Workers, Unions and Pension Funds
September 24, 2012
Reprinted from UNITED STEELWORKERS – http://www.usw.org/
Unions have played a crucial role in promoting pension plans and negotiating good pension benefits, as statistics on pensions and unionization demonstrate.
Eighty-three percent of union workers have retirement plans, compared to only 44 percent for nonunion workers. But union workers are also far more likely to have defined benefit pension plans – 69 percent, compared to just 14 percent for nonunion workers.
In multi-employer and many public pension funds, workers have taken on leadership positions as trustees, helping to oversee the funds that handle their pension assets. By law, the trustee boards of Taft-Hartley plans, both defined benefit and defined contribution have equal representation from management and workers.
In public employee funds, workers and unions are often, but certainly not always, represented on trustee boards. In single employer plans, however, workers and unions are generally not represented on pension boards.
Where they are present on the board, workers have a strong voice in determining how their pension assets are overseen.
Worker voice on pension fund boards is important because it can provide a broadened vision about how to meet the long-term retirement needs of plan participants and beneficiaries. At the same time, it can serve as a check against arbitrary or short-term decision making that may promote the interests of the plan’s sponsors but be detrimental to plan participants and beneficiaries.
Employers who establish plans without worker participation are free to establish the menu of investment options available, determine the fees and expenses paid by workers and settle on the type of financial services accessible to plan participants.
Employers often choose investment options based on criteria unrelated to investment return, such as administrative capability and minimal employer-paid costs.
Workers without a say in such structures stand to receive diminished returns over time. They also stand to suffer the consequences of employer manipulation of stock prices.
The recent increase in the number of lawsuits against employers stands as an indicator of the need for greater worker voice in defined contribution plan boards.