Last week, current and former employees of The Tampa Bay Times received a letter from the paper’s chairman about issues with their pension plan. But reading all the details, he wrote, wasn’t something he was interested in doing himself.
“You are welcome to pore over the official version of this application,” Chairman and CEO Paul Tash wrote, “but as a member of the plan, I will find more interesting uses for my time.”
The Times was asking permission from federal regulators to contribute less than the minimum required amount into the pension fund for current and former employees. This marked the second time the St. Petersburg paper made such a request in two years.
Normally, a company with a traditional pension plan is required by law to make a minimum required contribution into that plan each year. Any company seeking to contribute less must first seek a waiver from the Internal Revenue Service. But there are limits, and costs that stretch out beyond last week’s letter.
“The IRS charges a user fee for the waiver application. And almost all waivers of at least $1 million have to be supported by a pledge of collateral,” said Robert Friedman, an attorney with Holland & Knight who specializes in benefits law. “The waiver is really for a company that finds itself in a temporary crunch.”
The IRS can grant — at its discretion — up to three such waivers over 15 consecutive years, but not more. Companies that fail to make required contributions face penalties and other problems, Friedman said. There is no little irony here, Friedman notes, that a company in financial trouble would face penalties for not being able to pay enough money into a pension fund.
What’s more, even if the IRS grants such a waiver, the company asking for a break isn’t off the hook forever. They must eventually pay the money back into the fund — meaning the waiver is akin to a loan to the company takes out from the pension fund to help fund company operations instead.
The IRS reviews such waiver requests, and consults with the Pension Benefit Guarantee Corporation, a federal agency that was set up to adopt pension plans from companies that fail to support them.
All this comes as the Times faces increasing financial strain. The paper has been selling off land, leasing properties and recently took out a $28 million loan due in December 2016.
Despite the pension issues, Tash wrote to console pensioners, “Thanks for your understanding and support. On the path toward financial recovery, we are making real progress.”
The Times is working with business consultants brought in after that loan to improve operations, and managers told employees recently to consider taking buyout packages, particularly because layoffs were likely coming later. Even if employees didn’t want to take a buyout, “this is an opportunity to take stock of your place in the Times’ future,” the memo to employees read. “This is an important time to understand where you stand.”