Thursday, March 25, 2010

Nonunion workers and private companies could be forced into absorbing the financial liabilities of underfunded union pension plans, thanks to pending health care mandates and an executive order that could be finalized this year, policy analysts and trade group representatives have concluded.

Even as unions continue to market themselves to new members on the basis of generous pension programs, government figures show these plans are performing poorly in comparison with retirement packages that operate beyond the orbit of organized labor.

In addition, unions are pushing the Obama administration on project labor agreements (PLAs), which, among other things, will give their pension plans new sources of outside funding - nonunion workers on government contracts worth more than $25 million.

The average union pension has resources to cover only 62 percent of what is owed to participants, according to the Pension Benefit Guarantee Corp. Pensions with less than 80 percent of the assets needed to cover present and projected liabilities are considered “endangered,” while those that fall below a 65 percent threshold are classified as “critical” under the Pension Protection Act of 2006.

Pension Benefit Guarantee Corp. figures also state that less than one in every 160 workers is covered by a union pension with required assets.

Michelle Ringuette, a spokeswoman for the Service Employees International Union (SEIU), acknowledged that pension funds for her union and for others were facing difficulties but said the fault lies with businesses, not the unions.

“SEIU’s pension funds - like all pension funds - were hit hard when the market collapsed in late 2008. The union is deeply concerned about the instability big banks and the high-finance industry have created in the markets and throughout our economy, and we take very seriously all threats to the retirement security of our members and people who work for a living,” said Ms. Ringuette, who represents the nation’s largest union by number of members.

Diana Furchtgott-Roth, a scholar with the Hudson Institute, dismissed that explanation.

“A lot of these plans were in trouble even before the stock crash, and the members are entitled to know,” she said, adding that “there should be a law against putting out information about pension funds that is simply false.”

Time lag on reports

There is often a one- to two-year delay in submitting the papers, called 5500 forms, that record the ratio of assets to liabilities on pension funds. This means many 2008 forms, which will show the impact of the stock market drop and the recession, are just being filed and are not reflected in these and other official statistics.

Demographics are at least partially responsible for the collapse of pension assets within unionized plans, according to labor analysts. Private-sector union membership has fallen from about 20 percent in 1980 to 7.6 percent in 2008 and 7.2 percent in 2009, the U.S. Bureau of Labor Statistics reports. For the first time in U.S. history, a majority of union members work for the government rather than in the private sector.

The fallback position for union leaders who need an influx of members to sustain underfunded pension plans is to push for policy changes that would coerce workers and companies into joining organized labor, Ms. Furchtgott-Roth said.

“In countries where there is a single-payer health care plan, you find that the doctors, nurses and health aides are all government workers, and this is always a source of new union membership,” she said. “If more Americans have health insurance, the demand for health care expands, as does employment in the health care field.”

The SEIU, which has many of its members employed in health care, has been out front and center in pushing for the legislative changes to the nation’s health care system that won congressional approval over the weekend and was signed by President Obama on Tuesday. The SEIU home page included a section titled “The Final Push for Health Care” that instructed union members to call and lobby elected officials.

“The idea here is to expand the health care centers available for unionization, and the SEIU already represents many of these providers,” Ms. Furchtgott-Roth said.

Employees with Kaiser Permanente, the League of Voluntary Hospitals and Homes of New York, Tenet Healthcare Corp. and Dominion Hope are all represented by the SEIU and could see their ranks swell as more of the uninsured gain coverage.

SEIU shortfall

At the same time, the SEIU has engaged in a sleight of hand that is unknown to its membership, Ms. Furchtgott-Roth said.

For example, the union claims on its Web site that its 1199 pension fund, which covers SEIU workers in the New York area, is flush and well-funded, though the U.S. Labor Department says it is not.

The SEIU’s 1199 Great New York Pension Fund in 2007 was funded only at 58 percent of its future obligations, government figures show.

Moreover, the most recent data available show that several other SEIU pension plans are strained. The Service Employees 32BJ North Pension Fund stands at 68 percent; the Local 32BJ Building Maintenance Contractors Association Pension Plan, at 41 percent; and the 32BJ District Building Operators Pension Trust Fund, at 56 percent.

Ms. Ringuette said the SEIU was honoring current pensions at 100 percent of the committed amounts, though she was less emphatic about future retirees.

“Fortunately for our members, SEIU pension fund beneficiaries are whole by law, meaning none of our members and beneficiaries lost a single dime despite the economy collapsing - contrary to retirees whose 401(k)s were gutted by the market failure. What is at risk today and what we are aggressively working to correct is the accrual rates for future benefits,” she said.

The spokeswoman said the union knows of its pension woes and has “made sure our outside team of investment managers immediately developed a plan for recovery that was fully compliant with the Pension Protection Act.”

