Retirement Benefits

  1. Issues Update

    American Journal of Nursing - December, 2002 - Volume 102, Issue 12

    Solidifying the Future
    United American Nurses (UAN)/AFL-CIO, the labor arm of the ANA, fights for secure retirement for nurses.

    By Edmund Bronder

    Retirement security is almost an oxymoron these days. For RNs, the prospect of retirement raises unsettling questions. What will my retirement be like? Will I have enough money to live securely and with dignity? Will I run out of money before I die? How many more years must I work to be able to retire?

    Nurses are not the only ones concerned. A 2002 study by the global consulting firm Watson Wyatt Worldwide (Retiree Health Benefits: Time to Resuscitate?) found that 80% of Americans over age 55 report that their anticipated standard of living in retirement is tied to pension income and retiree health coverage. This suggests that without such benefits many people would be forced to delay retirement or accept a reduced standard of living in retirement.

    Women especially have reason for concern. Only 18% of women age 65 and older receive a pension, according to a Heinz Foundation report (What Smart Women Need to Know about Pensions). Since pension benefits and Social Security are calculated on life earnings, many women have insufficient retirement income. RNs traditionally have not enjoyed strong annual earnings, and many who have changed jobs frequently may not have a secure pension.

    UAN Strategy: Educate and Negotiate -

    As the union of RNs for RNs, the United American Nurses (UAN), AFL-CIO, the labor arm of the ANA, is committed to educating its members about retirement issues and negotiating benefits on their behalf.

    "Helping nurses understand the complexities of pensions and other retirement benefits is a top UAN priority," says Cheryl Johnson,RN, chair of the UAN. "Education is essential, particularly as the nurse workforce ages." Through union-sponsored workshops, continuing education seminars, Web sites, and newsletters, nurses learn how their retirement plans work and what benefits to expect.

    UAN and other unionized registered nurses have long enjoyed higher levels of compensation than their nonunion colleagues.

    According to U.S. Bureau of the Census data, RNs covered by a collective bargaining agreement in 2001 earned 15% more in weekly wage than nonunion nurses. The union premium extends to retirement benefits as well. In a study prepared for the UAN, data from the Current Population Survey for 1994-2001 show that 82% of unionized RNs were covered by a pension plan, compared to 66% of nonunion nurses.

    Moreover, among unionized employees who have employer-provided pensions, the AFL-CIO found that those pensions are likely to be defined benefit plans (70%, compared to 16% of nonunion workers). When combined with defined benefit pension programs, higher wages can translate into greater retirement benefits.

    UAN education programs assist nurses in understanding the important differences between defined benefit and defined contribution plans. Traditional defined benefit (DB) pension plans assure a guaranteed level of benefits upon retirement. Typically, DB plans are funded entirely by the employer who bears the risk associated with providing the specific (that is, defined) benefit. The guaranteed benefit usually is calculated by averaging the annual earnings of the final years of employment--the RN's peak earnings years--plus years of service. Private-sector DB plans are insured by the Pension Benefit Guaranty Corporation, a federal agency.

    In a defined contribution (DC) plan, employers generally make periodic contributions to accounts set up for individual employees. The most common DC plan is the 401(k). DC plans provide for either employer contributions only, employee contributes only, or both. The current contribution is guaranteed; but the level of benefit at retirement is not. The benefit payable at retirement is based on the money accumulated in each employee's account and reflects the total of employer contributions, employee contributions, and investment gains or losses. DC plans are not insured against loss.

    The Employee Benefit Research Institute, a nonprofit Washington, DC-based organization that analyzes employee benefit programs, recently reported that DB plans have been steadily losing ground to DC plans as the preferred plan type. As employers nationwide switch from offering DB to DC plans, a move sometimes couched in the rhetoric of "giving employees more choice," nurses need to recognize that the switch shifts responsibility (i.e., risk) for managing pension assets from employers to employees and represents an erosion of pension quality. "More choice" for employees means less risk for employers but also a greater burden on nurses to handle their retirement accounts wisely. This can be a challenge in the best of circumstances but potentially disastrous in a volatile equities market.

