Summary # 7
UE, GE Clash on Pensions,
SERO Windows

NEW YORK – Tuesday, June 5

Bargaining resumed Tuesday with three presentations by the company – on the GE Pension, Savings & Security Program, and Job and Income Security – and union proposals on Article VII, continuity of service and service credits.

Mike Gorman of the GE pension board began with an overview of the GE Pension Plan as the company sees it. Retirement, he said, is a "mutual responsibility" of government, employers and workers, and GE aims for the pension to replace 70 to 80 percent of a person’s earnings in their last years of work, in combination with personal savings and Social Security. The 70-80 percent figure is based on the assumption that "taxes, deductions and expenses" are less when you’re retired.

Steve Tormey questioned Gorman on this assumption. He said the company counts savings and Social Security against workers twice – expecting workers to substantially fund their own retirement through Social Security taxes and payments into the savings plan while they’re working, and then removing that part of workers’ wages from pension needs calculations because they don’t make those payments after retirement. He also noted that 70 percent "replacement income" is a lot different when it’s 70 percent of a $150,000 a year salary, as opposed to a $45,000 yearly factory wage.

Gorman presented slides giving examples of GE workers in slightly different situations of marital status, earnings, and service amounts at retirement (30 and 35 years).

In the scenarios he presented, the GE pension replaced 31 to 41 percent of income, with the balance of replacement income provided by Social Security and savings. Tormey noted that in these examples, a portion of the pension money itself came from the workers, as GE employees up to 1989 were required to contribute three percent of wages to the pension fund.

Gorman went through the two formulas for calculating a person’s GE pension benefits – the Guaranteed Pension, which calculates pension based on the worker’s high-three years of earnings, using a table of multipliers; and Regular Pension (also known as the career formula), which adds up pension benefits earned each year through a set of formulas covering different periods. He explained pension updates, one-time increases that recalibrate the Regular Pension for groups of workers whose relatively low earnings earlier in their GE careers would otherwise result in too low a pension; he offered examples of how the 2003 update worked. He also explained pension supplements and employee contributions – mandatory for pay over $60,000; voluntary below that.

Gorman presented a slide titled "Pension Growth during Contract," which claimed that for a "sample employee" between 2003 and 2005, general wage increases and COLA adjustments of 17 percent, and the addition of four more years service, resulted in "GE Pension benefit increased 34%." Tormey took issue with this, calling it "misleading." Much of this "increase" was the result of the worker having worked another four years, and the company took no account of inflation. "It’s not a clear picture of reality," he said, noting that the real benefit increase is "a little over one percent a year" over the past four years.

A slide titled "GE Pension Plan Funded Status" showed a dip, from 1999 through 2002, in both total trust assets and in the overfunding levels. Gorman argued that the fund surplus provides security to GE workers. Tormey called this statement misleading, and pointed out that early in this decade, "you had the worst Wall Street performance in 30 years," combined with low interest rates – an economic "perfect storm." Despite what Tormey called "nearly a worst case scenario," the GE Pension Trust in the worst year of that crash still had a $6.8 billion surplus. The GE Pension Trust has been so overfunded that GE has not made a contribution for twenty years, and while GE has become very comfortable with that situation, Tormey reminded them that it would be "no catastrophe" if the company should someday in the future have to contribute again to the pension plan, as other employers routinely do. "This plan is a benefits plan," said Tormey. "It’s not supposed to be a financial prop to the company’s earnings."

GE ATTACK ON FUTURE WORKERS

Gorman’s last slide was the most controversial. With the title "New GE Pension Design," it summarized the benefit cuts imposed on new salaried hires in 2005, to deprive them of retirement health care and penalize them for retiring before age 65. "What changed the company’s mind from wanting people to retire at 60, to making 65 the retirement age" asked UE President John Hovis.

Tormey said the last slide "nullifies the rest of your presentation" and "shows how hypocritical the whole thing is." Tormey asked if the company has changed its actuarial assumptions on the basis of its "new pension design," either on the basis of people working to age 65, or that people will "bail out at 45 or 50" when they know that GE will not provide them with retiree health care or any chance for early retirement.

Tormey said the problem is that GE’s pension, finance, and legal experts "get together in your cocoon, with no contact with real people" and then present this to us "as a fait accompli." "Your hallowed principles get flushed down the toilet. It’s an absolute disgrace." He asked how eliminating all retiree medical coverage affects the "replacement income" targets of 70 to 80 percent. "Everything I’ve read says you need to replace 92 percent of income if you don’t get retiree health care from the employer," said John Hovis.

The company had said it wanted to end early retirement because it is difficult to replace skilled, experienced workers who leave at 60. "Are new replacement workers going to magically materialize in the five years from age 60 to 65?" asked Lynda Leech, Local 618. Frank Fusco told that company that its new retirement model "might be OK for someone in an air conditioned office. But for someone cutting metal chips and welding on the shop floor, working to 65 is not a viable reality."

Tom O’Heron of the IAM said the slight increase in life expectancy over the next 50 years should provide people "a couple more years to enjoy life, to enjoy their families," not to work longer in the factory. As for the company’s concerns about finding skilled replacements for retiring workers, John Hovis faulted GE for eliminating apprentice programs. "You don’t want to train anybody." O’Heron added that the U.S. is failing to train workers, and also asked, in the wake of the mass exodus of manufacturing to foreign countries, "How many skilled people are out there without a job?"