“If anything, the losses the market caused in late 2008 point to our need as a nation to address and develop a 21st-century plan for retirement security.” She said her union was committed to making sure that “everyday concerns of workers are heard and addressed” in pension reform bills.

Becker redux?

After losing out on getting the Employee Free Choice Act passed last year, which includes the so-called “card-check” legislation and binding arbitration, Katie Packer, executive director of the Workforce Fairness Institute, anticipates that Obama administration officials will pursue union favors through alternative legislation such as health care and administrative changes that include the use of executive orders.

During the AFL-CIO’s annual meeting earlier this month, Labor Secretary Hilda L. Solis told members that the administration was contemplating a recess appointment for Craig Becker to the National Labor Relations Board (NLRB). In February, Senate Democrats failed to break a filibuster of Mr. Becker’s nomination.

A recess appointment, if made this year, would be in effect until the start of 2012. Mr. Obama also could submit Mr. Becker or another nominee for that position any time during that period.

Mr. Becker, who has worked as an SEIU attorney, has suggested in his writings that major policy changes, including portions of Employee Free Choice Act relating to the relationship between an employer and his not-yet-unionized employees, could be implemented administratively, without congressional approval.

For example, in a 1993 Minnesota Law Review article, Mr. Becker argued that traditional notions of democracy should not apply in union elections, the key phrase being, “employers should be stripped of any legally cognizable interest in their employees’ election of representatives.”

He also wrote that employers should not be permitted to attend NLRB election hearings, be able to challenge election results in response to suspected union misconduct, and have their ability to communicate with workers about the downside of unionization restricted.

“The Board should return to the principle that a union election is not a contest between the employer and the union. … Unlike the other proposals, however, it could be achieved with almost no alteration to the statutory framework,” he wrote.

“Secretary Solis’ comments indicating that labor radical Craig Becker will be appointed to the National Labor Relations Board despite bipartisan opposition to his nomination in the Senate smack of political payback,” Ms. Packer told The Washington Times. “The administration is simply taking orders from Big Labor bosses, in spite of the fact that their agenda will make economic recovery impossible.”

Return on investment

In the 2008 election cycle, labor union political action committees contributed more than $66 million to congressional candidates with 92 percent of those contributions going to Democrats, according to Labor PACs also contributed $531,711 to Mr. Obama’s campaign that year.

“This is incredible when you think about it, after all the promises that were made, we are coming off a pretty unsuccessful year for organized labor,” said Ben Brubeck, director of labor and federal procurement for the Associated Builders and Contractors, a trade organization for private companies.

“After all the money they invested into electing Obama and the Democratic Congress, you would think they would get something,” he said.

Next up after health care could be final approval of an executive order that calls for multi-employer, multi-union PLAs to be used when federal construction projects exceed $25 million. PLAs stipulate that projects be awarded to contractors and subcontractors who agree to recognize unions as representing their employees during that particular job.

Although nonunion contractors are permitted to bid on PLA projects, the reality is that the projects are awarded almost exclusively to unionized contractors, critics point out. Only 15.6 percent of the nation’s private construction work force is unionized, Labor Department statistics show. This means PLAs could be used to discriminate against the more than eight out of 10 construction workers who are not part of a union.

Moreover, PLAs typically require contractors to participate in multi-employer union pension plans. This arrangement puts nonunion contractors at a financial disadvantage because they must pay for the union plan and for their existing company plan, the Associated Builders and Contractors points out in its analysis of the Obama order.

Individual workers also could lose out because they must surrender their nonunion plans and become vested with the union before receiving any benefits, the Associated Builders and Contractors argues.

Another disadvantage to private companies concerns the “withdrawal liabilities” they may be forced to cover as pensions erode, John R. McGowan, an accounting professor with St. Louis University, has warned in a study that examines the impact of PLAs.

Employers that are tied in with collectively bargained agreements are obligated to cover costs for underfunded union pensions when other contractors drop out, according to the study.

Tommy Vietor, the assistant White House press secretary who handles labor issues, did not respond to requests for comment on the PLA issue and the status of Mr. Becker.

The Federal Acquisition Regulation Council has not issued a final ruling on the PLA order, which may account for why it has received scant attention. The council is responsible for issuing rules that officially enshrine executive orders into the federal procurement process. The public comment period for the PLA rule was closed Sept. 24.

Meanwhile, the General Services Administration has listed 10 projects across the country that could be eligible for PLAs, including three in Washington, D.C.

“We are collectively amazed that there has been no movement on this rule yet,” said Brett McMahon, an Associated Builders and Contractors representative who is also vice president of Miller & Long, a Maryland-based concrete construction company. “But because the executive order was crafted so poorly, it has raised a lot of legal questions.”

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