    Furthermore, for RNs with longer job tenure, there can be a substantial difference in the retirement values accumulated under these two types of plans. DB plans favor more senior workers because the value of their benefit accruals as a percentage of compensation increases as they approach retirement. In addition, more senior nurses can receive past service credit by being grandfathered into DB plans at their inception. Ideally, DC plans should serve as a supplement to, not a substitute for, traditional DB plans.

    UAN Negotiating Priorities -

    UAN members have set good retirement benefits as a negotiating priority, and two of them lead the way.

    The New York State Nurses Association (NYSNA) is a recognized national leader in RN retirement benefits. Nearly two-thirds of NYSNA collective bargaining agreements provide for defined benefit pensions. NYSNA also is the only state nurses' association in the nation with its own pension plan. Begun in 1972, the plan is a multi-employer, defined benefit pension plan and covers thousands of working and retired RNs in the New York metropolitan area. The plan is funded entirely by participating employers and is jointly administered by a labor-management board of trustees.

    Under the plan, nurses working in bargaining unit jobs earn credit toward their pensions based on earnings and length of service. NYSNA has also negotiated with participating employers to provide past service credit (credit accrued by working in a covered position prior to the employer joining the plan). The NYSNA plan offers several retirement options, all of which require five years of credited service. Nurses in the plan may choose to retire with full benefits at age 65, elect standard early retirement with reduced benefits (following age 55 or age 60, depending on when the nurse's active covered employment began), or early unreduced retirement (60 years of age with at least 20 years of credited service under the plan). A disability pension benefit is also available under certain criteria. "NYSNA is second to none in bargaining the best retirement benefits in the industry," says Ed Goldberg, a veteran NYSNA nurse.

    Another UAN member, the Minnesota Nurses Association (MNA), has one of the oldest multi-employer, portable, non-contributory defined benefit pension plans in the country. Begun in 1962, the plan is jointly administered by MNA and participating Twin Cities hospitals. Like the NYSNA plan, the MNA plan includes a portable service credit that allows a registered nurse working at a participating Twin Cities hospital to continue building her pension even if she changes employment from one participating hospital to another.

    Under the "Rule of 85," MNA nurses in the plan can exercise early unreduced pension benefits if their age plus vesting years equals 85. Once the RN is vested in the plan, her benefits are guaranteed for life. The MNA negotiates a minimum monthly benefit for the plan and regularly bargains for increases in the plan.

    "Forty years ago the Minnesota Nurses Association pioneered retirement benefits for RNs in the state," says Karen Patek, RN, MNA labor relations specialist. "They achieved what they were told couldn't be done. MNA and other UAN members continue to build retirement benefits programs that reflect the dignity of professional nurses. Our nurses deserve nothing less."

    Retiree Health Benefits -

    The UAN is also fighting employer efforts to reduce or eliminate retiree health benefits. As the Watson Wyatt Worldwide report indicated, employers are using various cost- cutting strategies such as dropping retiree health coverage for new hires, cutting premium contributions, tying premium contributions to employees' length of service, and imposing tougher minimum service requirements for future retirees. While large employers today pay more than 50% of total retiree medical expenses, the Watson study projects that by 2031 they will pay less than 10% as a result of changes the companies have already made to retiree health benefits packages.

    In the face of these trends, UAN members continue to negotiate significant benefits. For example, NYSNA-represented nurses at several New York facilities who retire after age 60 but before 65 receive tax-free cash supplements of up to $3,000 per year that they can use toward the purchase of health insurance coverage.

    Nurses represented by other UAN members--such as Michigan, Minnesota, Ohio, Oregon, and Washington-- enjoy contract provisions that provide pharmacy discount cards, cashable unused sick leave, expanded retirement medical coverage, life insurance and post-retirement medical spending accounts. Also being pursued are negotiations to reduce vesting time and length of service requirements for full benefits and self-funded retiree health insurance programs. On top of these efforts, UAN members routinely bargain increases in base wages, cost-of-living and experience differentials, which all result in greater pension benefits.

