“Personally, I think a pension is a tremendous benefit,” said Don W. Blackwell, ILM’s chief financial officer and treasurer. “This is a very valuable benefit to our employees. We did not want to take it away.”
But with the pension plan causing the firm to report a $8 million liability at the end of last year and with no end in sight for low interest rates, “we waved the white flag,” Blackwell said. “It was a waiting game and we blinked. We had no idea that interest rates would remain this low.”
Once it froze its pension plan, ILM started to contribute 3 percent of each worker’s salary to a 401(k) plan. It’s something, but nowhere near enough to provide the same level of retirement security that the company’s pension did.
Blackwell said an employee with a $40,000 annual salary who received a 3 percent raise each year, set aside 7 percent of his pay for retirement and received a 3 percent company contribution would wind up with roughly a third less money in his retirement fund after 25 years than he would have with the pension plan.
Still, ILM employees are taking the pension fund’s demise in stride. “To be honest, I am surprised that the plan was not frozen a while back,” said Traci Barber, 42, a service center manager who has been with ILM nearly 13 years. “I was surprised when I took this job that it even offered a pension plan.”
Knotts, the firm’s vice president for human resources, said that many employees do not seem to understand the security that a pension’s guaranteed monthly payments offer in retirement. “When people get hired here,” she said, “they are not thinking about that. All of the questions are about salary and paid time off.”
She was among the executives who fretted over cutting the pension plan, deciding to back the decision even though she knew it is bad for employees. Keeping it, she said, would be even worse for the company.
Surprisingly, she added, the company seemed to value the plan more than some employees. Only one employee complained, she said. Moreover, when employees leave ILM, she said, they most often choose to take their pension as a lump-sum payment rather than as a monthly payment for life. “I guess it’s the lottery effect,” she said.
ILM retirees who chose to receive the pension on a monthly basis call it the best decision they could have made. “This was the first job that offered me the comfort of a pension,” said Beverly C. Shoemaker, a former secretary who left the company in 2004 after working there 15 years. “I feel blessed to have it. I really do feel for the current employees, because I know how much it means to me.”
David J. Riese, who retired as vice president of claims in 1997 after 16 years at ILM, said he values the security provided by his company pension. Current employees, he added, will not have it as good.
“They have to rely on the profitability of a 401(k) and their ability to manage it,” he said. “To me that is iffy, at best.”