Feared Run on Savings : TRW Retirement Plan Altered After Crash

While most companies were slow to respond to the October market crash’s blows to their retirement programs, TRW has confirmed that it froze its stock savings plan on Black Monday and then altered plan rules to prevent workers and retirees from escaping crash-related losses.

The aerospace company, which has about 25,000 employees in Southern California, said it had been considering the rules change for months but implemented it after the crash to stave off an anticipated run on the retirement plan.

Under the plan--in which about 40,000 of TRW’s 75,000 employees nationwide participate--employees can accumulate company stock through payroll deductions and company matching contributions. Similar retirement savings programs are offered by about half of all larger companies.

What made TRW’s plan unusual, however, was that until the rules changed, employees could make withdrawals from their accounts based on the stock’s value at the end of the previous month.

Normally, the difference would be negligible. But TRW’s stock price plunged by one-third between Sept. 30 and Oct. 19--the day the Dow Jones industrial average tumbled 508 points--dropping to $42.50 from $63.50.

So had the company taken no action, employees and retirees who made withdrawals between Oct. 20 and Oct. 30 would have realized a 33% bonus over the actual value of their savings plan accounts--a windfall that would have been charged against the accounts of the remaining participants in the plan.

“Without this action, other participants would have suffered a substantial loss,” Mike Johnson, a spokesman for the Cleveland-based company, said. “The idea was that there should be increased equity in the program for all participants.”

By contrast, Lockheed left a similar provision in its retirement savings plan intact, and more than 600 employees took advantage of it and retired early. They were, thereby, able to preserve their account balances at Sept. 30 levels.

Retiree Unhappy

Benefits experts said the steps taken by TRW were extraordinary. “I haven’t seen anybody doing that,” said James Gilmore, a principal in the Los Angeles office of Mercer-Meidinger-Hansen, a benefits consulting firm. “It’s fairly creative thinking.”

One TRW retiree who was rebuffed when he tried to make a withdrawal from the savings plan a few days after the market crash complained that it was unfair for the company to suddenly change the program’s rules.

In a letter to the company that he made available to The Times, retired engineer J. E. McTaggart of Malibu said he and his wife had counted on his account as part of their retirement “safety net.”

McTaggart, 62, said the market crash sliced about $2,500 from the value of his account. “On Oct. 23, when we reached the point of needing the safety net,” he wrote, “it was not there.”