    UAN unions continuously work with, and when needed, pressure employers to realize that good pensions and other retirement benefits are proven retention and recruitment strategies that keep them economically competitive in a tight RN labor market.

    Preparing for the Future -

    The UAN remains focused on maintaining and enhancing the retirement benefits of registered nurses. "Nurses spend their professional careers looking out for others," Johnson says. "It is reassuring to know that their union looks out for them when it comes to retirement security." For RNs who enjoy the union advantage, education and negotiated benefits are proven methods of ensuring a dignified and financially sound retirement.

    Thinking About Retirement: A Starter List of Resources and Information -

    There are many resources to assist nurses in retirement planning. Besides professional guidance from financial experts, nurses might want to consult their own state nurses associations as well as online resources for additional information. The short list of Web sites below is intended only as a starting point for further research.
    This Web site provides usable information on the American Federation of Labor-Congress of Industrial Organizations. It also links to affiliated unions and numerous workplace topics such as pay equity, pension reform and Social Security. Check the sections entitled "Retirement Security," "Working Women," and "Working Families Agenda" as well as "Links of Interest to Working Women" for more information. Also, see the Alliance for Retired Americans.
    Created in 1996 by the Heinz Family Philanthropies, the Women's Institute for a Secure Retirement (WISER) works to expand retirement planning education and improve the opportunities for women to secure retirement benefits. Through its POWERCenter program, a cooperative project with the National Center on Women and Aging, WISER serves as a clearinghouse of information and training programs available to women, employers, and community organizations on retirement issues.
    Founded in 1978, the Employee Benefit Research Institute (EBRI) is a private, nonprofit, nonpartisan organization whose goal is to expand public policy research and education on economic security and employee benefits issues. Each month EBRI publishes "Issue Briefs," which offer analyses of employee benefit issues and trends.
    The American Savings Education Council (ASEC), a coalition of private and public sector institutions, promotes public awareness about what is needed to ensure long-term personal financial independence. Its Web site includes a "Ballpark Estimate" worksheet to identify approximately how much money a person needs for a comfortable retirement.
    AARP, formerly known as the American Association of Retired Persons, is a nonprofit education and advocacy organization that focuses on health and wellness, economic security and work, long-term care and independent living, and personal enrichment. Founded in 1961, AARP today represents more than 35 million members, about half of whom are still in the workforce.
    The Pension and Welfare Benefits Administration (PWBA) is responsible for administering and enforcing the fiduciary, reporting, and disclosure provisions of Title 1 of the Employee Retirement Income Security Act of 1974 (ERISA). Administered by the U.S. Department of Labor (DOL), PWBA provides information about and access to employee benefit plan documents filed with the DOL.

    Edmund Bronder is senior policy fellow at United American Nurses, AFL-CIO, the labor arm of the ANA

    Last edit by -jt on Jan 22, '03
  2. Visit -jt profile page

    About -jt

    Joined: Oct '00; Posts: 2,662; Likes: 46


  3. by   -jt
    American Journal of Nursing - November, 2002 - Volume 102, Issue 11

    A Retirement Plan of One's Own
    Nurses, ANA address issues surrounding retirement.

    By Susan Trossman, RN

    My children have said to me, 'You're just like the people they're talking about on the evening news,'" said Doris D'Errico, RN, CPAN, a staff nurse in an Ohio hospital PACU.

    Like many people affected by downturns in the stock market, the Ohio Nurses Association member's retirement investments have taken quite a hit. But she still hopes to retire in about three years.

    Lasca Beck, MS, RN, plans to retire from her administrative and faculty teaching positions at an Arizona university at the end of the current fall semester. She considers herself fortunate because the employee investment plan she fell into while working in Texas has been performing relatively well. Her only regret is not planning for retirement earlier.

