logan said that the UAW's pension requirement, or some version of it, may spread to other unions, reigniting a conversation about a benefit that many thought was long gone. From United Parcel Service, Inc. to Hollywood, 'What you've seen in the last year or so, especially, is unions are definitely feeling emboldened in many industries right now.