Monday, July 09, 2012

A pension plan report that's worth a closer look

As I've written this winter and spring, there's no doubt Gannett's main pension plan isn't as robust as it could be.

The Gannett Retirement Plan, which benefits about 50,000 current and former employees, is underfunded by as much as $560 $500 million, according to documents filed with U.S. securities regulators.

That means if all things remained the same -- the number of people owed benefits, and the amount set aside to pay them -- the plan would come up short. Under the worst-case scenario, the plan has about $1.8 billion in stocks and other investments, but would need $2.3 billion to pay all claims.

But I don't believe things are as bad as appear in a new published report about newspaper publishers and their pension obligations. In his column today, New York Times media writer David Carr quotes a Fitch ratings analyst, Mike Simonton, saying GCI's plan is underfunded by an amount nearly twice as high: $942 million. Carr's column isn't specific about the source of Simonton's figures.

Corporate has published two reports this year that offered two different figures on the plan's funding: In February, the annual report said it was underfunded by about $560 $500 million. More recently, in April, the figure was a lower $415 million. The reports didn't explain the differing amounts, which may have been due to changes in the value of assets amid swings in the stock market.

A worthy red flag
To be sure, it's common for U.S. pension plans in all industries to be underfunded because companies aren't making big-enough contributions. Employers assume that, over time, pension assets will increase in value with rising stock markets. And GCI's was in better shape than many, according to the February report, which said the plan was 81% funded vs. a 74% national average.

Still, the thrust of Carr's column is worth paying attention: Newspaper publishers have struggled to make sufficient contributions to their plans because advertising revenue has been in a tailspin. At some companies, Carr says, the situation could grow so grave, publishers will seek bankruptcy court approval to walk away from their plans. That would force the Pension Benefit Guaranty Corporation, a government-sponsored agency, to assume responsibility for failed plans -- without promising to pay the full benefits owned.

Bear in mind, employers aren't required to offer pensions; these are voluntary benefits more typical in older industries. Newer businesses, especially in the technology sector where GCI now competes, usually don't sponsor pensions.

GCI's contributions last year weren't enough to close the funding gap. It added just $33 million during 2011 vs. $130 million in 2010. To be sure, the company pumped in more money early this year -- $54 million -- and expects to add up to another $64 million by the end of the year.

Frozen, but not forgotten
But unlike another publisher in Carr's story, McClatchy, GCI has greater financial resources. It has boosted its relatively generous dividend to pay $1.3 billion to shareholders by 2015. That's a financial stream that could be re-directed to pension support -- although Wall Street would then punish GCI's stock. And this assumes that the company's revenue doesn't crumble further; that would endanger the dividend.

The Gannett Retirement Plan was frozen for substantially all employees in 2008 as the company raced to cut costs during the industry-wide plunge in advertising revenue. Nonetheless, it remains the biggest of four company-sponsored plans benefiting more than 30,000 current employees and thousands more who have already retired.

GCI's main retirement vehicle is the 401(k) plan, where the company matches some of the money contributed by employees. Unlike the pension plan, all the 401(k) money is the employees' property once the vesting requirement is met. Companies may walk away from pension obligations, but that's not an option with 401(k)s.


  1. Come on Jim you were a business reporter correct. It is unde3rfunded if 50,000 people retired tomorrow. THat isn;t going to happen and no one had not been paid. And by teh way, your boy Carr despises Gannett almost as much as you do so I take verything he says with a grain of salt. No it is your turn to rip me and tell me how wonderful Carr is.

  2. Whether Jim's figures or Carr's sources are correct, both point to a lack of sustainability. If you are already laid off and have money in the pension plan, get it out. Or you will be screwed over yet again by the Big G.

  3. "Underfunded" is a legitimate financial yardstick commonly used to measure the overall fiscal state of pensions. Of course, 50,000 people aren't retiring tomorrow but that is not part of such equations.

    As for not being paid? Yeah, I know it's "guaranteed," but I still haven't been able to collect a dime and the Gannett Pension Center offers no explanation -- one harried clerk saying one thing, totally convincing date wise, and when the date passes? Another harried clerk recites something else.

    This goes back to last spring. May 15! Nope. Call #2: June 15! June 15, nope. Call #3: July 1! July 1, nope. And that's just to get the effing packet.

    So payment is "guaranteed," but Gannett has no incentive to pay it. Once you're off the payroll, you don't exist to this awful company -- and evidently neither do your benefits.

