The Wall Street Journal writes today that the US Treasury Department has rejected a proposal to cut retirement payouts for thousands of construction workers, truck drivers and other members of the International Brotherhood of Teamsters Central States Pension Fund. Mediator Kenneth Feinberg rejected planned reductions to pension checks of up to 90 percent for some union retirees.
The Central State Pension Fund represents 400,000 workers at 1,500 companies in the Great Plains, Midwest and Southeast. Thomas Nyhan, the plan’s executive director, says the fund could collapse within a decade.
The Application for Benefit Suspension plan submitted by Teamsters’ Central States Pension Fund in an effort to keep the fund solvent was denied by Feinberg in part because it unfairly imposed uneven cuts among retirees, sent notifications to participants that were too technical to be understood and was based on overly optimistic assumptions of about 7.5 percent future investment returns.
Central States, which pays out $2.8 billion in retiree benefits annually, was hit hard in the 2008 recession and currently has about half of the money it needs to meet future obligations. While it has been rare for pension benefits to be cut, a 2014 federal law made it possible to impose cuts on participants in some cash-strapped plans covering workers and multiple employers. At Central States, some 270,000 retirees were facing benefit cuts.
If Central States should become insolvent, the safety net provided by the federal Pension Benefit Guaranty Corporation could pick up the Central States shortfall but at a lesser amount.
However, the Pension Benefit Guaranty Corporation is already 55 funding deficit retirement plans to the tune of $52.3 billion and is losing about $5 million a day.
In a press release from Associated General Contractors of America, CEO Stephen E. Sandherr said, “Tens of thousands of retirees face the likelihood that the Central States pension funds they depend upon will soon become insolvent because the administration has chosen politics over the need to protect retirees. The Multiemployer Pension Reform Act that President Obama signed into law in 2014 received overwhelming, bipartisan support in Congress because it wisely empowered the trustees of pension plans to take steps to prevent the draconian benefits cuts that come with insolvency."
Bottom line - nobody is winning.
Click here to read Elliot Blair Smith's articles 'Opinion: Teamsters Pension Cuts May Get Worse' and 'How The Teamsters Pension Disappeared More Quickly Under Wall Street Than The Mob'.
Source: Wall Street Journal; MarketWatch.com