However, the decision must be approved by the U.S. Treasury Department and wouldn’t take effect until July 1, meaning nothing’s final.
Since most workers and retirees affected are or were Teamsters, that may give them a chance to beat back the threat.
Almost a year after Congress in 2014 changed federal pension protection to let pension-fund trustees renege on promises, participants in the Central States Pension Fund got the announcement.
“On September 25, 2015, the pension fund filed an application with the U.S. Department of the Treasury seeking approval for a pension rescue plan under the Multiemployer Pension Reform Act of 2014 to ensure that our fund will continue providing pension benefits for many years in the future,” officials wrote.
Figures vary on the number of affected workers, but between 270,000 and 400,000 people could suffer losses. Pension trustees say the average reduction would be 23 percent, but activists say some could face cuts of about 60 percent.
“These cuts are simply outrageous,” said Teamsters president James P. Hoffa. “Trying to prop up Central States by proposing draconian pension cuts that will impose significant hardships on the very people the fund is supposed to serve makes no sense.
“The benefits these workers and retirees earned were the result of their own hard work as well as that of their fellow Teamsters,” he continued. “Wiping it out in order to balance the books is tantamount to highway robbery.”
It used to be illegal to cut promised pension benefits. But in 2014, Congress changed that within a must-pass spending bill. It lets multi-employer pension plans – set up to be jointly run by unions and employers – to apply to Treasury to cut benefits to avoid insolvency.
If the cuts aren’t made, Central States could run out of money in 10 years, claims Thomas Nyhan, the fund’s executive director.
Multi-employer pension plans are in financial difficulty. Covering more than 10 million workers, they’ve become underfunded. But root problems have been ignored.
After President Reagan broke the air traffic controllers’ strike in 1981, organized labor was hurt by the acceptance of “permanent replacements” for lawful strikers, and unions were weakened across all sectors. Also, trucking was deregulated, and a lot of companies went out of business. Finally, changes affecting health-care costs, Social Security and other generational bridges – people living longer, with fewer younger people working – meant contributions were outpaced by expenditures.
The Great Recession hurt, too, of course. Before the 2008 financial crisis, Central States had more than $25 billion in assets. Since then, disappointing investments resulted in its losing about a third of its value.
Whatever the biggest factor, people who are targeted for suffering the biggest hit did nothing wrong.
Union members will get to vote on the cuts, but that may not matter.
Trustees wrote, “Benefit reductions under Central States’ proposed pension rescue plan will, under current rules, become effective around July 1, 2016 – if approved by both Treasury and a subsequent vote of our plan participants,” then adding, “Treasury, by law, can override a negative participant vote and order the plan implemented and/or modified.”
A more sensible solution would be to strengthen pensions and protect beneficiaries, and such ideas are getting some bipartisan support.
“Lawmakers across the political spectrum recognize a fix is needed,” Hoffa said.
Because pension benefits are compensation – workers help generate pension value in addition to earning (arguably, INSTEAD OF higher) wages – taking them is stealing.
Pension participants, both workers and retirees, fulfilled their end of the deal. Yet this “rescue” requires that only they will bear the burden.
“Central States should pull its horrific pension proposal,” Hoffa said. “But if it doesn’t, this union is not backing down."
[PICTURED: Photo from the IBT's teamster.org.]
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