Retirees question DuPont pension funding

DuPont expects to contribute another $230 million to its U.S. pension plan in 2017, but some pensioners say it is not nearly enough to ease their fears about the fund's future.

The Wilmington chemical company also added $230 million last year, the first year it contributed since 2012.

DuPont will also add $95 million into its overseas pension plans, which account for about 20 percent of its pension debt. The company committed $121 million to those funds in 2016.

Pensioners, who number about 134,000, say the contributions are not enough to close a pension gap. DuPont has a pension obligation of $24.8 billion with $16.6 billion of assets, according to filings with the Securities & Exchange Commission.

"These contributions are like sticking a Band-Aid on someone who had their jugular vein sliced," said David Bartlett, a former DuPont manager who lives in Hockessin and retired in 2014.

Bartlett is a member of the DuPont Pensioners Facebook page, an online forum with nearly 5,000 members. The Facebook page was started by Craig Skaggs, a second-generation DuPont employee and former lobbyist for the company. Skaggs launched the site so pensioners can swap information about plan changes. Concern among retirees has increased since DuPont announced at the end of 2015 it will merge with The Dow Chemical Co. and split into three separate, publicly traded companies.

Another member, Tommy Thompson, of Orange, Texas, retired in 2008 after 34 years with the company. He called the contribution, about 2.9 percent of the $8 billion pension shortfall, "too low."

"It is more or less a token," Thompson said. "It is the minimum DuPont could put in to show some level of good faith."

Without knowing more about the plan's investments or DuPont's economic future after the Dow merger and split, it is hard to know if the $230 million contribution is sufficient, said Norman Stein, a professor of pension and employee benefit law at Drexel University.

"The real question is if DuPont, over the next decade, is going to have the economic resources to fund the plan and make it adequate," he said.

DuPont has yet to disclose which of the three spin-off companies will inherit its pension liabilities or other debts that might be assigned to the new businesses. Two of the three spin-offs will be based in Delaware while a third will be headquartered in Dow's hometown of Midland, Michigan.

Dan Turner, a DuPont spokesman, referred to the regulatory filings in response to questions.

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DuPont has decreased both its pension obligation and assets since 2016. At the start of last year, the obligation totaled $26.1 billion with assets of $17.5 billion.

Some of that is due to changes DuPont made last year. It offered pension buyouts to about 18,000 retirees whose plans had vested. Retirees had the option to trade their future pensions for a lump sum or an earlier, but smaller, monthly annuity instead of waiting until they reached 62 to collect a traditional pension. Those who accepted their buyout received their money in the fourth quarter of 2016.

Separately, DuPont announced last year that it will no longer contribute to active employees' pension plans, a move that will impact the retirement of 13,000 workers, including 2,800 in Delaware. Workers will stop accruing benefits sometime in November 2018 or the creation date of the first independent company created through the Dow merger. DuPont also eliminated active employees' retirement health benefits, including dental and life insurance for all employees younger than 50 when the pension contribution ends in 2018.

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The changes will reduce DuPont's long-term employee benefit obligation by $527 million and the additional $50 million it pays annually to maintain the plan.

The buyouts and termination of active employee pensions still leave the pension plan at about 67 percent funded, retirees claim. Under guidelines established by the Pension Benefit Guarantee Corp., an independent government agency established to provide a safety net for underfunded plans, a pension is only considered healthy if it is greater than 80 percent funded. If a plan slips below 80 percent, the PBGC launches an investigation.

DuPont is not currently under a PBGC investigation, but the agency has requested additional corporate financial and pension plan information from the company.

The company has also challenged the 67 percent number, contending the plan is actually 93 percent funded.

A 2010 federal law is the reason for the discrepancy between how both sides are calculating the pension. The law, known as Moving Ahead for Progress in the 21st Century, or MAP-21, allows companies to measure pension funding levels based on using a 25-year average of interest rates, instead of the two-year average businesses traditionally used.

Stein said MAP-21 has created confusion because a plan can be well-funded under one standard, but not another. The PBGC doesn't use either method, preferring to use its own formula.

The PBGC does protect retirees if a pension plan fails, Stein said. But pension benefits paid by the agency are subject to a maximum level of $5,000 a month for retirees aged 65 and older. That is of little comfort to DuPont retirees.

"You would hope after all the angst we've been through someone would try to alleviate our fears," Thompson said. "All this does is confirm my suspicion that they aren't even close to fully funding the pension."

Contact Jeff Mordock at (302) 324-2786, on Twitter @JeffMordockTNJ or jmordock@delawareonline.com.