EMPLOYEE BENEFIT FUNDS - PART II - A FORTY YEAR SUMMARY OF RJR

 The “modern” history of RJR’s retirement funds begins about 1949 when Reynolds was making annual, and increasing, contributions.[i] We will examine that history through 1988 when the Leveraged Buyout occurred.  This 40-year history illustrates many of the changes that American companies made in their employee benefit plans. The chart below is a broad sketch of RJR’s plans in those years.  It will serve as a framework for future posts.   

The RJR pension fund was not well funded., and the company paid pensions on a ‘pay as you go’ basis, mostly from corporate cash. But the new ERISA law in 1974 meant that RJR needed to revamp its pension fund structure.

RJR played “catch up” with large annual contributions to comply with ERISA. The pension assets increased from a modest $17 million in 1949 to $2.3 billion in 1988. During those years, the new money contributed to the plans annually grew from $2 million to $122 million. But the pension plan was only about half the total retirement assets by 1988. Beginning with only a pension plan for U.S. employees, RJR created three new plans – a profit sharing plan, foreign pension plans for workers in other countries, and a 401-k plan for employees’ individual retirement accounts. The assets totaled $4.5 billion by 1988.

From 1957 through 1987, RJR acquired 15 major business units.  This growth through acquisition ballooned the number of employees worldwide from 12,000 to a peak of more than 147,000. The thousands of employees, many overseas, meant that the fund work grew larger and more complex.

In future posts, we will discuss the challenges this growth brought in each area.     

[i] RJR established its pension plan in 1929, reportedly the 101st such fund in America.  However, the fund held few assets for the first two years.  But in 1933, the fund purchased 200,000 shares of the “A” stock, an estimated $13 million - perhaps the only significant funding through 1949. The purchase in 1933 is shrouded in mystery. Which corporate officers sold their precious “A” preferred stock to the pension fund? And why? The answer may be found HERE in Appendix WP I.16 to Going Down Tobacco Road. If the explanation is true, it is easy to see why RJR did not want publicity about this purchase.