Fans of Peeps, the sugary marshmallow treats that fill millions of Easter baskets each year, may want to brace themselves—the gooey confections will likely be in short supply this coming April. Last week, 400 employees at the Bethlehem, Pa., candy manufacturer Just Born Quality Confections walked out amid pension protests. The strike comes as Easter production of the candy gets underway.
At the heart of the strike is a proposal by Just Born to move new employees to a 401(K) retirement plan, while continuing to contribute to its current employees’ pension fund at its current level. Sounds simple, right? Think again.
While most private companies have moved to 401(K)-style retirement plans (avoiding the trillion dollar underfunded pension crisis that plagues the public sector), Just Born is part of a multi-employer union pension fund. The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union Local 6 provides pension income to thousands of workers, including those of Just Born.
And as most pension funds have found themselves drowning in debt in recent years, so, too, has the confectioner’s pension. As of April, the fund reported $5 billion in assets and $8 billion in liabilities. To try to regain solvency, the fund began charging employers a per-employee surcharge, costing Just Born more than $2 million. And now, according to the candy maker, surcharges to keep the fledgling pension fund afloat are threatening operations of the Bethlehem plant.
Just Born is caught in a Catch 22: as long as its employees remain covered by the pension fund, it must pay millions of dollars in surcharges; otherwise, to exit the pension plan would costs tens of millions of dollars in fines, bankrupting the company. Hence, to reduce costs, Just Born wants to move new hires to a 401(K), but the union argues it’s against pension plan rules. And there's the rub.
The Retirement Security Initiative believes that all workers deserve safe and secure retirements and benefits should be fair, sustainable and predictable. Unfortunately, the workers of Just Born are faced with a troubled pension that could go belly-up, leaving them without their full pensions, or an employer that may have to cease operations because it can’t afford pension surcharges and fees. Whatever the case, there’s no sugar-coating the issue: public or private pension funds that aren’t being fully funded jeopardize the futures of the workers that they are there to protect.