Pension Gains for Current, Future Retirees
Your UAW bargaining team resisted persistent proposals from Ford for radical changes in our pension plan and succeeded in negotiating significant improvements. The company pursued numerous takeaways such as: freezing all credited service, imposing new restrictions on early retirements, and eliminating the Social Security age-creep patch which replaces the benefits lost due to the gradual increase in the Social Security normal retirement age.
Your bargaining team forged an agreement that provides significant benefit increases for current and future retirees.
Credited Service
The UAW has periodically negotiated pension credited service increases covering periods when Ford workers lost service due to layoffs and sick leaves. In this bargaining session, the union negotiated an improvement that a worker’s credited service as of Dec. 31, 1995, would never be less than the worker’s seniority at that date.
Interim Supplement
The interim supplement is paid to workers who retire prior to their Social Security 80 percent date and who have fewer than 30 years of credited service. This benefit is paid until that date in addition to the life income benefit described above, but is reduced for early retirement. The amount per month per year of credited service, under the current agreement, payable at retirement ages 60 and 61, is $47.30. The corresponding amounts negotiated under the proposed agreement are $48.25, effective Oct. 1, 2007; $48.45, effective Oct. 1, 2008; $48.65, effective Oct.1, 2009; and $48.85, effective Oct. 1, 2010. Reduced amounts will be paid for retirees at younger ages.
Social Security Age-Creep Adjustment
The Social Security age-creep adjustment, first negotiated in 1999, is extended through this agreement. The existing years covered were extended to retirees born between 1944 and Sept. 14, 1949. They will continue to receive supplements or temporary benefits to which they are entitled until they reach their so-called 80 percent date.
Retirements Under the New Contract
Life Income Benefit
The life income benefit rate is increased in each year of the proposed four-year agreement. These increases will total $2.65 per month per year of credited service by the final year of the agreement. The increases will be effective Oct. 1 of each year of the agreement.
Insurance Overpayments
Beginning Oct. 1, 2007, retirees who have an outstanding overpayment under the Life and Disability Benefits Program will have their life income benefit rate increases reduced by 50 percent until their debt is repaid.
Temporary Benefit
The temporary benefit is paid to retirees who qualify for either a disability retirement and are not eligible for a Social Security disability income benefit, or for a special early retirement, and in either case have not reached their Social Security 80 percent date. This benefit is paid until that date in addition to the life income benefit described above, unreduced for early retirement. The proposed temporary benefits are shown below:
30-and-Out Supplement
The 30-and-out benefits will be increased $150 for workers who retire before their Social Security 80 percent date during the term of the agreement. This will increase the 30-and-out income from the current $3,020 to $3,170 per month in the fourth year of the agreement. The 30-and-out monthly benefits for workers who retire under the proposed agreement are displayed below:
Current Retirees
Life Income Benefit and 30-and-Out Supplement
The UAW has once again remembered our retirees and surviving spouses who retired prior to Oct.1, 2007. In this proposed agreement, the life income benefit rate has been increased by $2 per month per year of credited service. Those retirees receiving a 30-and-out supplement will receive a $120 increase in the total amount payable to them, inclusive of the basic benefit rate increase. All increases are effective Oct. 1, 2007.
Temporary Benefit and Interim Supplement
Retirees receiving a temporary benefit will receive an increase of $1 per month per year of credited service, to a maximum of $30 per month. Retirees receiving an interim supplement will receive an increase of 95 cents per month per year of credited service, reduced if retirement was before age 60. These will be paid in addition to the increased life income benefit.
Retiree Lump-Sum Bonus
UAW retirees and surviving spouses whose benefit started before Oct. 1, 2007 will receive four lump-sum payments during the proposed 2007-2011 agreement. The payment for December 2007 will be $700 for all retirees and $455 for all surviving spouses. The lump-sum payments to be made in December 2008, December 2009 and December 2010 will be $23.33 times years of credited service, with a minimum of $233.33 and a maximum of $700. Surviving spouses will receive 65 percent of the retiree amount. Examples are as follows:
Special Survivorship Option
Benefits under the Special Survivorship Option will be increased to $14.10 per month per year of credited service, effective Oct.1, 2007.
Improving Participation and Performance in TESPHE
As a result of recent federal legislation and in an effort to boost members’ retirement savings, a new automatic enrollment program will become effective July 1, 2008, or as soon as practicable thereafter. This program will apply to future hires and members who currently do not participate in the Tax Efficient Savings Plan for Hourly Employees (TESPHE).
Under the auto-enrollment program, 3 percent of eligible weekly earnings will be deducted from pay and contributed into a default fund if a different investment choice is not selected. Members who do not want to participate in TESPHE will be able to opt out of the program within the 90-day advance notice and election period.
The default funds are life-cycle funds, designed to be growth-oriented at younger ages and protective of assets at ages approaching retirement. Per current TESPHE rules, members in the program can change investment selections and contribution percentages at any time. Auto-enrollment programs have been successfully implemented at a number of companies and can enhance the TESPHE as a valued supplement to our pension plan.
Phased Retirement Study
The Pension Protection Act of 2006 liberalized provisions relating to workers’ eligibility for phased retirement, an option whereby a worker can transition to retirement by gradually reducing worktime and gradually increasing retirement time. The UAW and the company agreed to study the feasibility of offering a phased retirement program on a pilot basis.
TESPHE Fees to be Studied
It is well-known that small differences in funds’ fees and expenses can have a dramatic effect on investment returns over the course of a working career. Accordingly, the UAW and the company agreed to jointly select an independent consultant to evaluate the fees and expenses charged to members, as well as the performance of all funds in Tax Efficient Savings Plan for Hourly Employees (TESPHE).
Qualified Domestic Relations Orders
Future retirees who have Qualified Domestic Relations Orders that require a portion of their retirement benefit be paid to an alternate payee will now only have an equivalent portion of the spousal reduction charge deducted from their pension, instead of paying 100 percent of the survivorship coverage.
Survivor Coverage Improved
The one-year marriage rule has been changed from the actual date of marriage to the first day of the month of the marriage. If future retirees should pass away during the 12th month, but before the exact date of the first year of marriage, the surviving spouse would still qualify for survivorship coverage.
Improvements for AAI Workers
Workers who have credited service at both AAI and Ford will receive all of the increases for future retirees described on page 16, “Retirements under the new contract,” for their years of credited service at Ford.
In addition, our bargaining team negotiated improvements for the years of AAI credited service earned by these workers. All future AAI retirees who do not elect the lump-sum option will receive the Ford pension class code designation and the 2007 Ford pension rates.
In addition, the AAI benefit will be available for early commencement (under age 55) at the appropriate reduced rate.
AAI retirees who did not take the lump sum and who retired under the 2003 agreement will have Ford benefit class codes added and their benefit levels will be upgraded to the levels in the 2003 Ford pension. This increase is effective Oct. 1, 2007.
ZF Batavia Workers Win Improvement
Workers at ZF Batavia will have their benefits under the ZF Batavia pension plan increased to match the rate structure in the UAW-Ford Retirement Plan. The Life Income Benefit rate, the Supplemental Allowance and Temporary Benefit rates will also increase to match the UAW-Ford plan.