The pension collapse · what December 1963 did to the households

1964 – 1974

The closing's second blow landed more slowly, and it landed on named streets: Studebaker's hourly workers' pension plan had been built up from 1950 on generous terms — benefits increased through successive negotiations while the funding was not increased to match. When the works closed, the plan was terminated, and there was no federal insurance of pensions: the Pension Benefit Guaranty Corporation did not yet exist. The distribution, carried in full in this history's Studebaker section from the employee-benefits literature, is the civic fact of the event, and its outline belongs here because it describes the city, not the company: the plan covered roughly 10,500 workers, holding about $24 million of assets against about $39 million of liabilities. About 3,600 of them, already retired, received their full benefits. About 4,000 employees between the ages of 40 and 59 — averaging 52 years of age and 23 years of service — received approximately fifteen cents for each dollar of benefit they had been promised. The remaining 2,900, all with less than ten years of service, received nothing. The PBGC's own fact sheet rounds the affected to about 11,000 workers, and the shortfall is also stated in the accounts as some $14–15 million.

Put in the city's terms, that is what the numbers mean: Four thousand households, headed by men and women in their prime working years with two decades and more in the plant, lost eighty-five cents of every pension dollar a working lifetime had been organized around — in a one-company city, in the same winter the jobs disappeared. The pension termination became the standing American example of the unprotected pension. A presidential committee on corporate pension plans, appointed in 1961, issued its report in 1965 in the case's shadow. NBC's 1972 documentary Pensions: The Broken Promise carried the Studebaker workers' stories to a national audience. On 2 September 1974, President Ford signed the Employee Retirement Income Security Act — ERISA — which set federal funding and vesting standards for private pensions and created the PBGC to insure them. The American Bar Association's journal states the line directly: the December 1963 Studebaker closing was one of the pivotal events that led to ERISA's enactment. The men and women who received fifteen cents on the dollar were not made whole by it. The law their case produced governs every private pension in the country since — the largest single piece of national law ever to come out of a South Bend event, and it came out of a loss.

Sources:

1. This build's Studebaker section (article "The pension termination"), from the employee-benefits literature's account of the case — the plan's terms from 1950; about $24 million of assets against about $39 million of liabilities; roughly 10,500 covered, 3,600 retired paid in full, about 4,000 aged 40–59 at about fifteen cents on the dollar (average age 52, average service 23 years), 2,900 with under ten years' service paid nothing; the PBGC's rounding to about 11,000 affected; the shortfall also stated as $14–15 million; the 1965 presidential committee report; NBC's Pensions: The Broken Promise (1972); ERISA signed 2 September 1974, creating the PBGC; the ABA Journal's statement of the closing as a pivotal event behind ERISA.