    "Hindsight is always better than foresight," said Beck, an Arizona Nurses Association (AzNA) member.

    When to retire might not be the number one priority for nurses, but it's certainly a growing one as the RN workforce ages.

    Betsey Snow, MPH, RN, director of the ANA's Workplace Advocacy program, said she and other staff frequently field calls from nurses who have a range of concerns about retirement. Some RNs would like to continue working past retirement age but don't know if they can under current workplace conditions that include long hours, lifting, and working short-staffed. Others are worried about their ability to pay for health care, particularly prescriptions, after retirement. And still others are worried about whether they can even afford to retire.

    "Many nurses assume that their employer is going to take care of them," Snow said. "They don't worry about their retirement benefits until a year or two before they want to leave. Then they find out that they might not be able to retire when they thought they could."


    When D'Errico began working for her current employer 30 years ago, she asked fellow nurses why the pension plan was so inadequate. She was told that when they negotiated early contracts, nurses didn't view retirement benefits as a priority.

    "At the time, the nurses were all young," D'Errico said. "Now our mean age is 47, so retirement benefits have become a priority. And we've gotten some good benefits into our contract."

    Beck shared a similar recollection.

    "Back in the '50s, nobody ever told us to plan for retirement," Beck explained. "And when you're young, you don't think you're going to get old." While Beck believes that younger nurses now are more sophisticated about financial matters, she said they still don't take full advantage of savings plans. She and other nurses believe that's because of both age and a changing economy.

    In the past, nurses' earnings, like many women's, were viewed as a second income to be used for "extras."

    "You've heard the term 'refrigerator nurses?'" D'Errico asked. "They'd work to buy the refrigerator."

    But times have changed.

    "The definition of a second income has changed in the past couple of decades," said Ray Kronenbitter, RN, an AzNA member, whose wife also is a nurse. "Now that second income is very much needed to pay for necessities."


    The ANA's Commission on Workplace Advocacy (CWPA) recently asked nurses at its annual policy-setting meeting about retirement issues they face in their various work settings. The CWPA is also designing a more detailed national survey that will be launched late this year. Specifically, the survey will explore nurses' concerns about retirement, including benefits, as well as workplace changes that might entice them to stay past retirement age to stem a critical nursing shortage. It also will address transition concerns of nurses who choose to retire.

    The CWPA then wants to bring together nurse leaders and others concerned about the nursing workforce to address issues raised in the survey by RNs, Snow said.

    Ann Minnick, PhD, RN, FAAN, associate dean of research at Rush University's College of Nursing in Chicago, also is interested in incentives to keep older, experienced nurses in the workforce. In an article she wrote on retirement and the nursing workforce, she cited data from the 1996 RN National Sample Survey, which showed that nurses start retiring in greater numbers at age 52 and then increasingly at ages 61, 62, and 65.

    "Common sense tells us that there are barriers and incentives to staying in the workforce," Minnick said. One potential barrier, she suggests, is nurses working 12-hour, rotating shifts when they are in their late 50s and early 60s. Another is a system that makes it difficult to accrue pension benefits when working part time, changing jobs, or wanting to phase into retirement.

    The ANA also is working on other efforts to improve the retirement outlook for nurses. For example, to help nurses become better financially informed, the ANA offered a financial planning seminar at its June convention. And it is gathering information about retirement benefits and phased-in retirement options offered in other countries through its participation in the International Council of Nurses.


    Most nurses know they will not be able to live comfortably on Social Security benefits when they retire. Yet many still haven't determined how much money to save so that they can retire when they want. Therefore, nurses interviewed for this column encourage RNs to take the time to fully explore their retirement benefits. And they offered the following suggestions:

    * Start thinking about and saving for retirement early in your career.

    * Become knowledgeable about retirement benefits offered through your current or future employer. Find out specifics. Does the employer pension plan include health care coverage? Does your employer make a matching contribution to your retirement plan? How does part-time work affect retirement benefits?

