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Port Talks Covering Pensions to Begin

Some fear a showdown over the union's demand for a big increase could undo earlier progress.

November 12, 2002|Nancy Cleeland | Times Staff Writer

Shipping companies and West Coast dockworkers are set to take up the issue of pension benefits Wednesday when they return to mediated labor negotiations after a weeklong break. By all accounts, it won't be an easy day.

The International Longshore and Warehouse Union is demanding a major pension increase in exchange for accepting cargo-moving technology that will eliminate hundreds of jobs. Yet the Pacific Maritime Assn., which represents shipping lines and terminal operators, says it can't go much higher than the 25% increase it put on the table in October.

Steve Stallone, the union spokesman, declined to say how much of a bump the ILWU is seeking, but several sources said the demand is more than double the PMA's offer.

Some worry that a showdown over the issue could threaten the fragile agreement made two weeks ago on technology, after weeks of disruptions and a 10-day employer lockout.

Conversely, reaching a deal on pensions would remove one of the final obstacles to a full labor contract.

Both parties are under a federal court order to keep the ports open and operating at a normal pace, but the order expires in late December. Negotiations are taking place in a San Francisco hotel under the supervision of Peter J. Hurtgen, director of the Federal Mediation and Conciliation Service.

Going into the talks on worker pensions, both sides claim the moral high ground. Shipping lines say their offer of a 25% jump over five years is generous, particularly given their earlier commitment to maintain fully paid family health insurance. The offer was part of a comprehensive contract proposal rejected by the union in October.

"The numbers are huge," said an industry financial expert who asked not to be named, citing the sensitive status of the discussions. "We're facing spiraling health benefit costs already.... There is a cash flow issue here."

On top of that, the shipping lines are required to keep workers' pension accounts 85% funded so as to guarantee the money will be there when people retire.

But lately, heavy stock market losses have cut into those accounts, the industry source said, meaning that employers now must come up with the cash to shore them up. That alone will cause PMA pension contributions this year to soar to more than $60 million from $23 million, he said.

Combined with increases granted in 1993 and 1999, the latest offer would triple the value of a longshore pension from what it was a decade ago, bringing the maximum annual retirement benefit to about $50,000. Shipping companies also contribute up to $2,000 a year to a 401(k) plan.

But the union says its pension plan was inadequate in the early 1990s and is just now coming up to industry standards. Union leaders also contend that a large pension boost is a fair trade-off for its acceptance of computer systems, scanners and other technology that will eliminate at least 400 highly paid marine clerk jobs.

"We figure they're going to save at least $200 million a year," said Stallone, the union spokesman. "So what we want are some increases in the pensions that will make sure people can retire in dignity."

A substantial pension benefit increase would buck recent national trends, said Dallas Salisbury, president of the Employee Benefit Research Institute, a Washington group. In recent years, employers have been pushing to move retirement funds away from defined-benefit plans and into plans that carry less liability.

A defined-benefit plan guarantees a fixed monthly payment upon retirement. Other plans, by contrast, merely set an amount contributed by an employer during a worker's career; once the worker retires, the company is no longer on the hook.

However, unions have been loath to give up traditional pensions, which are seen as an important selling point for labor to potential members.

"Union negotiators hang pretty tough on that," said Shaun O'Brien, the top pension official at the AFL-CIO.

In private industry, about 70% of union workers are covered by defined-benefit pension plans, compared with about 16% of nonunion workers, according to the federal 1999 National Compensation Survey.

Sectors with heavy union density and a long history of union representation, such as the maritime industry, tend to have strong pensions, O'Brien said.

Although it may be the envy of many nonunion employees, the ILWU's pension plan -- even with the proposed 25% increase -- falls at the low end of the normal range for union workers in similar situations, said the manager of a major pension consulting firm who asked that he and his firm not be named, because his comments could upset one or both sides in the negotiations.

"It's not the richest by a longshot," he said.

A pension industry rule of thumb is that retirement funds, combined with Social Security payments, should equal about 70% of annual wages.

For longshore workers at the low end of the scale, such as basic laborers in smaller north coast ports, the $50,000-per-year payment would more than meet that requirement. But longshore clerks and foremen earn on average $118,000 to $158,000 a year with overtime and shift premiums.

"At the lower end of the wage scale, it's rich," said the manager. "At the higher end, it's more than mediocre, but nowhere near the greed scale."

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