    1. Their is always a way to eat up the big dogs... collecting your retirement is easy only if you know how to get it. Gannett has to pay up to those employed from 1998 on back for their pension; and I'm not talking about a 401k either... Lesson to be learn always keep your documents from a company for evidence... Now that's real talk...

  4. @10:28 . . . it's true that 50,000 AREN'T retiring tomorrow. And yet, look at ANY old-style industry (usually heavily unionized) AND their pension plans.

    Steel and autos come to mind. How many BILLIONS did the Feds pay to bail out GM and Chrysler? $50 billion? More? The bailout was for ONE THING. To take the pension liability away, since ALL auto profits were essentially going to pay for people who no longer worked.

    I gotta say, the Media General deal with Buffett is a real head-scratcher now that we know Buffett DID NOT assume the pension liabilities. MG sold the assets, and kept the liabilities. What dunces approved THAT deal?

    Finally Jim, a nit-pick of your final sentence. With 401ks, there's nothing to walk away FROM. 401k funds are kept with a separate financial entity, such as Fidelity or Schwab. To end any 401k liability, all the company has to do is immediately end matching funds. 401ks end a company's long-term pension liabilities by making all payments in the present.

    An examination of Gannett's pension plan holdings seems to show a diverse group of holdings, with very little or none in actual Gannett stock. Give Gannett credit for running an apparently clean and above-board operation.

    The cheapest way to fund a pension is to use company stock, which costs the company nothing. If Gannett REALLY wants to cut its pension cost and puff up the percentage of coverage, all it has to do is add GCI to the assets.

  5. Good news is it matters not to me, pension and 401K transferred to IRA's since my departure from Mother Gannett.

  6. I have worked for my company since 1986, when it was a well run family business. Then Gannett bought out the business and things went into a tailspin almost immediately. My biggest problem is when CNI owned us I was to receive a rather nice annuity for the rest of my life. Then due to my young age, Gannett changed the plan for the "youngsters"
    It changed it to a lump sum payment. I have received three statements since, first my lump sum was to be over $100k. then the second one stated about $70k, finally I got one about a year ago, stating $50k. I called today to inquire about this. I was asked. Do you have the old statements? Why was I asked that i wonder? Do I need proof to get the money previously promised to me. When I told them I have the information buried deep in my files they said to find it, then we can talk. Unhappy with that I asked for an accounting of how the company came up with the latest figure. The reply is I will send you something, but I have no idea what it will contain.
    I really think we as a group of employees, past and present need to band together and get an accounting as to what we are owed according to "plan document".


    Yeah, David Carr hates Gannett. And if you read the article, it notes that the NYT pension fund is ALSO (potentially) under-funded.

    Jim did a good job here (and no, I'm not his mommy). What most math-phobic news folks don't get -- financial estimates CAN vary, based on the underlying assumptions. (Example: original CBO estimate of Medicare is now 800% WRONG).

    At bottom: this is serious. It needs serious attention. As with GM, those still with Capt. Gannettoid might want to consider a lump-sum payout, just to avoid a PGC 'crash.' Consult independent advisers.

    Relying on gub-mint or Capt. Gannettoid won't help. You are your best friend. Start acting like it.

  8. A number of people are suddenly finding bogus quality control "adjustments" to lump sums. When challenged, contractor calls for proof from from employees of service details. The company is obligated to retain records and calculate properly. It gains by gaming this way.

  9. @2:29 . . . if you worked for CNI, I hope you traded your Gannett stock for something else as soon as you could. As I recall, the buyout was around $60 a share, paid in GCI stock. The same stock that's now about $15. You do the math.

    As for your payout, it's pretty simple now, since they froze future increases a few years ago. The reason they quoted different figures to you, is that over the years those numbers changed, usually for the worse, as you noted.

    A quick calculation gets you in the ballpark: years at Gannett/CNI + your age = percentage of your final salary that you get as a kiss-off.

    So . . . if you retire at 65, with 25 years employment, and you make $50,000 . . . add 65 + 25 = 90% times $50,000 = $40,000 retirement lump-sum. Minus taxes (which you can avoid with a bit of planning), you ought to clear about $27,500, so don't buy that condo on the beach just yet.

