The recent contract changes approved by the membership
raised some questions about the Transit Employees’ Retirement Plan which need
to be answered. It has been widely applauded by Metro's Board of Directors and the Washington Post. This alone should make members of ATU Local 689 skeptical.
The Plan was established in 1945 to provide pension benefits
to members of Local 689. The plan was funded
by contributions from both employees and employer. The employer put into the fund twice the
amount of the employee for most of the period until 1983. The employees put in
between 4% and 7% of wages, and the employer put in between 8% and 14% depending
on the contract in effect. In 1983,
Metro management proposed that they assume the total cost of the pension if the
union would take a wage freeze of one year. The wage increase which at that
time was based on the inflation rate was estimated to be about 6.5%.
The union agreed and on July 1, 1983, Metro took
responsibility for the funding of the pension plan. Why did they propose this change? Metro realized that if they changed the way
the pension funds were invested, they could return greater yields and over time
their costs would go down. So the fund
went from investing in mostly government bonds to a majority of its investments
in the stock market. The plan worked
well for Metro. In the 1989 contract,
the minimum contribution required which was 11%, was eliminated from the
contract. By 1997, the investments had
done so well, Metro’s contribution to the fund went to zero and stayed there
until 2006. The 2004 contract changed
the method of calculating Metro’s contribution, and they were in the fall of
2006 required to begin contributing to the fund once more. To get Metro to agree to change the method of
calculating their contribution the union had to agree to a small wage increase
of 1.5% instead of 3%. From 1983 to 2006, Metro saved hundreds of millions of
dollars on pension contributions. They
never once complained about this.
In 2008, when the stock market crashed, they began
complaining about their contribution. At
the same time they began demanding the employees start contributing to the plan. They wanted the members to forget about the
6.5% and 1.5% wage increases they had given up in 1983 and 2004 were the
members’ contribution to the plan and the millions of dollars Metro had saved
in those years. The sad part is the
union leadership did forget.
In the course of discussing the new contract, many argued
that it should be approved because the pension fund needs more money, and
therefore the members should start contributing to guarantee the solvency of
the fund in the future. This issue was
not a part of the contract changes. The
money contributed to the fund will remain unchanged. What will happen is Metro’s contribution will
decrease and the members will pick up the difference.
Our pension plan is a defined benefit plan. That means the benefits are defined by our
contract. The money for these benefits comes from a fund controlled by a six
member committee of union officers and management people. This committee invests the funds at a
reasonable risk level and expecting reasonable return so that they can pay the
pensions when due. In 1983, Metro saw an
advantage in assuming all the investment risk.
They made out like bandits for 25 years.
They are still way ahead in the game.
Metro has drawn blood in this contract. It will wet their appetite for more next
contract. We need to get prepared.
