U.S. Employers Dropping Retiree Benefits
The New York Times on Thursday examined how large U.S. corporations are "reducing the burden of caring for retirees" by cutting pensions and health benefits so that they can "compete against foreign companies with lower benefits costs and domestic rivals with younger work forces and less generous benefit packages." Longer-living retirees and new accounting rules are "forcing companies to more honestly reflect their full costs on their books," which makes "the corporate-sponsored social contract" to care for workers as they age "no longer sustainable," according to the Times.
Many of the nation's large companies, such as General Motors and IBM, have taken steps recently to close their pension plans or retiree health benefits packages to new employees, offering Instead, "fixed contributions to individual retirement accounts and health care packages limited to active workers," the Times reports.
According to an annual survey by the Kaiser Family Foundation and Health Research and Educational Trust, the percentage of companies with 200 or more workers that offered some form of health care benefits for retirees decreased from 66% in 1988 to 33% in 2005. Private companies that do still offer pensions and retiree health plans often have union contracts or legal obligations that do not allow the company to drop the benefits, according to the Times. Many of them have been downsizing their plans in recent years, according to the foundation survey.
Meanwhile, many workers "are rolling with the punches," given "all the flux in today's corporate environment," the Times reports. A 2004 Employee Benefit Research Institute survey found that only 5% of workers think of retiree health care as their most important benefit, while 4% believe a pension is the most important, and 9% of respondents rank either of the two benefits in second place (Porter/Williams Walsh, New York Times, 2/9).