  10. If you are having problems getting info on your retirement from Gannett, then contact the Department of Labor. They are charged with the enforcement of the ERISA act. Here's the info from the last Plan Document I have:

    If you have any questions about your Plan, you should contact
    your Human Resources representative. If you have any
    questions about this statement, or about your rights under
    ERISA, or if you need assistance in obtaining documents
    from the Plan Administrator, you should contact the nearest
    office of the Employee Benefits Security Administration, U.S.
    Department of Labor, listed in the telephone directory, or
    the Division of Technical Assistance and Inquiries, Employee
    Benefits Security Administration, U.S. Department of Labor,
    200 Constitution Avenue N.W., Washington, D.C. 20210.

  11. 1. You cant lump sum out until you leave the company.

    2. Although pensions are generally protected by the government, iyounare not gauranteed 100% of it.

    3. Gannett used to give you annual statements of what you were owed in retirement. Havent gotten a statement since pension was frozen. Is this available somewhere?

  12. BONDS

    "A number of people are suddenly finding bogus quality control "adjustments" to lump sums."

    Probably due to drops in bond returns. As with the general economy.

    Capt. Gannettoid doesn't know journalism.

    But she/he does know math and does not want to go to jail.

    Plus, probably using a standard "Fortune 500" pension management vendor.

  13. @12:33 re statement of expected benefit.

    You ought to get a statement in the mail every year. It will typically be a year behind. In 2012, the statements reflected the benefit as of 12/31/2010.

    Use the calc I screwed up earlier to get a rough idea. Years of service + age = percentage of your final salary that you ought to receive.

    So if you have worked 25 years at age 65 and you make $50,000 a year, your benefit is figured:

    25 + 65 = 90% x $50,000 = $45,000 benefit. You'll lose a BIG chunk of that to taxes if you don't plan correctly.

  14. I don't think the pension payout, or lump sum withdrawal calculations, are dependent on fluctuations in the investment market.

    For many of us, including Anonymous 2:29 if I read correctly, the sum due to us isn't just Gannett pension but prior plans, some of which were types bound by different laws than the common Gannett Pension.

    There is a group to compare concerns and give each other heads-up at gannettpensions at gmail.

  15. This comment has been removed by a blog administrator.

  16. Peter Beller7/13/2012 7:14 PM

    Maybe this will help clear things up (I'm a former financial reporter):

    Pension funding status is the value of the plan's assets (stocks, bonds, cash, etc.) minus the PRESENT VALUE of its liabilities (all the cash it will have to pay out to current and someday retirees, discounted back to today). Swings in the financial markets do move the values on the asset side but the biggest determinants in these estimates (and they are estimates) are two key figures: the estimated rate of investment return on assets and especially the discount rate used to calculate the liabilities side.

    Gannett's 2012 10-K statement filed with the SEC, which says it is underfunded by $560 million, notes that a half-percentage-point change in the discount rate is uses would result in a $106 million change to the estimated obligations of the pension plan.

    So is Carr right to be worried? In a word, absolutely. Comparing Gannett to the universe of financially robust U.S. corporations does not make sense. To compensate for lackluster investment returns the company will have to fund its pension from free cash flow (the dividend would be a good place to start). And corporate pension owners rarely use conservative rates to make their pensions look even worse than they are (Gannett thinks it will make 8.75% a year on its investments) so it is reasonable to assume that a credit analyst from Fitch might take issue with Gannett's accounting figures.

    One thing Carr forgot to note is that a major reason most corporate plans (including newspapers') are underwater right now is that bond rates are the lowest they've ever been and regulators require companies to use those rates to discount their liabilities, so lower rates mean higher estimated obligations in the future.

    If bond rates were to increase, those estimates would go down (although the bonds held as investments would drop in value, too).


  17. Does anyone know what happened to the pension plan of the former managers of the Hawaii Newspaper Agency? Is it part of the same retirement fund that is the topic of this article?

  18. Hi – Will you please post a link to your Blog/Article at The Retirement Planning Community at Our members will really appreciate it.
    Members include: Those planning their retirements, retirement planners, retirement plan and planning experts and professionals.
    It's easy to do, just cut and paste the link and it automatically links back to your website. You can also add News, Photos, and Videos if you like.
    Email me if you need any help or would like me to do it for you. I hope you consider sharing with us.
    Please feel free to share as often and as much as you like.
    The Retirement Planning Community:
    James Kaufman, Editor


Jim says: "Proceed with caution; this is a free-for-all comment zone. I try to correct or clarify incorrect information. But I can't catch everything. Please keep your posts focused on Gannett and media-related subjects. Note that I occasionally review comments in advance, to reject inappropriate ones. And I ignore hostile posters, and recommend you do, too."

Note: Only a member of this blog may post a comment.