U.S. Steel freezes traditional pensions for long-serving nonunion staff
U.S. Steel said it will freeze pension benefits for nonunion workers at the end of the year and offer them a 401(k) retirement plan as it looks to cut costs amid a prolonged downturn in its business.
The shift away from a company-funded pension to a plan in which employees can contribute toward their retirement will affect 1,300 workers who were employed with the company for more than 12 years, a spokeswoman said. The change does not affect union workers.
U.S. Steel spokeswoman Sarah Cassella said the company faces “increasingly significant headwinds and pressures,” including fluctuating oil prices, overcapacity in the global steel market and a high rate of domestic imports.
“We must make responsible decisions we believe will strengthen the financial foundation of our company and continue our transformation as we look to earn the right to grow and drive sustainable profitability, regardless of the business cycle,” Cassella said.
U.S. Steel had replaced traditional pensions that guarantee a fixed payment for life in favor of a plan whose payout depends on the investment performance of contributions — made by employees and the company — for its nonunion staff hired on or after July 1, 2003.
That includes CEO Mario Longhi, who joined the company in 2011. Among U.S. Steel's top 21 executives, only five began working for the company or one of its subsidiaries before July 2003, according to the company's profiles of its top brass.
The move away from defined benefit plans to defined contribution plans is one that many companies have made in an effort to reduce expenses and corral runaway retiree costs. U.S. Steel's pension assets totaled $6.4 billion, with projected obligations of $7.3 billion as of the end of last year, a regulatory filing showed. Pension obligations amounted to $10.2 billion a year earlier, the filing said.
“It's a prudent time to lower costs. No one ever got in trouble lowering costs and reducing debt,” said stock analyst John Tumazos of New Jersey-based Very Independent Research LLC.
Tumazos pointed to recent turbulence in the stock market and falling sales in China's auto market, adding, “It makes sense for U.S. Steel to control any costs that it can control.”
The Downtown company is making the latest change, effective Dec. 31, for the longest-serving members of its white-collar workforce as it seeks health benefit concessions from its unionized workers. The company is in negotiations with the U.S. Steelworkers union to replace a labor agreement that expires Sept. 1. About 18,000 of the company's 30,000 workers worldwide are represented by the union.
“I can tell you that the pension is one of many issues being discussed as part of our current contract negotiations with the company,” union spokesman R.J. Hufnagel said, declining to offer specifics.
U.S. Steel last year posted its first annual profit in six years, reporting net income of $102 million. The company is trying to lower costs and improve efficiency in a profit-expanding initiative known as Carnegie Way as it struggles with a slump in business. The company has idled mills across the country and laid off thousands of workers in response to a downturn in its business that it has blamed largely on competition from cheap imports and lower demand, especially from the oil and gas sector. U.S. Steel announced the pension decision in an Aug. 17 filing with the Securities & Exchange Commission.
Tom Fontaine is a staff writer for Trib Total Media. He can be reached at 412-320-7847 or email@example.com.