The Associated Press is seeking to freeze the pensions of employees who are still guaranteed a monthly benefit when they retire.
Future retirement contributions would instead go to a plan that shifts the responsibility for retirement planning and investing to workers, but does not guarantee a specific amount of money based on years of service. AP CEO Tom Curley announced the planned cutback in a Tuesday memo to the news cooperative's employees.
"Since I came to AP, I have strived to do everything possible to keep your pension plan intact," wrote Curley, who has been running the company since June 2003. "Unfortunately, industry and economic pressures mean this is no longer possible."
The AP already had stopped offering the pension guarantees, known as a defined-benefit plan, to management employees hired since 2005 and union-covered employees since March 2006. Those newer employees are offered what's known as a defined-contribution plan in addition to the cooperative's 401(k) retirement plan.
About 1,500, or less than half of the cooperative's 3,700 employees, still have the older pensions and would be affected by the proposed freeze.
The AP's revenue fell nearly 10 percent last year to $676 million, partly because it lowered its fees to ease the financial strain on newspapers and broadcasters. Another revenue drop had been budgeted for this year, marking the first consecutive declines since the Great Depression.
The AP expects to contribute nearly $27 million to its pension plans this year and probably will need to spend similar amounts in the next few years even if a change is made, said Ken Dale, AP's chief financial officer. By freezing the pension plan, the not-for-profit AP eventually would be able to reduce the amount of money that it needs to contribute to ensure retirees receive their promised benefits.
The trend has been recently embraced by two major newspaper publishers as they try to overcome a sharp drop in revenue and a media shift that has driven advertising away from print. Gannett Co., owner of USA Today and more than 80 other daily newspapers, froze its defined-benefit plan in 2008 and McClatchy Co., publisher of The Sacramento (Calif.) Bee, The Miami Herald and other newspapers, froze its plan last year.
It's still not certain the AP will be able to impose the pension freeze as broadly as it hopes because most of the affected work force is represented by unions. It already looms as a sticking point in upcoming talks on a new labor contract with reporters, editors, photographers and other workers represented by the News Media Guild, said Tony Winton, the union's president. The current agreement expires Nov. 30.
The AP said it plans to freeze pension benefits for management and administrative employees who aren't represented by a union. That group makes up less than half of the 1,500 workers still participating in the defined-benefit plan, said AP spokesman Paul Colford. The freeze would take effect June 30 next year.
After the freeze, workers who had been covered by the defined-benefit plan would be covered by the contribution plan instead. It pays the equivalent of 3 percent of an employee's salary into an account similar to a 401(k). The company also matches voluntary contributions made by employees enrolled in the 401(k); the match is up to 4.5 percent of salary for management and 3 percent for union-covered employees.