Web Only / Features » November 11, 2013
A Fight Builds Over Multi-Employer Pensions
Unions are stepping up to oppose a likely bill in Congress to slash benefits.
The ideal solution, Caldwell says, would be for Congress to give federal assistance to those funds that need it most, i.e. a 'bailout.'
As Congress inches toward proposing legislation that would arguably enable the most significant changes to private pension law in decades, opposition from organized labor is slowly mounting.
In addition to the Machinists, the first union to come out strongly against the proposal, the Teamsters, Steelworkers and Boilermakers are now raising concerns. The wave of rebelling unions marks the most significant opposition that the proposal, which enjoys bipartisan support among the most influential members of the House Education and Workforce Committee, has yet to encounter.
As In These Times has reported, the upcoming bill is expected to closely mirror a February 2013 proposal [PDF] from the National Coordinating Committee for Multiemployer Plans (NCCMP), a coalition of employers and labor unions that administer multi-employer pension plans (which are negotiated as part of some union contracts).
The NCCMP proposal would allow trustees of financially troubled multi-employer pension plans to slash benefits to current retirees. This could affect hundreds of thousands of the roughly 10 million workers covered by this type of plan—most of them in construction, but some in manufacturing, retail, service or transportation.
The proposal is controversial because it would breach the so-called “anti-cutback” rules of the 1974 Employee Retirement Income Security Act (ERISA) and its 1980 amendment, which prohibit trustees from slashing accrued benefits to current retirees. Defenders of the proposal argue that the reforms would only apply to a select few of the funds and are necessary in order to ensure the long-term solvency of multi-employer plans—which will have a total of $27 billion in unfunded liabilities in 10 to 20 years, according to the Pension Benefit Guaranty Corporation (PBGC), the government-run agency that insures private pensions. Much of that projected deficit stems from two large plans in particular: the International Brotherhood of Teamsters’ 410,000-member Central States Fund and an 118,000-member United Mine Workers of America fund. Since those funds are most likely meet the legislation’s criteria, their retirees would be first in line to see their pensions cut.
NCCMP’s executive director told In These Times in October that he expected legislation to emerge by the end of the month. Although the government shutdown slowed that process, the House Subcommittee on Health, Employment, Labor and Pensions held a hearing on the topic on October 29. While Reps. Rush Holt (D-N.J.) and Frederica Wilson (D-Fla.) appeared skeptical of the plan, they were in the minority. The subcommittee’s chair, Rep. Phil Roe (R-Tenn.), its ranking member, Rep. Rob Andrews (D-N.J.), and the chair of the full Education and Workforce Committee, Rep. John Kline (R-Minn.), each voiced support for granting benefit-cutting authority to trustees.
“Almost everything we do around here, every day is about politics,” said Andrews in his opening statement at the hearing. “This is one of the few things we’re doing around here that is not about politics.”
On the face of it, the proposal may indeed appear to Congress members to be a relatively apolitical instance of cooperation between business and labor. Over a dozen labor unions, including the Service Employees International Union (SEIU), the Teamsters and the International Brotherhood of Electrical Workers (IBEW), helped craft a February 2013 NCCMP report that became the basis of the proposal. And Sean McGarvey, president of the AFL-CIO Building and Construction Trades Department, testified strongly in its favor at the hearing. (A spokesperson for the Building Trades declined to comment for this story.)
But the majority of the unions involved in the report have yet to publicly indicate where they stand on the pension-cutting proposal—and several are now taking a public stand against it.
The most notable—because of both its size and its participation in the Central States Fund—is the Teamsters. On the eve of Tuesday’s hearing, Teamsters President James Hoffa submitted a letter [PDF] to the subcommittee stating, “We cannot at this time support any proposal that would cut accrued benefits of participants, including cutting the pension benefits of current retirees in endangered plans.”
Speaking with In These Times, union spokesperson Bret Caldwell elaborated on what exactly that means.
“The Teamsters believe that we have to protect the integrity of our pension system, that these workers earned these benefits and they deserve for them to be paid,” Caldwell says. “And we’ve got to find a way to do that. If Congress can bail out the banks and these bank CEOs can continue to make hundreds of millions of dollars off the backs of taxpayers, then we think that retirees deserve to be protected.”
The ideal solution, Caldwell says, would be for Congress to give federal assistance to those funds that need it most, i.e. a “bailout.” The Teamsters, like the other three unions that submitted statements in opposition to granting trustees special authority to cut benefits, have also all asked Congress to explore a number of alternatives that the AARP submitted to the subcommittee in June.
In addition to a bailout of the individual funds that are soon facing insolvency, those alternatives could include increased federal support for the PBGC, hiking up the small premiums that plans currently pay to the PBGC, facilitating mergers between healthy and unhealthy plans, and extending low-interest loans to struggling funds.
Caldwell also tells In These Times that the union is preparing to launch a campaign against legislation that includes granting special pension-cutting authority to trustees. He says those plans are still very much in the early stages, but that the Teamsters eventually hope to build a coalition with other unions and retiree advocacy groups like AARP and the Alliance for Retired Americans. Caldwell says it’s too soon to say whether or not the campaign—which he estimates will be ready to launch early in 2014—will specifically ask for a federal bailout, but says it will certainly express strong opposition to granting trustees the proposed pension-slashing authority.