    * Seek the advice of a qualified financial planner who can help you look at the whole picture, including what to expect from Social Security, your employer pension plan, and other investments when you retire. Some employers offer the services of a financial planner, which can save you pricey consultation fees.

    * Take an active role in managing your investments. Don't just look at the quarterly statements and toss them in the drawer.

    * Work with your professional nurses association, colleagues, employers, and policymakers to improve retirement benefits--for both nurses who work full time and those who want to scale back their hours. Better benefits can help attract and retain people into the profession.

    Changing Jobs Can Dramatically Affect Retirement Benefits

    Fictional nurses Mary and George share many similarities. Both worked for 20 years, earning the same amount of pay throughout their careers. Both were covered under identical retirement programs--defined benefit pension plans that provided a benefit equal to 2% of their final pay for each year of service. They each had an annual salary of $60,000 before retirement.

    But the similarities end there.

    Mary had changed jobs every four years. She received no pension benefits, because all of the retirement plans under which she was covered required that she complete five years of service to become vested. On the other hand, George spent his entire career at one hospital and received a lifetime benefit equal to 40% of his final pay at retirement. That translates to a monthly income of $2,000 for life.

    While this example is extreme, it illustrates how nurses can lose pension benefits when changing jobs, according to Aquil Ahmed, a Washington, DC-based senior retirement consultant for Mercer Human Resource Consulting. He suggests that nurses carefully evaluate the impact that job changes have on projected retirement incomes. To compensate for pension losses, nurses can set aside additional funds on their own, he said. Or they can try to negotiate higher salaries or bonuses to make up for any pension lost because of job changes.

    Some Basic Definitions:

    Defined benefit plan: Most defined benefit plans, or pension plans, are solely funded through employer contributions. Upon retirement, employees receive a set amount--such as 2% of their final salary multiplied by their years of service--every month until they die. In these plans, the employer bears the investment risk. Most private-sector defined benefit plans are insured by the Pension Benefit Guaranty Corporation (PBGC), a federal agency. If the employer's plan cannot provide pension benefits because of financial reasons, the PBGC will administer the plan, and employees, in most instances, will continue to receive their monthly benefit throughout their lives.

    401(k) plan: This retirement plan lets employees defer a portion of their salary into an investment account on a pretax basis, thereby building a retirement fund while deferring a portion of their income taxes. Often, these plans include an employer-matching contribution. For example, if employees contribute 2% of their pay to the plan, their employer will contribute 2%. Employees usually have a choice of mutual funds--such as stocks or bonds--in which to invest their contributions. Under these plans, the employee bears the investment risks and rewards, and the PBGC does not insure the benefits. Funds can be withdrawn without penalty at age 59. If employees change jobs, they can take the vested account balance and transfer it to an IRA or another employer retirement plan.

    403(b) plan: Under Section 403(b) of the Internal Revenue Code, employees of certain organizations, such as tax-exempt hospitals or universities, can defer part of their incomes into a special investment account on a pretax basis. Employees can direct their contributions toward mutual funds or other investment vehicles. Some 403(b) plans provide for employer-matching contributions. These plans are similar to 401(k) plans, and also are not insured by the PBGC.

    Vesting: This refers to employees' right to receive the contributions or benefits that an employer has provided to their retirement plan--even if they terminate employment before retirement age. Most defined benefit plans provide for five-year vesting, entitling employees to a nonforfeitable right to their fully accrued benefits after five years of service.

    Employee contributions in a 401(k) or 403(b) are fully vested when made. Employer contributions to these plans generally vest after two to three years of service.

    Information provided by Aquil Ahmed, a Washington, DC-based senior retirement consultant for Mercer Human Resource Consulting. He is the enrolled actuary for the American Nurses Association Retirement Plan.

    Susan Trossman, RN is the senior reporter for the American Nurse at the ANA.

    Last edit by -jt on Jan 21, '03