Some Union Pension Cuts Likely As New Federal Rules Take Shape

Bruce Vail April 23, 2015

The cuts would likely be devastating for hundreds of thousands of retirees. (Teamsters for a Democratic Union)

The like­li­hood that hun­dreds of thou­sands of union mem­bers nation­wide won’t be receiv­ing the full pen­sion ben­e­fits promised to them is becom­ing clear­er as fed­er­al reg­u­la­to­ry agen­cies in Wash­ing­ton, D.C., move to imple­ment new pen­sion leg­is­la­tion qui­et­ly approved in the final weeks of 2014.

As report­ed by Cole Stan­gler in In These Times late last year, leg­is­la­tors rushed to amend a 40-year-old law gov­ern­ing pri­vate-sec­tor mul­ti­em­ploy­er pen­sion plans as part of broad­er bud­get leg­is­la­tion that was con­sid­ered must pass” by both Repub­li­cans and Democ­rats. The new law, which has been the sub­ject of heat­ed debate in Wash­ing­ton for more than a decade, is aimed specif­i­cal­ly at union pen­sion plans fac­ing long-term insol­ven­cy and gives the trustees of such plans new free­dom to cut ben­e­fits to retirees as a way to reverse the declin­ing for­tunes of those plans. Pres­i­dent Barack Oba­ma signed the mea­sure, called the Mul­ti­em­ploy­er Pen­sion Reform Act of 2014 (MPRA), into law on Decem­ber 16.

These peo­ple [affect­ed pen­sion­ers] don’t know what’s going to hap­pen to them” as a result of cuts autho­rized by the law, says Bob Ams­den of the new­ly formed Wis­con­sin Com­mit­tee to Pro­tect Pen­sions. A Team­ster truck dri­ver for 33 years, Ams­den says he’s now in dan­ger of los­ing a sub­stan­tial por­tion of his own pen­sion, and that hun­dreds of thou­sands of oth­er union mem­bers are fac­ing sim­i­lar cuts.

There are numer­ous unan­swered ques­tion on how exact­ly the MPRA will be imple­ment­ed in the com­ing months by the Depart­ment of the Trea­sury and oth­er fed­er­al agen­cies, but a trou­bling ear­ly sign for the future comes from the Cen­ter for Retire­ment Research at Boston Col­lege, which has com­piled a list of the 100 union pen­sion plans deemed like­ly to face ben­e­fit cuts.

The list is bad news for thou­sands of union mem­bers, or retired union mem­bers, at the Inter­na­tion­al Broth­er­hood of Team­sters, Unit­ed Mine Work­ers of Amer­i­ca (UMWA), Bak­ery, Con­fec­tionery, Tobac­co Work­ers and Grain Millers Inter­na­tion­al Union (BCT­GM) and a var­ied col­lec­tion of small­er unions.

The list is large­ly spec­u­la­tive, con­cedes Cen­ter for Retire­ment Research spokesper­son Amy Grzy­bows­ki, and is based sole­ly on a math­e­mat­i­cal analy­sis of pub­licly avail­able finan­cial data rather than a detailed exam­i­na­tion of each of the indi­vid­ual pen­sion plans. The pres­ence of a union pen­sion plan on the list does not nec­es­sar­i­ly mean that plan trustees will seek cuts, or that the Trea­sury Depart­ment will approve any pro­posed cuts, as required by the new MPRA law, she says.

Nev­er­the­less, the list does pro­vides a use­ful begin­ning guide­post” to the spe­cif­ic union pen­sion plans fac­ing severe finan­cial prob­lems that can lead to ben­e­fit cuts for pen­sion­ers, explains Karen Fried­man, Exec­u­tive Vice Pres­i­dent of the Pen­sion Rights Cen­ter, a Wash­ing­ton, D.C.-based advo­ca­cy group. She cites in par­tic­u­lar the Team­sters’ Cen­tral States Pen­sion Fund—which han­dles pen­sion accounts for an esti­mat­ed 411,238 union mem­bers and retirees spread out over much of the coun­try — as the largest and most promi­nent union orga­ni­za­tion named in the Boston Col­lege report.

This [MPRA] leg­is­la­tion was writ­ten for the Team­sters to begin with,” Fried­man says, and will affect oth­er region­al or local Team­ster plans in addi­tion to Cen­tral States, notably the West­ern Penn­syl­va­nia Team­sters & Employ­ers Pen­sion Fund, which han­dles pen­sion accounts for some 35,000 work­ers and retirees.