John Payne, Local 731, said his mother worked at GE until age 67 and enjoyed only two years of retirement in good health. "You should let people out earlier to enjoy life." When GE spokesman John Gritti argued that the company’s proposals is "not so different" from current pension provisions, Tormey shot back, "It’s very different," with no early retirement supplements and no health care. "It’s going backward," said Lynda Leech, "making things worse for the next generation."

"There’s a big difference between the people we represent and fast-track exempts," said Tormey. "Our people don’t have the options they have, and are largely used up by age 60," and sometimes are disabled even before reaching 60. Gorman responded that "Disability pension will still be there," to which Tormey replied, "You’ve got to be kidding!"

Pat Rafferty, Local 506, said older workers "are desperate to retire early. They’re stressed out to the max," as a result of lean manufacturing. Marcia Barnhart, Local 731, said continued job cutting forces people to work more overtime. "A 50 year old has probably worked the equivalent of 50 years," she said.

To UE local leader’s calls for lowering, not raising, the retirement age, GE’s John Gritti responded, "It’s not in the cards."

After a lunch break, Gorman resumed, with a presentation on the Savings & Security Program. The company’s figures show that 85 percent of union hourly employees participate in the plan, with 70 percent saving seven percent or more.

SLAMMING SHUT THE SERO WINDOW

GE’s Barbara Beckmann then made the company’s presentation on job and income security. The company summarized and congratulated itself for a variety of union-negotiated benefits and protections, but it soon became clear that their real objective in this area is the elimination of SERO windows. Beckmann’s final slide declared, "Windows are extremely costly and not responsive to current business conditions." The company again complained of the difficulty of finding qualified replacements for retiring workers.

The company’s position drew fire from the UE bargaining committee. When we talk about wage increases, "you tell us you have thousands of applicants whenever you have a few hundred job openings," said John Hovis. "Now you contradict yourselves," complaining that you can’t find experienced workers. In Erie you only hire people with seven years manufacturing experience.

Steve Tormey said GE created its own problems with the way it has manipulated SERO windows, and "the company also steadfastly refuses to entertain lowering the early retirement age." He told the company it has created expectations of SERO window retirement opportunities, which have been in every GE contract since 1988, and "It would be unfair to change the rules of the game again."

"Employees also know that SERO windows are not a legacy cost" but a one-time charge, said Hovis. "People are clamoring to get out of those plants as soon as possible."

GE negotiator John Curtin said SERO is no longer a direct replacement program, but has become "a voluntary retirement plan." Steve Tormey replied, "You guys turned it into that." Curtin responded, "We no longer have an interest in that."

COMPANY "OVERREACHING"

John Hovis cautioned the company that it was "overreaching" with its unreasonable proposals on new hires, health insurance, early retirement and SERO. "It almost looks like you’re trying to back us up against the wall and see what we’ll do. I’d advise against that. But that’s one person’s opinion."

Frank Fusco, Local 506, said Hovis was wrong only in saying that was only his opinion.

"We did a survey of our members in Erie. The number one issue was health care. Number two was SERO. Number three was night shift bonus. So it’s not just John Hovis. It’s 3,800 people in Erie." Bruce Reese, Local 332 added, "Same in Ft. Edward."

Tom O’Heron said that in the IAM’s survey of its GE members, "It was very clear that SERO had to be there – SERO windows." Rudy Gomez, UAW, added, "SERO windows are also a big priority in Evandale. Our people rely on it being there."

Marcia Barnhart, Local 731, took issue with GE’s complaints about the difficulty in replacing retiring workers. "Flexibility is the word in Conneaut," she said, and the company only gives people one week training to learn an additional job.

Pat Rafferty, Local 506, commented on how generously GE provides for retired executives. "Our people generate wealth for the company, too, with their hands as well as their minds," and deserve to be justly rewarded later in life.

Ron Flowers, retired Erie GE worker, former officer of Local 618, and now president of the Retirees Association of General Electric (RAGE), added some important thoughts to the discussion. "I retired in 1997. What I hear disturbs me. You’re talking about the high-service people in the shop. They’re the people who broke in the younger people on their jobs. The rest of the workforce looks up to these people and respects them." He warned the company, "All of a sudden, there’s no windows, you’ve alienated a very solid group of people who have a lot of influence in the plant."

The topic then shifted to proposals from UE for changes to Article VII, Continuity of Service and Service Credits. Among other proposals, the union called for five year recall rights for anyone laid off with at least six months service; extending by six months accumulation of service credits during layoff or illness; and lowering from three years to one the wait for restoration of service credits for prior periods of GE service.

UE was represented in Tuesday’s bargaining by President John Hovis; Secretary-Treasurer Bruce Klipple; Conference Board Secretary Steve Tormey; Scott Gates and Bruce Reese, Local 332; Marcia Barnhart and John Payne, Local 731; Lynda Leech, Local 618; Bill Wossum, Local 1010; Pat Rafferty and Frank Fusco, Local 506; and Ed Baran, Local 751. For the afternoon session, the committee was joined by UE Director of Organization Bob Kingsley and Ron Flowers, president of RAGE, the UE Local 506/618 retirees group. Also participating on the UE bargaining committee were Tom O’Heron of the IAM, Bob Roberts of IBEW, Rudy Gomez of UAW, and Mike Barrell of the Steelworkers. Chris Townsend, UE political action director, represented UE at the IUE-CWA bargaining table.

Bargaining resumes Wednesday morning with a UE presentation on pensions.