The two companies are vastly different. But their memos to employees sound much alike.
Come January 2005, your retirement benefits are going to change.
Traditional pensions, the kind that guarantee your retirement income, will start to diminish or go away completely. And 401(k) plans - accounts that shift the control and risk of your retiree savings into your own hands - will become the principal and more precarious way to save for your golden years.
The memos belong to Sears, Roebuck and Co., the nation's fifth-largest retailer, and Times Publishing Co., the private owner of the St. Petersburg Times. Both companies recently announced major overhauls to their employee retirement plans.
The goals: to control volatile pension costs; to keep employees' retirement expectations reasonably satisfied; and to boost the competitive ability to recruit new workers. All at the same time.
It's a formidable balancing act. One that thousands of U.S. companies are wrestling with after the sharp stock market declines in 2001 and 2002, and the current era of ultra-low interest rates. Those difficult financial conditions combined to shrink the assets of traditional pensions, also known as defined benefit plans, but did not shrink their obligations to fund guaranteed payouts to retirees.
In 2005, Sears employees over 40 can choose to stay in the company's traditional pension plan and old 401(k) plan with a 3.5 percent matching contribution by the company. Or they can drop out of the traditional pension and join a new 401(k) plan with a 5.5 percent match. Every other Sears worker and new employees will be funneled into the new 401(k) plan.
Starting next year at the Times, current employees will earn credits for the traditional pension at half the pace as before. But the company will double to 2.5 percent of employee pay its quarterly contributions to worker 401(k) accounts. New employees hired starting in 2005 cannot join the traditional pension, but the company will contribute more - 4 percent of staffer pay quarterly - to their 401(k)'s.
All those changes and choices, especially the larger shift away from the comfort of a guaranteed benefit, make for uneasy workers.
"The guarantees found in defined benefit plans tend to be more paternalistic," said Brian Broverman, a senior vice president and benefits adviser with Aon Consulting in Tampa. "But we are moving away from paternalism in our corporate world."
Broverman's got that right. After the Times memo came out this week outlining the coming changes in retirement benefits, much of the initial reaction by newsroom staffers was the same. Wary - even at a company that considers itself paternalistic.
Hey, at least we have retirement benefits. Nationwide, Florida workers boast one of the lowest levels of participation in a retirement plan, says the Employee Benefit Research Institute.
The Times' experience of financing its traditional pension is typical of many businesses. For 17 years, including the booming stock markets of the 1990s, the company's pension assets were healthy, growing and more than enough to cover the payouts to retirees. When the stock market tumbled several years ago, pension assets fell. The company injected $3-million one year to cover the shortfall, then added $10-million the next year.
Without any change to retirement benefits, the company likely would be on the hook to add millions more to the pension fund in the next several years. That's big money.
By changing the pension formula in 2005, the projected shortfall would drop. Half of the "savings" will be funneled in those coming years into employee 401(k) accounts in the form of higher levels of company contributions.
It's really a chicken-and-egg story.
Paul Tash, editor and president of the Times, suggested Thursday that heavy spending on retirement benefits will serve nobody if that expense starts to undermine the health of the very company whose success funds retirement benefits.
Tash also noted that all employees - not just those at the Times - must take more command of their personal finances as 401(k) accounts become the country's retirement vehicle of choice.
"The trend is that workers will have a more active role in understanding and managing their retirement benefits," Tash said.
Adding more variables is the Bush administration, which has proposed several new types of savings accounts that could help boost retirement income.
At Aon Consulting, Broverman estimates about 30 percent of his company's clients have frozen their traditional pensions, or intend to do so.
Indeed, one survey after another by benefits consultants point to a tougher environment for employees trying to save for retirement - much less figure out how much they need to set aside in 401(k)'s in the first place.
"A lot of security is being taken away," Broverman acknowledged, "and being replaced with uncertainty."
The startling declines of the stock market - and most 401(k) accounts - in the past few years were a nasty wake-up call for many employees who once fancied rich 401(k) accounts.
For now, the stock market has rebounded. But this is no time to go back to sleep.
