[2008 annual report reveals total underfunding of four plans]
President and Chief Operating Officer Gracia Martore disclosed welcome news this month about the Gannett Retirement Plan, the biggest of four pension plans benefiting most of the company's nearly 40,000 employees. Because of surging stock markets last year, the value of Gannett's main pension plan investments rose about $150 million, she told a Feb. 1 teleconference of Wall Street stock analysts. That was good news for employees and investors because it bolstered Gannett's ability to pay retirement benefits; investment assets, after all, are the source of those payments.
But Martore didn't report a key piece of information: the plan's overall funding levels -- the assets required to meet all estimated current and future benefit payments. That is a figure now disclosed once a year in the company's annual 10-K report, filed with federal regulators. We'll get fresh information when the 2009 report is filed with the U.S. Securities and Exchange Commission as soon as this week.
The last 10-K report, covering 2008, revealed a sobering view of the Gannett Retirement Plan ("GRP" in the table, above). At the end of that year, it was underfunded by about $587 million. That was for two principal reasons: a sharp decline in the plan's stocks and other investments during the year, one where the great recession sent markets tumbling. (Those of you invested in the company's 401(k) plan experienced similar declines.)
The other reason: Gannett hasn't contributed to the plan since adding $50 million way back in February 2004, according to annual 10-K reports. What's more, Gannett isn't facing mandatory contributions this year, Martore told Wall Street analysts after GCI reported fourth-quarter earnings. "We may look at doing something on the voluntary side; but it would not be of significant scope,'' she said during the question-and-answer portion of the conference.Underfunding: Gannett isn't alone
Many companies have underfunded pension plans. The 100 biggest U.S. pensions were just 79% funded in 2008 vs. 109% funded at the end of 2007, according to consultant Watson Wyatt Worldwide. That means they had 79 cents set aside for every dollar owed to current and future retirees, The Boston Globe reported.
Gannett gave itself some relief by freezing the plan's benefits in August 2008, which limited future expenditures. If stock markets continue rising, the value of the plan's assets should rise, too. Also, assuming Gannett's financial situation continues improving, the company could resume large plan contributions.
But as investment professionals say, past performance is no guarantee of future results. The stock market could dive again; as I write this, the Dow Jones Industrial Average closed down 100 points today. And Gannett's revenue and profits could suffer unexpected, additional declines if it can't stem advertising losses to online competitors; that could pinch GCI's ability to fund the pension plan.
What's more, Gannett's total pension underfunding is actually much bigger than the $587 million in the main plan at the end of 2008. The company is on the hook for three other plans: one for U.K. employees in the Newsquest newspaper chain; another supplemental plan for a small group of senior executives, and a third "all other" plan, which the company doesn't appear to detail in the annual report.
Combined, those plans had a total underfunding of nearly $892 million at the end of 2008. (See the table, top.) We'll know the status of the four-plan underfunding when the 2009 report is filed, as I said, as soon as this week.
A cautionary note
I am by no means an expert on pensions. The subject's complexity is reflected in the fact that the word pension appears at least 44 times in the annual report. Employees and retirees who are concerned about their benefits should consult an accountant or other retirement professional. My observations here are meant only to start a discussion on the subject.
Current and retired Gannett financial professionals, please post your replies in the comments section, below. To e-mail confidentially, write jimhopkins[at]gmail[dot-com]; see Tipsters Anonymous Policy in the rail, upper right.
Great reporting, Jim.
ReplyDeleteHow in the world do companies justify awarding bonuses and fat salaries to the top dogs when pensions for the peons are so grossly underfunded?
When Gannett bought the Courier-Journal in 1986, Diamond Al and his boys declared the pension fund overfunded and removed $50 million to Rochester. We'd like that back now.
ReplyDeleteThis is pretty interesting.
ReplyDeletehttp://bulletin.aarp.org/yourmoney/work/articles/outrage_bosses_bonuses_trump_workers_pensions.html
My concern over the viability of the Gannett pension fund is absolutely one of the reasons I decided to retire a few years earlier than I originally had planned. I no longer trust the people who run this company. I wanted the cash that had been promised to me and the only way to get it was to leave now. I'm out. I have my pension money. I'm glad.
ReplyDelete3:56 is right to get his money now. The underfunding is "probably" not a problem. But when you are approaching the golden years, there is no point taking a chance, especially with a company such as Gannett which tends to treat its employees poorly. It is sad that 3:56 no longer trusts Gannett management. That says a lot, and he is far from alone in this regard.
ReplyDelete