When IBEW Local 614 and Peco started negotiating a new contract earlier this year for call center employees, linemen, and other field workers, one thing was clear to local union president Larry Anastasi: He needed to get pensions back for all of his members.
Roughly 600 of his 1,500 members, hired since 2021, weren’t offered a pension. The rest had differing plans.
Clawing back pensions for the whole union wouldn’t just be a reversal of Peco’s trajectory. It would buck a cross-industry trend.
“The trend my entire career, which is now more than 40 years in this business, has been employers want to get away from defined benefit plans, and unions want to maintain them and get them in more places,” said Wendell Young IV, president of United Food and Commercial Workers Local 1776, which represents workers in Pennsylvania and neighboring states.
In early July, after a three-day strike, Peco and its worker union reached a deal that includes a pension plan for all workers. But it’s not your grandparent’s pension.
The traditional defined-benefit retirement plan peaked in popularity in the 1970s, when up to 62% of private-sector workers relied on a pension as their sole retirement plan, according to the New York Times. That number shrank to 1% of private-sector workers in 2022.
Employers in the gas and electric utility industry started moving away from traditional pensions in the 1990s, according to William Dwyer, a professor at the Rutgers University School of Management and Labor Relations, who once worked at PSE&G in New Jersey.
Under the new Peco union contract, workers will get a cash-balance plan — where employees are promised a specific amount of money in retirement without having to contribute to it themselves. The benefit accrues throughout a worker’s career, unlike the old-school pension that is typically based on total years of employment and how much a worker is earning in the final few years of their career.
It’s an increasingly popular compromise, said professor Olivia Mitchell of the Wharton School. With workers living and working longer than they used to, traditional pensions become unpredictably costly for employers. The cash-balance option is a chance for both company and worker to better see the future.
“They accumulate benefits more evenly over a worker’s career,” she said, “making them easier to understand and often less costly and less risky for employers.”
By getting a pension of any sort, said Young, of UFCW, Peco’s unionized workers “rode against the current” and “achieved a really amazing benefit.”
What is a cash-balance pension plan?
Cash-balance plans are often seen as a hybrid of the traditional pension and the “defined-contribution” plan, such as a 401(k).
Like a traditional pension, they are employer-funded and typically don’t require the employee to make their own contributions. But like a 401(k), the amount available to the employee upon retirement is based on a stated account balance rather than expressed as a promised monthly payment for life.
These plans debuted in the 1980s and gained popularity in recent decades. Some 23,000 employers offered them in 2020, up from 1,477 in 2001, the Wall Street Journal reported.
Traditional pensions “typically have benefit formulas that rise sharply late in a career, making them expensive for employers with long-tenured workforces and less valuable for employees who change jobs before retiring,” said Mitchell of Wharton.
Bank of America was the first large company to introduce one, in the 1980s. It offered young employees some flexibility to take their cash balance plan elsewhere if they switched jobs.
By 1996, some 200 “large companies” had cash balance plans, the New York Times reported. The Campbell’s Co., the food giant based in Camden, was one of them. Some companies faced backlash.
Despite adoption at several well-known companies, cash-balance plans still aren’t the norm in the private sector. A recent study by the International Foundation of Employee Benefit Plans found that 21% of corporations surveyed had a defined benefit plan, with 5% being the hybrid kind.
How Peco retirement evolved
Peco employees were given the option to transition to a cash-balance plan in 2001, and roughly 80% of them did so, the union has said, while others kept their traditional pension. This was before Peco workers unionized with IBEW. The company has also offered 401(k)-based retirement programs.
Peco’s retirement options “have evolved over time in a manner consistent with broader employer and utility industry practices,” the company said in a statement earlier this month.
As IBEW laid out its goals for the new contract, including pensions for all, Peco laid out its own position. The company said it wanted a contract that maintained affordable service for customers.
Unlike other private sector businesses that can raise prices at their sole discretion to cover labor costs, Peco leaders must get approval from the state’s regulating entity, the Pennsylvania Public Utility Commission (PUC) for rate hikes, which is a lengthy process.
Peco did raise rates in 2025 and tried to do so again this year. While the company’s 2025 profits were up 48% from the previous year, leaders said the business still needed to increase rates to meet customer demand for energy.
At Peco, “90% of what we receive [from ratepayers] goes right back into our infrastructure, and that includes paying for the wages and benefits for employees so they can go out and restore power and improve our grid,” Peco’s chief operating officer, Nicole LeVine, said earlier this year during bargaining.
After backlash, the utility company rescinded its rake hike request.
When pensions came up at the bargaining table this year, the cash-balance option prevailed.
The plan’s similarities with a defined contribution plan, such as a 401(k), make it easier for employees to understand, said Joseph Hicks, consultant and co-owner of Keystone 74 Benefits and Administration, which worked with IBEW local 614 during the recent bargaining process. If employers are spending money on a benefit, they want their workers to be able to understand and appreciate that benefit, Hicks said.
Peco, upon reaching the tentative agreement July 6, said the deal “recognizes the contributions of our employees while supporting our responsibility to deliver reliable, affordable service across Southeastern Pennsylvania.”
