The IRS approved the Newspaper Guild of New York and New York Times' application to begin an adjustable pension plan that will allow the newspaper company to keep a defined benefit plan structure, said Bill O'Meara, president of the guild.
In November 2012, the guild and the Times concluded collective bargaining and agreed to freeze the $275 million defined benefit plan and replace it with a new adjustable pension plan. The new plan structure, which shares the investment risk between employees and employers while providing more retirement income security than a typical defined contribution plan, required approval from the IRS.
The new DB plan at the Times, approved Tuesday, covers about 1,100 workers and guarantees a monthly payment for life for its employees. The New York Times contributed a pre-negotiated amount of $7 million for the first year.
The Pension Benefit Guaranty Corp. covers IRS-approved tax-qualified plans.
“We think this is a much better solution than a 401(k) plan,” said Mr. O'Meara in a telephone interview. “The employer knows exactly what they're going to be putting in the plan based on the size of the staff, and every year the employee knows in advance how much money they'll be getting each month.”
Mr. O'Meara added that market volatility or an economic downturn should not affect the plan. “This plan is designed to survive against any horrible (economic) scenario.”
Actuaries at Cheiron developed the adjustable pension plan.
James Comtois writes for Pensions & Investments, a sister publication of Business Insurance.