Wyatt Employment Law Report

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Walmart Announces Wage Increases

By Colby F. Block

On Thursday, Walmart announced several changes to its compensation and benefits structure—the most noticeable being its hourly wage increase. Walmart states that, by April 2015, its entry-level wage will start at $9 an hour, and it will go up to $10 an hour by early 2016.

Other new measures include additional training and opportunities for internal promotion, which Walmart CEO Doug McMillon states will create clearer paths to better jobs and higher pay.

wage increaseThese changes are significant—Walmart is the largest private employer in the country, and this will increase wages for 500,000 of its employees. The cost to Walmart over the next year is projected at one billion dollars, but this number is actually small considering the company’s almost $500 billion in annual revenue.

Walmart’s announcement has already created quite the media frenzy. And some—noting that it is not altruism behind these changes—are already questioning Walmart’s motives. Walmart is a business, after all, so there is a bottom line. Is the goal to Continue reading

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PBGC Releases Annual Report: Multiemployer Program Deficit Overshadows Single-Employer Improvement

By Rachel K. Mulloy

The Pension Benefit Guaranty Corp. (PBGC) issued its annual report on Monday, November 17, 2014, presenting a mixed bag of good and (mostly) bad news. The PBGC was created in 1974 as a government insurance program for traditional employer-paid defined benefit pension plans. If an employer can no longer support its pension plan, the agency takes over the assets and liabilities and pays promised benefits to retirees up to certain limits. The federal agency, which insures pensions for about 41 million Americans, saw its deficit nearly double from $36 billion to about $62 billion in the latest fiscal year. The agency has run deficits for twelve straight years but this is the widest deficit in its 40-year history. The gap grew wider in recent years because of the weak economy, which triggered more corporate bankruptcies and failed pension plans. The PBGC’s pension obligations grew by $30.9 billion in 2014, to $151.5 billion, while assets used to cover those obligations only increased by $4.9 billion, to $89.8 billion. The agency stated the increased deficit is largely due to the worsening finances of some multiemployer pension plans.

The report projected the deficit in the multiemployer pension insurance program rose more than five-fold over the past year, from $8.3 billion in 2013 to $42.4 billion this past year. A multiemployer plan is one in which groups of businesses join with unions to provide pension coverage for workers. There are currently a total of approximately 1,400 multiemployer pension plans covering about 10 million workers. The increase in the program’s deficit is due in part to the estimate that several large pension plans will become insolvent over the next decade. The PBGC’s report further predicted that, unless Congress makes some changes, the multiemployer insurance program faces a greater than 50% chance of collapsing within the next eight years. That likelihood increases to 90% by 2025. If these projections prove true, millions of workers could be left without pensions and with only a fraction of the insurance payouts they had anticipated.

The PBGC’s maximum insurance benefit for retirees in multiemployer plans is less than $13,000.00 a year compared to the more than $59,000.00 for those in single-employer plans. The agency has said this means that workers with a $20,000.00-per-year pension and thirty years of service would lose more than $7,000.00 in annual benefits if the plan fails. And if the PBGC becomes insolvent, the agency would be left with only incoming premiums, causing payments to be just a fraction of previous levels. John Kline (R-Miss), Chairman of the House Education and Workforce Committee, has called the multiemployer pension system “a ticking time bomb that will inflict a lot of pain on workers, employers, taxpayers, and retirees if Congress fails to act.”

Policymakers have been debating fixes to the nation’s growing retirement security problem for the past several years. The Obama administration proposed in its latest budget to raise the insurance premiums, which are set by Congress, and tailor them to the size of companies and their level of financial risk. Congress has not yet acted on this proposal. The PBGC acknowledged that some of the multiemployer plans that are critically underfunded have taken steps on their own to help avoid insolvency, but such action is not enough. The PBGC urges Congress and stakeholders to work together to “provide solutions and additional tools to help preserve these critically important multiemployer plans.” One risk of Congress delaying to take action is that employers may simply leave the pension plans before the system collapses. While federal law requires employers that leave the system to make an exit contribution, the loss of employers weakens the system for those who remain.

Apart from this dire news about multiemployer pension plans, the PBGC report noted finances have improved for its other pension insurance program, which is offered by individual companies, as a result of the surging stock market, higher insurance premiums, and an improving economy. The long-term deficit for this program, which insures 22,300 pension plans covering 31 million Americans, sank by nearly one-third over the past year, from $27.4 billion to $19.3 billion.