The fear now emerg­ing among pen­sion­ers in the Cen­tral States Fund is very real, com­ments Sue Cole, a union activist and spouse of a retired Team­ster in St. Louis, Mis­souri. My phone start­ed blow­ing up” with calls from retirees wor­ried that their ben­e­fits will be slashed, she says. If rumored pen­sion cuts are enact­ed, Peo­ple are going to have to go on food stamps, peo­ple are going to lose their homes.”

Cole is help­ing orga­nize Team­ster pen­sion activists to head off unfair cuts. They held their first pub­lic protest April 8 at a meet­ing of Team­ster offi­cials in Chica­go, backed by Team­sters for a Demo­c­ra­t­ic Union and oth­ers, and are begin­ning to lob­by the Trea­sury Depart­ment and oth­er agen­cies to insure that rules to imple­ment MPRA will pro­vide pro­tec­tion for vul­ner­a­ble fam­i­lies. Cole and oth­er activists like Bob Ams­den also intend to lob­by Con­gress for out­right repeal of MPRA.

Union mem­bers or retirees are at risk in pen­sion plans aside from the Team­ster-relat­ed orga­ni­za­tions cit­ed in the Boston Col­lege report. Among the largest are: 

  • UMWA — 115,210 mem­bers or retirees
  • BCT­GM — 114,224 mem­bers or retirees
  • CWA — ITU (Com­mu­ni­ca­tions Work­ers of Amer­i­ca-Inter­na­tion­al Typo­graph­i­cal Union) — 32,504 mem­bers or retirees

One expert in mul­ti­em­ploy­er pen­sions tells In These Times that MPRA has a lot of pro­tec­tions for union mem­bers, and that the draw­backs of the new law are out­weighed by its advantages.

Randy DeFrehn is Exec­u­tive Direc­tor of the Nation­al Coor­di­nat­ing Com­mit­tee for Mul­ti­em­ploy­er Plans, a Wash­ing­ton-based labor-man­age­ment group that lob­bies on union pen­sion issues. DeFrehn’s group sup­port­ed MPRA as a way to keep endan­gered pen­sion plans afloat, he says. Doing noth­ing would just allow such plans to fail entire­ly, he says, with even worse con­se­quences for pen­sion­ers. Any cuts under the law will be a strict­ly vol­un­tary” choice by pen­sion trustees (although not vol­un­tary to indi­vid­ual pen­sion­ers), accord­ing to DeFrehn, and must be approved by the Trea­sury Depart­ment. Also writ­ten into the law are cer­tain pro­tec­tions, he says, like exemp­tions from cuts for dis­abled pen­sion­ers or indi­vid­u­als over 80.

The Trea­sury Depart­ment is begin­ning work with the Depart­ment of Labor and the gov­ern­ment Pen­sion Ben­e­fit Guar­an­ty Corp. to devise rules to insure that any cuts are both nec­es­sary and fair, DeFrehn con­tin­ues, and those rules are expect­ed to be pub­lished in the next sev­er­al months. Rumors about those rules are ram­pant, he allows, and it is real­ly irre­spon­si­ble to rouse old peo­ple that way.”

One labor leader with long expe­ri­ence in union pen­sion issues says that the MPRA was a nec­es­sary step for some of the most trou­bled retire­ment plans. Wen­dell Young IV, Pres­i­dent of Unit­ed Food and Com­mer­cial Work­ers Local 1776, says some plans have seen their [finan­cial] con­tri­bu­tions from employ­ers dry up because of bank­rupt­cies or merg­ers or what­ev­er. The plain fact is they will nev­er be able to pay all the ben­e­fits that the mem­bers expect.”

Sev­er­al Local 1776 plans are under­fund­ed, he says, but the union has been work­ing with employ­ers over a num­ber of years to cor­rect the prob­lems, so no MPRA cuts are expect­ed for Local 1776 pensioners.

This is a prob­lem that has been out there for a long time, so none of this is a sur­prise,” to union offi­cials or employ­er com­pa­nies, Young adds.

Bruce Vail is a Bal­ti­more-based free­lance writer with decades of expe­ri­ence cov­er­ing labor and busi­ness sto­ries for news­pa­pers, mag­a­zines and new media. He was a reporter for Bloomberg BNA’s Dai­ly Labor Report, cov­er­ing col­lec­tive bar­gain­ing issues in a wide range of indus­tries, and a mar­itime indus­try reporter and edi­tor for the Jour­nal of Com­merce, serv­ing both in the newspaper’s New York City head­quar­ters and in the Wash­ing­ton, D.C. bureau.
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