The Markets March 24, 2009

Newspaper Halts Pension Contributions, Ups 401(k) Match

The Newark Star-Ledger is stopping contributions to its employee pension plan and increasing its match to the 401(k) plan.
Reported by

Publisher George Arwady announced a halt of contributions to the employee pension plan. He also said full-time workers will be required to take a 10-day unpaid furlough in an effort to combat declining revenue.

He said the newspaper will try to cushion the financial blow to its staff by increasing the amount of money it contributes to employees’ 401(k) plans while it looks for ways to cut costs, the Star-Ledger reported. The company will stop contributing to the pension fund as of May 15, but as of May 16, the company will begin matching 100% of the first 2% employees contribute to their 401(k) plans and 50% of the next 4% employees contribute.

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Under the current plan, the newspaper matches 50% of the first 4% of the salary employees put into their plan.

Similar furloughs and pension changes were announced at other Newhouse-owned newspapers, including the Staten Island Advance in New York, The Plain Dealer in Cleveland, The Oregonian in Portland, and The Times-Picayune in New Orleans.

At The Oregonian, defined benefit accruals will be frozen effective May 15. The company will increase its 401(k) match just like the Star-Ledger.

The recession and declining ad revenue in the media industry has led other newspapers to cut 401(k) matching contributions (see “Courier Clips 401(k) Match’).

Compliance March 24, 2009

Pfizer, Pharmacia Stock-Drop Case Moves Forward

A judge gave the OK for current and former Pfizer Inc. and Pharmacia Corp. employees to move forward with their fiduciary breach suit.
Reported by

The suit alleges the companies did not warn employees that their stock share price was artificially inflated.

U.S. District Judge Laura Taylor Swain of the U.S. District Court for the Southern District of New York ruled that the Pfizer and Pharmacia employees had put forward strong enough evidence to withstand the companies’ request to dismiss the Employee Retirement Income Security Act (ERISA) case.

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The crux of the employees’ ERISA allegation is that the Pfizer and Pharmacia retirement savings plans, including 401(k) programs, lost hundreds of millions of dollars when fiduciaries imprudently continued to allow employees to invest in company stock. Swain says the companies and their executives did not properly look into the potential effects on the stock share value of the controversy and eventual recall of the prescription drugs Celebrex and Bextra. The drugs were pulled from the market in 2005 after concerns were raised that they posed cardiovascular risks.

With the “vast majority” of the plans’ assets in company stock, the plans lost about a quarter of their value when the problems with the drugs were publicized, Swain says.

Swain rebuffed arguments that Pfizer and Pharmacia were not fiduciaries, saying the plaintiffs’ had enough evidence that although the companies were not named as fiduciaries in the plan documents, they effectively functioned in that capacity. Similarly, Swain asserted, the plaintiffs had sufficiently proven the company directors were ERISA fiduciaries because of their authority to appoint plan administrative committee members.

Swain also turned down a request to throw out a charge the defendants committed a fiduciary breach by not being honest about the potential problems with the two drugs and by not bringing in an outside fiduciary when conflicts of interest arose.

The case is In re Pfizer Inc. ERISA Litigation, S.D.N.Y., No. 04 Civ. 10071 (LTS)(JFE).

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