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The Mail


To the Editors of The Crimson

The Board of Directors of the Coop have voted unanimously me to reply to an article entitled "Controversy Opens Over Coop Pensions, NLRB Probes 'Intimidation' of Union," which appeared in the Crimson of October 21, 1972. This article contained many erroneous statements and was particularly misleading in its cursory treatment of the changes made in 1971 in the pension and insurance plans maintained by the Coop for the benefit of its employees.

These changes significantly improved pension and insurance benefits for Coop employees. They were made only after a careful study by the management of the Coop acting with the assistance of an outside expert on employee benefit plans. They were all fully discussed and approved by the Board of Directors and the new pension plan has been approved by the Internal Revenue Service.

The old pension plan referred to in the article was adopted by the Coop in 1944. It provided pension benefits, on a non-contributory basis, for employees with at least three years of service. These pension benefits were funded through individual life insurance contracts which paid an annuity on retirement and provided a death benefit prior to retirement. Thus, some life insurance was included in that plan. Under a separate group life insurance plan the Coop provided additional life insurance, on a contributory basis, for employees with at least six months service, regardless of age, in an amount depending on the employee's salary.

The old pension plan was deficient in a number of respects. Funding the pension benefits through individual life insurance contracts made administration costs extremely high. Every time a new employee became a participant in the plan or any participant received an increase in salary it was necessary to obtain a new contract and pay a commission to the insurance agent. The pension benefits were too low. No provision was made for employees who were disabled.

Likewise, the insurance benefits under the old plans were deficient in several respects. An employee was not covered by insurance under the old pension plan until he became a participant in that plan after three years of service. Employees were required to pay income tax on the cost of that insurance. Insurance was made available under the old group insurance plan for all eligible employees without regard to their need or desire for life insurance.

In the spring of 1971, the management of the Coop, having begun a review of the old plans, decided that an outside expert on employee benefit plans should be retained to assist them in developing recommendations to the Board of Directors for changes in the plans which would enable the Coop to improve benefits, especially pension benefits, reduce administration costs and update the plans. Mr. Archibald Price of Peat, Marwick, Mitchell & Company was retained for this purpose. After a thorough review of the old plans and extensive discussions between Mr. Price and the management, detailed recommendations were prepared for the Board of Directors. These recommendations, in essence, were to provide all insurance under a new group life insurance plan; to shift the funding vehicle for the pension plan to a modern group annuity contract to reduce administration costs; to increase the level of pension benefits; to make certain changes in the vesting provisions; to provide greater amounts of insurance for employees with dependents; and to eliminate the income tax problem of employees described above. After further discussions, the Board of Directors voted in July, 1971, to accept these recommendations and to direct the management, working with Mr. Price, to prepare a new pension plan and to negotiate a new group life insurance contract reflecting these changes, to take effect as of January 1 and August 1, 1971, respectively. This was accomplished and the new pension plan was formally approved by the Board of Directors later in 1971 and by the Internal Revenue Service in June, 1972.

The new pension piss, like the old, Proposes pension benefits, on a non-contributory basis, for all regular emphases with at least three vearn of service, However, the new pension plan is funded with a group annuity countract and the level of pension benefits has been improved for all participating employees, regardless of age. (The lowest paid employees received the highest percentage of increase in pension benefits). The new vesting provision compare favorably with those in the retirement plans of other major department stores in the Boston area. The pension plan also makes provision for employees who are disabled and provides dependent spouse's benefits in the event of death before retirement.

Thee new group life insurance plan provides a minimum amount of life insurance for all regular employees and makes additional life insurance available to employees having at least one dependent. This additional insurance is provided on a contributory basis, but the percentage of the premium contributed by an employee is much less than it was under the old group insurance plan. The insurance is available after only three months service. The new insurance plan also provides additional insurance for accidental death or dismemberment. Indicative of its acceptance is the fact that the proportion of eligible employees participating in the new plan and the aggregate insurance protection in force have greatly increased.

In summary, modern pension and insurance plans have been put into effect by the Board of Directors of the Coop, after careful study and consideration, Viewed in their entirety-as they should be-they provide improved benefits for Coop employees in line with those provided by other major department stores in the Greater Boston area. Milton Brown, Filene Prof. of Retailing and Pres., Harvard Cooperative Society

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