A LESSON IN SHARING
A large employer’s pension plan was no longer sustainable.
A large public sector employer had significant issues with their existing pension plan. Their union-sponsored, defined benefit pension plan had a significant unfunded liability in the millions of dollars after the market crash of 2008. There were significant shortfalls in the plan asset bringing into question the plan’s solvency.
The employer was searching for a long-term solution to the problem. HR Atlantic orchestrated the development of innovative solutions to restore the plan and bring the union on side. Discussions with senior management and their pension advisors led to a negotiation with the union to develop a solution to restructure the plan to a shared risk model. They agreed upon sharing the unfunded liability and amended the pension using a cost-share model. They also factored in a solution in the event that the plan was in trouble in the future. What worked in this situation was HR Atlantic engaging the union in a problem solving exercise so everyone could emerge with the best possible outcome.
The result of bargaining was that they were able to package the increased pension costs by moderating wage increases over a three year period, allowing the pension plan to replenish itself organically. This put the pension plan on stable footing.