A New Attack on Pensions

    The Wall Street Journal reports today that DuPont is going to severely cut back its pension plan for workers, even though the company remains profitable and its pension plan is in sound shape. Welcome to the new world:

DuPont Aims to Slash Pension Plan Benefits Will Be Reduced By Two-Thirds After 2007, Eliminated for New Hires
By THEO FRANCIS

DuPont Co. said it would cut its employees' company pension benefits by two-thirds after 2007, making the chemicals giant the first major company to reduce pension benefits since Congress passed new legislation touted as improving pensions' health.

Employers and pension-industry representatives have predicted the legislation, which requires companies to add more money to underfunded plans, would lead more companies to close their pensions.

DuPont's pension is healthy, as are the pensions at Verizon Communications Inc., which froze its plan in June, and International Business Machines Corp., which will freeze its pension at the end of 2007. Freezing a plan entirely means employees build no additional benefits.

DuPont, Wilmington, Del., said its plan to change the pension was under way well before the legislation was adopted. "A decision this large doesn't happen in three weeks," said Ken Porter, DuPont's director of global benefits financial planning.

    But, here is the real killer of a sentence:

DuPont's $23 billion pension plans have a funding shortfall of $3.1 billion, but most of that ($1.8 billion) stems from pensions for executives, which aren't funded in advance, and its foreign employees, where funding isn't required.

    This is no isolated example. A couple of months ago, I discussed a previous Wall Street Journal article that uncovered the little-noticed point that the often-discussed crisis in pension shortfalls was largely due to the burden of executive pensions, not workers pensions.

Comments

[panasianbiz.com]

This report about DuPont cutting back on workers' pension plans is so troubling. Years ago, workers felt their pensions were secure, but in today's economy, they know that, not only may their plans be cut, but they may not be there at all once the workers retire!

[Bill Walsh]

The money in the Dupont plan does not belong to the Company. In all Union contract negotiations, the Company took the position that the contributions they made to the Pension plan were a form of compensation, just like an employees hourly wage. That was always used to justify the ultra low wage adjustments granted to workers for many years. Inferences that the Pension Plan was owned by the employees, and merely overseen by the Company were also common place in Union discussions. I sincerely hope that every employee affected by this NO pension decision will immediately leave the Company.

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