1199 Union Forgoing Raises to Aid Pension
By STEVEN GREENHOUSE
Published: July 20, 2009
Facing a crisis in its pension fund, 1199, New York’s giant health care union, reached an innovative settlement on Monday that calls for forgoing nearly a billion dollars in raises for 145,000 union members so that hospitals can increase their pension contributions to safeguard future retirement benefits.
The union, formally called 1199 S.E.I.U. United Healthcare Workers East, agreed to a wage freeze for next year, but also — in a move that parallels Mayor Michael R. Bloomberg’s proposal for municipal employees — accepted less generous pensions for future hires.
With the union’s pension fund losing $3.5 billion — or one-third its value — in recent years, mostly because of losses in stock market investments, 1199 feared that the fund would have to reduce promised pension payments to not only 48,000 current retirees, but also tens of thousands of current workers.
To restore the fund’s financial health, the tentative agreement calls for scrapping the 3 percent raise planned for December and redirecting that money into the pension fund, along with a second fund that pays for health benefits.
The pension crisis was so severe that 1199 and the League of Voluntary Hospitals and Homes of New York, which represents 108 hospitals and nursing homes, took the unusual step of negotiating this agreement more than two years before the union’s current contract was due to expire.
“Never before in the history of this collective bargaining agreement have we faced the kinds of challenges that we have been confronting in this bargaining,” said Bruce McIver, president of the league, whose members include Mount Sinai, NewYork-Presbyterian, Montefiore, St. Vincent’s and Beth Israel.
As a result of the wage concessions the union agreed to, the league’s members will increase annual contributions to the pension funds in several steps to 15.8 percent of payroll in 2012, up from 6.75 percent of payroll this year.
“Our goal was to save our benefits for the future — all our benefits, and we were absolutely able to do that,” said George Gresham, president of 1199 “And the pension fund should be healthy at the end of this rehabilitation period.”
The tentative agreement expires on April 30, 2015, and supersedes the current agreement, which was set to expire on Sept. 30, 2011. The union’s membership still must ratify the settlement.
The agreement calls for many concessions beyond the wage freeze this year. To help direct more money into the pension and health funds, the two sides agreed that one-third of the 3 percent wage increase scheduled for Dec. 1, 2010, will also be directed into those funds. The other two-thirds of that wage increase will go into effect on March 1, 2011.
The settlement calls for no raises in 2012, but instead a lump-sum payment of 2.5 percent that year. The agreement calls for a 2.5 percent wage increase on Oct. 1, 2013, and another 2.5 percent on Oct. 1, 2014.
The agreement would allow either side to insist on reopening it in September 2013