Pensions were the subject of discussion at our April 22 meeting, and the more than 100 retirees who attended received a candid and comprehensive review of Honeywell pension plans. Eric Warren, Director, Retirement Plans and Benefits Labor, was our featured speaker, and his talk, responses to questions, and written handout, left us with the impression that the Honeywell pension plans are in capable hands. If you were not at the meeting, all is not lost! Log on to the H/AREA website, www.hon-area.org, where you will find a copy of Mr. Warren’s presentation, and the material handed out at the meeting. We also have a limited number of the hard copies, and a request to our Contact Point, PO Box 2245, Morristown, NJ 07962-224 will get one to you.
I'd like to summarize the items discussed for the benefit of those of you who weren’t present.
First, pensions of interest to us are either qualified or non-qualified plans. Most of us receive pensions that fall into the qualified category, which means that they are funded by Honeywell in a secure trust and protected up to a point by the Pension Benefit Guaranty Corporation (PBGC). This quasi-government entity was set up years ago to protect employee pension benefits, after a number of corporate failures deprived retirees of earned benefits. The program is funded by mandatory contributions from employers, and the current maximum protection for any individual is limited to $44,386 per year. Naturally, if you retire before age 65, and/or choose survivor benefits, the protection cap is lower. However, the PBGC does provide considerable protection for most of us.
Non-qualified plans are protected only by the ability of the company to pay. If you receive more than one monthly pension check, the reason could be that you were covered by more than one qualified plan or one may be from a non-qualified plan . It’s easy to identify the difference at tax-reporting time. For income tax purposes, qualified pensions are reported on 1099 forms, while the non-qualified variety comes as a W-2 form. Honeywell non-qualified pensions result mostly from an employee's compensation above a limit set by federal statutes, or from some form of deferred compensation.
The second subject covered was the most common forms of retirement plans currently in place, namely defined benefit and defined contribution. Most of us, now retired, were covered under the defined benefit plans, which, like an annuity, pays a fixed amount each month. The funds to cover this are placed with a trust manager responsible for investing and payment. From time to time, (most recently in 2002 and 2003) Honeywell has added to the trust by making contributions. The Honeywell trusts are well funded, and above the government’s guidelines. If the fund grows at 9% per year, as planned, it should cover the expected pension benefit payouts into the future.
The defined contribution plan is much simpler. The company puts in a fixed amount per year, and the rate of investment growth, some of it self-directed, determines the amount of money available at retirement. The retiree enjoys the potential for higher growth, but shares in the pain if results are disappointing. Most employers have moved to defined contribution plans because they are more contemporary and work better for a more mobile workforce.
Another subject was the administrative record of service to retirees. The company has made some recent changes to the administration of retiree benefits. Foremost among these was the selection of Hewitt Associates as the retiree benefit administration vendor. Hewitt is the industry leader, and has the required technical tools and experienced personnel. Scott Bradley of Hewitt was present at our meeting, and a post-meeting participant. They have a complex task, inasmuch as there are 6 separate pension plans, with over 150 different formulas. Hewitt’s job is to become expert in each of the plans, and administer all of the retiree pension and medical benefits. The company tracks their response time to telephone calls, call-back delays, and similar metrics. Eric shared the records of improvements to date, and the results are encouraging. We should expect to see continued improvement.
A word of thanks here to our many members who responded to our call for questions and topics to be covered in the meeting. Those questions formed the backbone of the presentation, and it was gratifying to see the loop closed in the meeting. We had many questions, and answers were forthcoming from Eric, Toni Boyce and Cindy Burnelko. Toni is SBU Benefits Service Manager, and Cindy is Manager - Retiree Services. Honeywell went all out to satisfy our stated concerns, and even initiated private sessions to assist several individuals.
You can read all of the details in the supplied material, but the meeting has to be judged an unqualified success. Thanks once again to those of you who submitted questions, those of you who attended, and especially to the Honeywell benefits team that listened to our issues, and shared their knowledge with us.
(Editors Note: The Honeywell presentation is in "Powerpoint" (PPT). Click here to view the Pension Slides 04 presentation. If you do not have Powerpoint and wish a copy of the slides, you have two choices:
a. download a free copy of of Powerpoint by clicking on Download, select next 45, scroll down to Power Point Viewer 2003, follow download instructions; or
b. click on Comments, give us your name and mailing address, and we will snail mail you a copy of the slides.)
Our next general meeting will be held in October 2004, probably on the 21st. The tentative topic is the impact of new Medicare laws on our retiree health plans.
Speakers Committee Chair