A few other unions, despite representing members who are for the most part in financially stable plans that would be spared the immediate impact of eventual legislation, have come out in opposition to the plan: the International Association of Machinists and Aerospace Workers (IAMAW), International Brotherhood of Boilermakers (IBB) and United Steelworkers (USW). These unions share a common concern that modifying the core of ERISA is a slippery slope—once you allow a few pension plans to start chopping away, the argument goes, what’s to stop other funds from asking for the same authority?
“Our concern is not for our pension plan, which is healthy, but really because it opens the door to modifying ERISA in a way that we think is a terrible idea,” says Frank Larkin, communications director for the Machinists union, which submitted a statement to the subcommittee and issued a press release condemning the plan.
The 70,000-member Boilermakers union also issued a statement to the subcommittee opposing the proposal’s changes to ERISA. Like the Machinists, the Boilermakers represent members in plans that, by all public accounts, are doing just fine.
Cecile Conroy, director of legislative affairs for the union, says it was a difficult decision to come out in opposition—especially because of the views of the umbrella AFL-CIO Building Trades Department, with which many of the unions or their individual locals are affiliated. But with President McGarvey testifying in support of the plan, Conroy says it was important for her union to clarify where it stands on the matter for the sake of its members.
“Going in and monkeying around with ERISA to be able to give trustees the ability to do that—it causes us grave concern,” Conroy says. “What a terrible message that would send to our Boilermaker retirees who have worked so hard—cut off one of the legs of the three-legged stool that unions represent: wages, healthcare, pensions.”
The United Steelworkers also submitted a statement prior to the hearing that encouraged the committee to “explore additional alternatives other than cutting accrued benefits to multi-employer plans” and referenced the alternatives in the AARP’s proposal. The USW has one 75,000-member fund that isn’t exactly in great shape [PDF]. The PACE Industry Union-Management Pension Fund is considered to be in “critical” status, according to pension law guidelines, which generally means that it is less than 65 percent funded. A Steelworkers spokesperson declined to comment for this story.
Nowhere to go?
One of the biggest selling points advanced by supporters of the NCCMP proposal is the claim that there are no alternatives. The plan might be a tough pill to swallow, they say, but at least it acknowledges the fact that there’s a lack of political will to find the ideal solution in today’s Congress.
Tom Nyhan, executive director of the Central States Fund, is perhaps the most vocal proponent of this view.
“I agree … that one of the fundamental rules of ERISA was the anti-cutback role,” Nyhan said at the hearing last week. “But there’s another fundamental rule that’s going to trump that and that’s called arithmetic. It’s not a question of if they’re going to be benefit cuts. There are going to be benefit cuts. The question is when and how they’re going to happen.”
Nyhan has said that he would support a congressional bailout of his fund and others, but doesn’t see it happening anytime soon. The last attempt to give some federal assistance to multi-employer plans, he points out, went down in flames. Unlike the bank accounts insured by the Federal Deposit Insurance Corporation (FDIC), pensions are not fully insured by the PBGC. That means that if a plan fails, the agency is only obligated to cover a small portion of the promised benefits. The legislation in 2010 would have essentially extended greater federal protections to multi-employer plans.
Randy DeFrehn, director of the NCCMP, echoes Nyhan’s critique.
“Banking on a bailout from Congress or burying our heads in the sand and hoping for the best are not long-term solutions to a very complicated and expensive problem,” DeFrehn wrote in an email to In These Times.
Rep. Kline, too, had some harsh words for the dissenting unions at last week’s hearing.
“I’m afraid that sometimes the leadership is just not being honest with their members,” Kline said. “Despite the failure of previous legislation, they’ve apparently deluded themselves into thinking that self-help is unnecessary because the federal government will bail out these plans. And I don’t see that as an option.”
The Teamsters’ Caldwell brushes aside the charge that union leaders who oppose the plan are being irresponsible.
“We’re telling our members what the risks are. And what we’re saying is that cutting members’ accrued benefits shouldn’t be the first step, that there are alternatives to saving these members’ pensions. Representative Kline and others aren’t being honest with America’s workers,” he says. “Congress can fix this. They’re choosing not to. We want to put pressure on Congress to fix this.”
At this juncture, the rebelling unions are still far from coalescing around an alternative piece of legislation. That likely won’t happen until the NCCMP-backed legislation actually makes it to the floor—after all, it’s difficult to build opposition to a bill that isn’t even yet public. Accordingly, it remains unclear what exactly an alternative bill would look like.
But what’s becoming clear is that the cooperative, bipartisan spirit that has permeated much of the conversation about multi-employer pension reform is beginning to disintegrate.
The Teamsters, however, are intent on reclaiming the language of non-partisanship.
“I think the message to our legislators is, this isn’t a partisan issue, this is an American issue,” Caldwell says. “Are we going to protect the people who have put their careers and lives on the line in their waning years or are we gonna let them suffer?”
The International Association of Machinists (IAM) is a sponsor of In These Times.
Cole Stangler writes about labor and the environment. His reporting has also appeared in The Nation, VICE, The New Republic and International Business Times. He lives in Paris, France. He can be reached at cole[at]inthesetimes.com. Follow him @colestangler.
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