What AMO members can expect from the new Defined Contribution Plan
In a unanimous vote February 9, the joint union-employer trustees of the AMO Defined Contribution Plan approved a benefit calculation reform strategy that relies exclusively on length of service in AMO covered employment, effective April 2, 2021.
Under the revised Plan, participation age will no longer be a factor in benefit calculations, and the allocation of employer contributions to individual AMO Defined Contribution Plan accounts will be set through one chart instead of the two now in place.
The April 2 start-up is necessary to ensure a smooth transition and the thorough, accurate reconciliation of the account data of 3,600 individual participants. This will also allow time to update the Defined Contribution Plan portion of the AMO Plans website.
"The goal was to determine how the two DC Plan contribution rate charts could be changed from years of service plus age to a single chart with a more equitable distribution reflecting years of service only," said AMO Plans Executive Director Steve Nickerson. "This mission was accomplished after lengthy membership data analysis by AMO Plans administration and staff and frequent consultation with a trustee subcommittee representing the union and AMO employers - nine different working models were considered from every angle in the interests of fair, comprehensive coverage and cautious application."
These important reforms - long sought by AMO members in the deep-sea, Great Lakes and inland waters fleets - brighten the prospect of secure, comfortable retirement for all AMO members.
The revised formula is intended as well to promote greater active membership retention among senior vessel officers and to encourage newly licensed officers to plan careers as members of American Maritime Officers.
The new AMO Defined Contribution Plan eliminates both the current 13.75 percent contribution rate cap and the widely applied 6.6 percent contribution rate limit.
Instead, AMO members can expect frequent contribution rate increases leading to rates capped at 20 percent at the 30-year service mark.
All AMO members with 10 years or more of covered employment - including vessel officers with up to 10 years of Seafarers International Union time credited to their Defined Contribution Plan accounts - are assured that contribution rates now in place for them will increase significantly over time and will never be lower than the rates now in place for them.
Newly licensed officers - maritime academy graduates and hawsepipers - can anticipate lower contribution rates at the AMO entry level, with gradual increases during their first 10 years of covered seagoing employment. The current contribution rate of 6.6 percent will no longer be provided to individuals with less than 10 years of covered employment.
These long-term incentives are expected to inspire newcomers to pursue seagoing careers as members of American Maritime Officers, instead of taking their AMO Defined Contribution Plan account balances with them in search of work elsewhere at sea or ashore at the 3-year vesting mark.
The new way of the AMO DC Plan is also expected to prevent a fundamentally unfair current complication: older newcomers to AMO with lengthy past service in maritime industry sectors not subject to AMO collective bargaining agreements - and presumably with some retirement benefits secured in their previous jobs - will no longer receive more in their individual DC Plan accounts than longer term or younger AMO members who have worked at sea exclusively with AMO.
Under the revised AMO Defined Contribution Plan formula, AMO members who had qualified for and received in-service lump-sum pensions from the defined benefit AMO Pension Plan before this option ended in December 2009 will be held to an AMO Defined Contribution Plan rate of 3 percent, regardless of their work histories in American Maritime Officers.
The new single, self-explanatory rate contribution chart is posted on the AMO Plans website. Copies are available at AMO headquarters and at STAR Center, and AMO vessel boarding representatives will carry copies with them as they make their East, Gulf and West Coast and Great Lakes rounds.
As the annually alternating Chairman and Secretary of the AMO Defined Contribution Plan Trustees, I thank the dedicated and expert AMO Plans administration and staff for weeks of difficult preparation for lengthy discussion leading to real gain.
My thanks as well to seagoing AMO members in all sectors for their frequent, welcome and honest commentary on the issues addressed here, and to AMO Executive Vice President Mike Finnigan for joining me in representing the membership in this effort.
Paul Doell
February 11, 2021