Good news for you too: A defined pension plan is now within reach
From the Massachusetts Nurse Newsletter
November/December 2010 Edition
What is a multiemployer defined benefit pension plan?
It is a pension plan that guarantees a specific amount of money (i.e., a defined benefit) for the retiree for the rest of his or her life. The framework of a defined benefit pension plan depends on the involvement of more than one employer (hospital); other unions can negotiate their way into the plan at any point after the original plan is established.
Multiemployer pension funds are one way employers can provide a pension benefit to their unionized employees at retirement. These funds are composed of contributions that the employer(s) makes on behalf of employees. The union representing the workers contractually negotiates contributions to the fund.
What are the characteristics?
- Two or more employers contribute to the fund. Because the MNA has negotiated with the Caritas system, the MNA may now negotiate with other hospitals across the state to participate in the plan. This includes YOUR hospital.
- The fund is collectively bargained with each participating employer.
- A board of trustees manages the fund and its assets jointly with equal numbers of representatives from management and labor.
- Assets are placed in a trust fund, legally distinct from the union and the employers, for the sole and exclusive benefit of the employees and their families.
How is this different from your current retirement plan?
A defined benefit pension plan does what it says: It provides a defined (i.e., guaranteed) benefit in retirement, which is paid out in monthly installments for the entire lifespan of the participant. These benefits are guaranteed under the law. Benefits can only be reduced by a vote of the trustees (half of whom are union members) and that change will only affect future beneficiaries. The employer retains the liability for paying the pension benefits.
Under your current plan (most likely a 401(k)-esque defined contribution plan) the employer’s liability ends after the money is contributed into your retirement account. From there, if the market tumbles and your account is depleted, your money is gone.
How does each type of plan compare in performance?
According to researchers from the Boston College Center for Retirement Research, 401(k)-type retirement savings plans have underperformed defined benefit plans by one percentage point a year. When adjusted for the size of their holdings, defined benefit plans returned 10.7 percent a year on average, compared to 9.7 percent a year on average for the defined contribution plans. This difference translates into a 20 percent cut in the retirement benefit for an employee working 40 years with a defined contribution plan.
What are the benefits of an MNA defined benefit pension plan?
- It provides a guaranteed annual benefit for life.
- It earns more money than other plans for participating nurses.
- It is better for those who must work part-time or step out of the workforce for childcare/family responsibilities.
- It provides a much stronger return for younger nurses, which gives them a strong incentive to keep working at the same hospital or within a network of participating hospitals.
- It improves nurse recruitment and retention.
- It is far more cost effective than other plans.
How do I learn more about my unit’s ability to participate?
Speak with your MNA labor AD, call the MNA at 781-821-4625 or send an e-mail message to email@example.com.