Story Photos
 Photo by Roger Werth Tom Henderson and his wife look over financial papers from Reynolds Aluminum and Alcoa in their home. Henderson signed away a portion of his pension in exchange for health-care coverage for his wife. But his faith in the company backfired, he says. |
Retirement Rigmarole: When Reynolds Aluminum disappeared so did some of Tom Henderson's benefits
Sunday, August 6, 2006 11:57 PM PDT
By Evan Caldwell
Printable version
E-mail this articleAfter 30 years working in hot and smoky conditions at Reynolds Aluminum's anode tender, Tom Henderson felt he earned his retirement in 1998.
Every two weeks, the company had taken 10 percent of his paycheck in return for a defined pension and lifetime medical. He even signed away 15 percent of his pension back to Reynolds at his retirement in exchange for full medical coverage for his wife.
"That was a no brainer, we felt so blessed," Henderson said. "We had a lot of faith in Reynolds metals."
But Reynolds disappeared from Longview, and so too did some of the retirement benefits Henderson had been promised.
Reynolds was sold to Alcoa in 2000, which assumed responsibility for paying retirees' pensions and benefits. Alcoa then sold the smelter to Chicago investor Michael Lynch. He shut down the site in 2001 and declared bankruptcy, leaving Alcoa paying for pensions and benefits for workers who had retired before the sale to Lynch.
In January, the Henderson's $1,000 a month retirement check was reduced to about $700 when Alcoa began taking out $150 per person a month to help cover the rising costs of health care.
"It's an outrage. A shame," Henderson said. "I gave them 30 years in return a promise of full health care ... and my pension."
Henderson is just one of thousands of American workers throughout the country whose retirement benefits have been slashed as companies look to dump or cut back on expensive traditional pension plans and to curb rising health care costs. Instead, companies choose to offer cheaper 401(k) retirement plans.
And the number continues to fall. About 15 percent of those companies plan to close pension funds to new workers this year and 6 percent will freeze benefits to current employees, the BLS says.
Companies, such as airlines, say they need these changes to stay competitive with global rivals who don't offer many benefits.
Even healthy companies are tempted to cut back. IBM and Verizon Wireless estimate they could save up to $3 billion during the next five years by freezing its pension plans.
"If everyone continues to leave the system and people are just expected to save for themselves, it's going to be a bleak picture," Karen Friedman, policy director at the nonprofit Pension Rights Center in Washington, D.C., told the United Transportation Union in April.
Increasingly, employers are offering 401(k) retirement plans, which are cheaper to run and require smaller company contributions. A 401(k) plan allows workers a tax-free account to save for retirement until withdrawal. Employees often make the bulk of the contributions and manage the fund themselves. Employer contributions vary by employer.
As a result of the migration away from pensions, workers need to understand how to properly manage their 401(k) plans, said David Groves, Washington State Labor Council AFL-CIO spokesman.
"Over time, you can have people who lose half or more of their retirement with the market takes a turn for the worse," Groves said. "This could potentially create waves of retirement when the market is good ... and we don't know how that will affect a community."
Daimon George, owner of Blue Collar Financial in Longview, said workers also should understand that pensions are not set in stone.
"Union's go through collective bargaining agreements and pensions can change drastically every four years," George said. "People need to start planning for retirement now to avoid potential pitfalls."
Chris Bryant, owner of Bryant Wealth Management in Longview, said as pensions continue to transition into 401(k) plans, workers need know that "no one is going to take care of you, we need to do it ourselves."
But Rudy Tiegen, another Reynolds retiree, thought his financial future was shored up upon retirement.
"We thought we prepared for this by working our 35 years. We thought we were promised full coverage ... so we didn't have to worry," Tiegen said. "Now that they've cut our pensions ... and you can't save hardly anything, that's for sure."
However in June, the United Steel Workers of America Local 305 scored a minor victory. The union managed to bargain the new $150 contribution in the health care down to $75 per person --- starting in 2007 and lasting through 2010, Local 305 president Bill Hannah said.
Even though the retirees' $300 payments still hurt, Hannah said, because until this year, retirees have never had to pay for health care from their pensions.
"This just kills them," he said. "For most, its between 25 percent and 50 percent of their pension."
Despite the surprise to many of the retirees, Hannah said he could see the writing on the wall.
"There was an unimaginable increase in health care over the past few years," Hannah said. "And, while the pension is guaranteed, health care costs are negotiated contract from contract."
Alcoa was to pay Reynolds and Alcoa retirees' health care expenses up to a certain amount, which was topped in 2006, Hannah said.
Now, with his pension --- and faith in Reynolds and Alcoa --- carved up, Henderson is adjusting to getting by on $700 a month, plus Social Security.
But "what will happen the years after 2010?" Henderson said. "Right now, it's barely enough to pay all the bills and have something left over for food.
"I just feel like they are pulling the rug out from us. After 30 years of hard work and service, this feels like a stab in the back."
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