Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Heinz 'Derisks' Pension Plans Food Company Wants Obligation off of Its Books

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Heinz 'Derisks' Pension Plans Food Company Wants Obligation off of Its Books

Article excerpt

Arnold Waldo is boycotting products made by the H.J. Heinz Co.

The Carrick resident who is near his 83rd birthday knows losing his business is probably not going to make or break the Pittsburgh- based food company that reports billions in sales annually. But for him the symbolism is strong.

Mr. Waldo started work for Heinz in 1951 and - except for a stint in the military - worked there until his retirement in 1985. He had several aunts who also worked for the company that was founded in Sharpsburg in the 19th century and employed generations of Pittsburghers at both its headquarters and its former North Side plant.

A few months ago, the company - which was acquired for more than $28 billion by new owners last June - sent a letter telling him that his annual retiree reimbursement account to cover certain medical expenses was being cut from $3,500 a year to $1,093.

Then the mailbox delivered another blow from Heinz. The company doesn't want to manage his pension plan anymore. "At Heinz, we are committed to being the best food company in the world and pension plan management is not our core competency," said the letter dated Feb. 26 sent to people such as Mr. Waldo who were involved in one of two pension plans covering salaried employees and nonunion hourly workers.

Like many other companies before it, Heinz is planning to shift the pension obligations off its books - a process called "de- risking" by organizations such as the Pension Rights Center, an advocacy group on retirement issues in Washington, D.C. GM and Verizon made news in recent years by taking similar steps.

Some experts see it as a logical move that will give Heinz relief from a volatile obligation that needs regular infusions of cash. They think the step might even offer a more secure guarantee that pensions won't be threatened if Heinz ever runs into trouble or ends up in bankruptcy.

The Pension Rights Center has concerns, arguing that both offering people lump-sum buyout offers and transferring pensions to insurance companies in the form of annuities could open retirees up to new risks. Individuals may not be prepared to invest the sums properly to make the money last, and they'll no longer be backed by the Pension Benefit Guaranty Corp. Instead, the annuities will be insured by State Guaranty Associations, which vary from state to state.

For its part, Heinz believes the changes to its U.S. and Canadian pension plans will protect retirees' benefits while helping the company. "The value of pension benefits earned to date under these plans will not be affected by these changes," said Michael Mullen, senior vice president of corporate and government affairs for Heinz. "We are simply changing the way pension benefits will be managed and delivered in the future."

He, too, noted that Heinz isn't a trailblazer on this issue. "Many companies have recently made similar changes providing greater flexibility for plan participants and more efficient operations for plan sponsors whose core business is something other than managing and delivering pension benefits."

Heinz has significant pension obligations, according to information in regulatory filings made in the months after the sale to a joint venture of Berkshire Hathaway and 3G Capital in June.

In a filing earlier this year, Heinz indicated it had defined benefit pension and other post-retirement benefit plan obligations of $3.225 billion, with service and interest costs of $92 million as of Dec. 31. The fair value assets behind the plans increased during the period to $3.7 billion, which included $156 million in employer contributions and $162 million in actual return on plan assets.

The company said it maintains retirement plans for the majority of its employees. The defined benefit plans are mainly for domestic union and for foreign employees, according to a regulatory filing. Defined contribution plans - a term that generally refers to 401(k) plans and individual retirement accounts that both employees and the company contribute to - are offered to most of the company's nonunion hourly and salaried employees. …

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