NEW YORK -- Dow Jones & Co. dropped a bomb on its employees when, during union negotiations, it proposed changing the company's $880 million profit-sharing plan to resemble a 401(k) plan.
Currently, Dow Jones contributes up to 15% from profits, and there is no employee contribution, said Richard Tofel, vice president of corporate communications.
Should the union -- the Independent Association of Publishers' Employees, a local of the Communications Workers of America -- accept Dow Jones' opening offer, the plan would be structured more like a 401(k). The ultimate design of Dow Jones' plan is yet to be determined.
To participate, employees would be required to contribute 5% of their salaries; the company would match 50% up to 6% of pay, for a total of 3% of salary, Mr. Tofel said.
Fidelity Investments, Boston, would continue as bundled provider, and the plan would contain the same 15 investment options it now has, he said.
What spurred the board of directors and management to push for a change in the company's defined contribution plan is a decline in profits.
Nevertheless, Dow Jones has continued to give employees the maximum match set by law, 15%, he said.
"The board said that this (level of contribution) could not be sustained," Mr. Tofel said.
The board and management wanted a plan whose employer contributions would be more predictable, he explained.
So, Dow Jones executives looked at peer companies, such as New York Times Co., Times Mirror Co. and McGraw-Hill Companies Inc., Mr. Tofel said. Although the structures of the plans vary, most have a fixed company match of 3%, he said.
According to a recently released survey by Buck Consultants, New York, 61% of employers that make matching contributions use a fixed match per dollar up to a maximum percentage. The most common matching contribution formula is 50 cents per dollar up to a maximum of 6% of an employee's salary, or 3%. In the communications industry, the average maximum percentage of salary matched is 5.63%, the survey indicated.
Dow Jones' initial proposal made in early April caused a blast of controversy at the company's annual meeting, when several employees -- including two Pulitzer Prize winners -- strongly objected to the proposal to cut company contributions to the defined contribution plan, he said.
The union and the 2,400 members who work for Dow Jones see the change in pension plan as a drop in benefits, said Joseph Diesso, CWA staff representative.
"There's no doubt that it is a take-away," he said. "It was a reason some of the members came to work for the Journal. Aside from the prestige of working for the Journal, some members could have gotten more money at other newspapers or in other fields with comparable titles, but the profit sharing was the thing that won them over. People feel betrayed."
So far the union has not made a counter offer to Dow Jones' initial offer, and the issue has not yet been raised at the bargaining table, Mr. Diesso said. It is gathering facts and determining whether it will make a counter offer. A union committee has made its own study and found comparable news organizations where pension benefits are better than Dow Jones' old profit-sharing pension plan, he said. One of these organizations is Time Warner Inc., which he said gives employees a combination of 401(k) plan, profit-sharing and defined benefit pension plan.
He added he does not believe the union will be "losing out in that area."
Should an agreement not be reached, however, the pension plan issue would be sufficient to warrant a union action, Mr. Diesso said. But he declined to say what action that would be.
Mr. Tofel said Dow Jones and the union are in active negotiations. The union contract was to expire April 30, but there is a two-month extension, Mr. Tofel said.