Comstock's magazine 1119 - November 2019 | Page 58

n FINANCE
hen financial writers
describe the shrink-
ing group of people
with a pension, the
word “lucky” comes
up a lot. That’s because
pensions — also known
as defined benefit plans
— put the risk on employers, who
are on the hook to pay retirees an
agreed amount no matter what
happens to the underlying invest-
ment. By contrast, most workers
who have a retirement plan are in a
defined-contribution arrangement
like a 401(k) or individual retire-
ment account that puts the risk of
a market downturn on them.
At least that’s how pensions are supposed to work. But Pa-
mela Martineau has no faith that will happen. Martineau, 56,
is a former senior writer with The Sacramento Bee, owned by
Sacramento-based McClatchy. She left in 2007 after spending
10 years there and is taking her pension payments early —
she started drawing in January. The plan allows participants
to begin withdrawing as young as age 55, but her early with-
drawal means she’s getting only 70 percent of what she would
if she waited until age 65. But she’s taking no chances.
“A part of the reason that I took my pensions now is that
I am worried about the integrity of the funds in the future
when so many people will be drawing pensions and there
will be fewer workers,” she says. “I feel it is a distinct possibil-
ity that those of us who are even drawing pensions now could
see them cut in the future if another financial meltdown oc-
curs similar or worse than the Great Recession of 2008.”
The state’s pension landscape consists of three variet-
ies. Private single-employer plans like McClatchy’s are rar-
er than in the past when employees spent their career with
one firm. Less well-known are private multiemployer plans,
a model designed to let companies join together to pool risk
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comstocksmag.com | November 2019
and take advantage of economies of scale. And best known
are the plans that cover current and former public employ-
ees, mostly of state and local agencies and teachers: the Cal-
ifornia Public Employees’ Retirement System and California
State Teachers’ Retirement System.
Most of the attention given to pensions has focused
on public plans because so many are covered by them —
CalPERS and CalSTRS have nearly 3 million members com-
bined — but some private plans are in far deeper trouble. For
employees and retirees, that means staying on top of how
their company’s plan is doing and taking steps to advocate
for themselves in the event of problems.
There’s no clear evidence McClatchy’s pension will fail,
though some signs are troubling, according to area actuar-
ies. The company froze its plan on March 31, 2009, meaning
no participants accrued benefits beyond that date, and new
hires couldn’t enter. The plan’s funded ratio — what it has in
assets vs. what it owes in future payouts — was 85 percent
in 2017, the latest reporting year. That funding level means
it’s not considered to be at risk under federal rules. In most
cases, at risk is defined under federal law as less than 80 per-