Growing up where I did, Hostess baked goods were a special treat. I liked the cupcakes filled with fudge and cream centers. We saved our pennies to walk to the little store around the corner and buy a package to split.
When the company announced that it was closing a few months ago, it made me sad. It felt like I had lost an important piece of my childhood. Last week, a report on efforts to salvage workers' retirement planning made me feel even worse.
Friday, the Pension Benefit Guaranty Corp., or PBGC, a quasi-government organization that guarantees private pensions, announced what it called an innovative plan to salvage some of the retirement benefits of nearly 350 former Hostess Brands employees who were members of the Bakery and Sales Drivers Local 33 Industry Pension Fund.
This plan was part of a multi-employer retirement plan including the bakery drivers of various companies. The Bakery and Sales Drivers said that it couldn't afford to pay the pensions of the Hostess workers and asked the PBGC to take over the entire plan. Instead, the PBGC has decided to divide the plan. It will take over paying the pensions of the Hostess drivers, while merging remaining members of the plan into the Milk Drivers and Dairy Employees Local Union No. 246 of Washington, D.C. This combined fund will be able to afford to pay benefits for all of its members.
Under the divided plan, former Hostess participants with 30 years of service will receive guaranteed benefits of up to $12,870 a year, a reduction of about $130 a month compared with promised benefits. If you think that sounds low, keep in mind that the PBGC has always guaranteed multi-employer plans at a low level.
Brad Raymond, attorney for the Teamsters, said in a prepared statement: "We are gratified that PBGC has stepped in to help. Of course, we would prefer that the Hostess participants receive more than what PBGC will provide, but at least these benefits will now be guaranteed and PBGC's actions will ensure that the fund will not run out of money."
If your retirement planning depends on a pension, here's yet another reason to save diligently on your own. You just never know what will happen to your plan.