Posted: April 13, 2011
DC Plan boosts security, could result in new AMO jobs
By Tom Bethel
National President
The new American Maritime Officers Defined Contribution Plan will enhance retirement security for all AMO families through individual employer-paid savings and investment accounts that will provide significant supplements to income earned under the defined benefit AMO Pension Plan, the AMO Pension Plan Money Purchase Benefit and the AMO 401(k) Plan.
But the AMO Defined Contribution Plan, which began for most participants on January 1, will also strengthen the competitive positions of deep-sea, Great Lakes and inland waters merchant vessel operating companies that have labor agreements with our union by freeing them of the crushing cost and complexity of confronting a nationwide retirement crisis and complying with the burdensome requirements of the federal Pension Protection Act of 2006. The AMO Defined Contribution Plan is in fact a better way, a realistic and responsible alternative that could entice additional employers to the AMO fold in all domestic and international trades - existing companies and start-ups hoping to provide sustainable services in emerging markets.
The AMO Defined Contribution Plan was established in 2009, after a severe and prolonged recession, the investment market meltdown of 2008 and the unreasonable terms of the Pension Protection Act combined to force the defined benefit AMO Pension Plan into "critical" funding status as defined by the 2006 law. The AMO Pension Plan is now governed by a rehabilitation strategy adopted by its joint union-employer trustees in compliance with the Pension Protection Act.
Once the AMO Pension Plan regains sound footing - in seven years or less, according to actuarial projections - vested participants will have the options of retiring with monthly benefits earned under the AMO Pension Plan or rolling the cash values of their earned monthly benefits as lump sums into their personal AMO Defined Contribution Plan accounts while continuing to work.
At that point, there will also be two options for the AMO Pension Plan itself. One would be to perpetuate the defined benefit retirement fund, incur new liabilities, compound existing obligations, endure relentless new risk and strain deep-sea, Great Lakes and inland waters employers with per-billet-per-day contributions prone forever to unchecked escalation. The other would be to end the AMO Pension Plan and the uncertainties that go with it.
The AMO Pension Plan trustees chose the latter option - and therein lies the lure to potential new AMO employers.
Under today's competitive conditions, merchant vessel operators have specific strategies to succeed in specific trades, but their business plans are constrained by what analysts see increasingly as futile focus on sustaining defined benefit pension plans at untold cost and with unpredictable results. These companies do not want to get out from under their benefit commitments to seagoing officers in their fleets, but they understand the trend of the last 30 years, and they can read the writing on the bulkhead.
In her syndicated column March 28, Tribune Co. financial writer Gail Marks Jarvis noted that the nationwide retirement crisis that struck the AMO Pension Plan and many other multiemployer pension plans at sea and ashore continues apace, with no relief in sight. "Of course, forces outside of people's control have threatened the golden years," she wrote. "Pension plans, which guaranteed retirees they would get spending money after leaving jobs, are becoming extinct."
McClatchy News Service reported separately March 28 that the Pension Benefit Guaranty Corp. - a federal agency that insures single employer and multiemployer pension plans, but which pays only a fraction of earned benefits when such plans collapse - is at "high risk" of failure, with a deficit of $22 billion. The PBGC insures 27,500 traditional pension plans that cover 44 million men and women in every industrial sector. According to McClatchy, multiemployer defined benefit pension plans nationwide are "in the red" by a combined $1.4 billion.
These sad truths are not lost on the seagoing AMO members who have expressed their support of our strategy to provide the greatest possible measure of retirement security for all AMO families through rehabilitation and eventual termination of the defined benefit AMO Pension Plan, development of the AMO Defined Contribution Plan and continued sound management of the AMO Pension Plan Money Purchase Benefit and AMO 401(k) Plan.
Nor are these truths lost on savvy merchant vessel operators. A representative of one company told me recently that he considered our union's approach to a difficult and painful issue bold, innovative and refreshingly honest. I believe others will see it the same way. In time, the AMO employment base will grow substantially because of what we have done on this front, and new jobs always mean greater benefit security for everyone in AMO - retirement, medical, vacation and training.
As always, I welcome your comments and questions. Please call me on my cell at (202) 251-0349.