The Teamsters have begun informing retirees and current workers that their pension benefits may soon be cut, the final ironic twist to a lobbying campaign that saw the union spend its own members’ dollars to win the right to shrink their retirement pay.
The somber notifications began going out from the Teamsters Central States Health and Welfare Pension Fund this spring, a decision that could ultimately affect 410,000 current pension participants and a total of more than 10 million U.S. workers nationwide. Cuts could begin as early as next year.
The cuts were made possible after the lame-duck Congress late last year passed the Multiemployer Pension Reform Act (MPRA), enabling any multiemployer pension fund to cut benefits to workers and current retirees if the plan is underfunded by at least 20 percent.
Multiemployer pension funds are commonly used by big unions and are maintained by one more or more collective bargaining agreements while operating under a board of trustees.
The Teamsters pension fund has been struggling with severe shortages for years, even as the union continued to pour millions of dollars into political election efforts and Washington lobbying.
In 2014 alone, the union and its affiliates spent nearly $5.9 million on lobbying and political contributions, and one of its main legislative targets was passage of the pension reform law that finally gave it the right to start reducing benefits, according to the lobbying reports it filed with Congress.
The union has already poured another $397,000 into Washington lobbying this year.
The letters that began going out to pensioners last month painted a bleak future for the Teamsters pension fund, suggesting Washington, and not the union, was to blame.
“Like many of our nation’s multiemployer pension funds, Central States Pension Fund has become severely underfunded and is headed toward financial failure if we don’t take immediate, decisive action,” said a CSPF letter dated April 8.
“Baby Boomers are retiring in record numbers and the union workforce has been steadily declining for years. As a result, the Fund currently has more than three times as many retirees as active members — so, fewer contributions are coming in than benefits being paid out. To put this into perspective, for every $3.46 that the Fund pays out in pension benefits, only $1 is collected from contributing employers, which results in a $2 billion annual shortfall. Clearly, that math will never work,” the letter said.
President Obama signed the MPRA into law in December after a lame-duck Democrat-run Senate reached a deal to get the law through both chambers of Congress.
Under the new law, the group hardest hit by reductions likely would be current workers and retirees under the age of 75. The most vulnerable retirees over the age of 80 and those with disabilities would continue to receive full benefits, and proposed benefit reductions for those aged 75 to 80 would be done on a sliding scale.
Any rescue plan proposed by the Teamsters pension fund trustees would have to be approved by the U.S. government. If the pension fund becomes insolvent, beneficiaries would only receive fractional payouts from the government’s Pension Benefit Guaranty Corporation.
The April 8 letter blamed Congress, saying the fact that MPRA wasn’t passed until December meant there was no legal remedy in place that allowed the Teamsters pension fund “to develop a rescue plan from going broke.”
The CSPF says pension cuts are necessary to save the Fund, but that it is too early to tell how dramatic any potential cuts will be.
“Any number put out there now would be entirely speculative and premature,” said Thomas Nyhan, a CSPF executive director and general counsel. “There are a whole variety of factors that must go into developing a rescue plan. This includes guidance from the U.S. Treasury Department, which hasn’t even happened yet. So we would caution against uninformed speculation . The soonest that a rescue plan, including benefit reductions, could be implemented is likely early 2016.”
The MPRA has received stinging criticism from workers who spent decades vesting in retirement programs, and are furious their benefits are being taken to make up for union mismanagement.
Angry Teamsters workers have been organizing rallies across the country and speaking out in labor trade publications.
Robert Amsden, who drove a truck in Wisconsin for 33 years, recently told Labor Notes online magazine that the pension cuts won’t save any money because Congress will end up making up the difference through government-funded entitlement programs.
“They are going to bail us out one way or another. People who never expected any government assistance in their life, they’re going to have to go for food stamps,” he said.
“They act like 30 or 40 percent is no big deal,” said Sue Cole, the wife of a retired car hauler and a founder of the Teamsters Local 604 Pension Protection Committee in St. Louis. “Our feeling is that we worked for it. They mismanaged it; we didn’t. Why should we lose any portion of our pension?”
Five days after the CSPF letter was mailed, retiree representative Susan Mauren sent an April 13 follow-up letter assuring retirees that “the Fund’s trustees are making every effort” to continue paying benefits.
Ms. Mauren, who has taken on the role of independent legal counsel and actuarial consultant for the retirees, added that she was not being paid to do so and that “as a 34-year Teamster,” her own benefits would be affected too.
She did not immediately respond to a Washington Times email inquiry for comment.
Some critics believe the Teamsters could have exercised more effective cost-saving measures ahead of time, cutting executive salaries, lobbying or political activities and repurposing those savings to cover shortfalls in the pension fund.
Conservative groups have suggested the law passed by Congress last December was essentially a political payback from Democrats, who for years have collected the majority of Big Labor’s political donations and have now shifted the burden of union executives’ poor pension management to everyday workers and retirees.
For instance, the Workforce Fairness Institute, an advocacy group that researches troubled collective bargaining and union situations, said there are a number of “attempts by Washington politicians to pay back their union campaign donors through bailouts of various forms. Legacy costs have many labor unions overextended and in need of a government relief.”
One criticism that even union members have made is that the Teamsters should not have allowed UPS to leave its multi-employer pension fund in 2008. Some reports speculate that the fund’s annual income would double if the 45,000 UPS workers in those states were still members.
But Teamsters President James P. Hoffa let UPS leave the fund in return for letting him organize 13,000 workers at UPS Freight, a new subsidiary.
Mr. Nyhan told The Times the Teamsters pension fund did not support the withdrawal of UPS.
“The fund did compel UPS to pay $6.1 billion in withdrawal liability fees to Central States Pension Fund, and transferred another $1.7 billion in liabilities to their books,” he told The Times. “But, to be very clear, the whole point of the Multiemployer Pension Reform Act of 2014 is to stabilize multi-employer pension funds, such as Central States, so that employers are motivated to remain as part of the plan and benefits can continue to be paid to participants for many years to come.”
A recording left at a toll-free number set up by the CSPF says that so far the board of trustees has not made any official decisions, implying that the recent letter that was sent is only a warning to prepare beneficiaries for what could be coming.
“Please know that we take very seriously the responsibility to protect your retirement security and the financial well-being of our plan now and for the future. At this time, the fund’s trustees have not yet made any decisions about a pension rescue plan. It will most likely be summer before we can share any additional details about a specific pension rescue plan and how it would affect your benefits.”