U.S. Steel is freezing pensions for senior managers as it looks to cut costs.
The Pittsburgh-based steelmaker is switching nonunion managers and supervisors who have been with the company for more than 12 years over to a 401(k) retirement plan next year. Any managers or supervisors who were hired or promoted more recently already get a 401(k) in lieu of a pension.
About 1,300 employees companywide will be affected, spokeswoman Sarah Cassella said. Locally, U.S. Steel operates Gary Works in Gary, the Midwest Plant in Portage, and East Chicago Tin in East Chicago.
"On Jan. 1, 2016, impacted employees will be transitioned to the retirement account under the U.S. Steel 401(k) Plan and receive employer contributions under the 401(k) plan, which is the same plan provided to nonrepresented employees who joined the company on or after July 1, 2003," Cassella said.
The move does not affect the 17,000 United Steelworkers-represented workers. The union is now negotiating a new contract with the steelmaker.
The number of private-sector employees covered by pensions in the United States has declined precipitously over the last few decades, as private sector employers have dropped the defined benefit plans in favor of less costly defined contribution plans, usually 401(k)s. An estimated 35.9 million private sector employees, or about 46 percent of all private sector workers, had pensions in 1980, but that number has dropped to around 3 percent today, according to the Employee Benefit Research Institute.
A 401(k) is a retirement savings plan sponsored by an employer that lets workers save and invest a piece of their paycheck before taxes are taken out. Taxes aren't paid until the money is withdrawn from the account. By contrast, a defined benefit pension is a retirement account an employer or union maintains to give retirees a fixed monthly benefit which is usually tied to how many years they worked.
U.S. Steel's move to push senior managers into 401(k)s is part of the steelmaker's cost-cutting "Carnegie Way" initiative, which new Chief Executive Officer Mario Longhi implemented as a way to reduce operations costs after U.S. Steel failed to turn a profit for five years in a row. The company claims it will save $495 million this year as a result of the wide ranging changes adopted during the effort to streamline operating expenses so that it can be profitable in both good times and bad.
The company declined to comment on what it will contribute in matching funds to affected employees, or how much it actually expects to save from such a transition.
"In keeping with our practices of disclosing Carnegie Way benefits, we will not forecast the savings related to this decision until they are realized," Cassella said.