05.02.08
Teamster’s Pensions in the “Red Zone”; Critical Status Letters Sent Per PPA Regs
During last week’s show, I got a confidential email from one of my listeners discussing a letter the family received from the Teamster’s pension plan. At this listener’s request I mentioned it briefly on the air with few details to preserve confidentiality. Today, that news is no longer secret. Both of these stories are from www.tdu.org (Teamster’s for a Democratic Union) and were issued today regarding these letters.
May 1, 2008: The New England Teamsters and Trucking Industry Pension Fund has put members on notice that the fund will be in critical status (the “Red Zone”) when its funding classification is officially certified later this year.
The fund also announced strict new rules that will make it tougher for local unions in contract negotiations.
The new rules are part of the fund’s Rehabilitation Plan—a plan required by the Pension Protection Act for improving its funding within a 10-year period.
The New England Fund has until Dec. 29 to officially certify its status under the Pension Protection Act—and a year after that to formally adopt a Rehabilitation Plan. But in a March 27 notice to members, the fund announced it is taking action now.
No Cuts—For Now
The good news is no pension cuts are being implemented—at least for now. Instead of reducing benefits, the fund is focusing on increasing revenue by requiring all new contracts that are negotiated to include a 10 percent increase in hourly pension contributions each year.
The 10 percent rule applies to all contracts negotiated after March 4. If a local union is unable to bargain a 10 percent annual increase in pension contributions, then Teamsters covered under the contract will suffer pension cuts.
The 10 percent Maintenance of Benefits (MOB) requirement is the highest in the Teamsters. It doubles the five percent MOB that the New England Fund implemented in 2005. The Central States Fund requires an eight percent increase in pension contributions each year.
The new requirement is so steep that the recently completed UPS and Freight contracts don’t meet the 10 percent standard—despite record pension contribution increases of 65 cents a year.
The New England Fund took this into account and allows any new contracts that include increases of 65¢ an hour over and above a current pension rate of $5.26 an hour to meet the new requirements.
Challenges in Bargaining
The new rules will create serious challenges for Teamsters in contract talks.
Healthcare costs are on the rise, and fuel prices are skyrocketing. At the bargaining table, we will face the triple challenge of negotiating record pension contributions, higher health and welfare contributions and wage increases to keep up with the rising cost of living.
All this, in the context of a recession.
Teamsters in New England need to get ready for tough bargaining and be prepared to get involved in contract campaigns if we’re going to protect our pensions and healthcare and win the wage increases we need to keep up with the cost of living.
And from the “Central” region…
May 1, 2008: Hundreds of thousands of working Teamsters and retirees received a startling letter from the Central States Pension Fund in early April saying that the fund is in critical status.
That’s also called the Red Zone. The notice is written in legalese and discusses a potential reduction in benefits.
Given the history of benefit cuts in Central States, it’s no wonder that thousands of Teamsters are calling the fund, their local unions, and Teamsters for a Democratic Union (TDU) for info.
Even UPS Teamsters, who exited the fund at the beginning of the year, got the letter because their retirement after age 65 will in part come from Central States.
The letter—or funding certification notice—was required by the Pension Protection Act, and the wording about “possible benefit reductions” was required by the law. But the Fund could have done a better job of explaining it so that so many Teamsters didn’t assume the worst.
No New Cuts
The good news is that Central States Teamsters and retirees will not face any new benefit cuts.
Those cuts were made four years ago. As a result, the fund has lowered its future benefit obligations. The cuts have driven the average retirement age up from 59 to 61. The fund has increased future income by requiring all new Teamster contracts to increase employer pension contributions by at least eight percent a year.
These measures mean more money will be coming in and less flowing out, so the fund’s balance sheet is expected to improve in the coming years, moving gradually toward being fully funded.
Small Pension Increases
Pension benefits will actually increase over the next several years—even with the fund in the Red Zone. That’s because the amount of retirement benefits that Teamsters earn each year (called “pension accrual”) is tied to employer contributions, which go up each year.
By August 2012, a freight Teamster will accrue nearly $200 a month in pension for a year of work.
Unfortunately being in the Red Zone means that this is the only pension improvement on the horizon in the Central States.
The April letter explains that if a company busts the union, or refuses to sign a contract with the eight percent increases, then cuts will be made in the affected members early-retirement (25- and 30-and-out) benefits.
Our union needs do whatever it takes to ensure that doesn’t happen to any Teamster. Most Central States Teamsters are already under contracts that include the eight percent pension contribution improvement.
The Long Run
No letter from the fund or anyone else can guarantee our pension fund will be secure for decades to come. Our only guarantee is a strong Teamsters Union and labor movement that can stand up to corporations who try to weaken or cut our pensions.
That’s what TDU stands for. We work to inform and unite Teamsters to defend and strengthen our benefit funds.
That’s why we opposed the International Union allowing UPS to buy their way out of the Central States Fund. In that case, corporate greed got its way, and our union leaders didn’t even put up a fight.
Elsewhere, TDU members have successfully mobilized Teamsters to defeat benefit cuts and win improvements.
We need to build our pension fund on the strongest and broadest base. We intend to make that happen.
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Needless to say, should anyone have any misconception, this is the beginning, not the end. The American people area about to discover that a “recession” does have an impact on their futures. The real discovery that the baby boomers are about to make is that when banksters run wild the investments they rate as “AAA” safe are in fact CCC- deadly and often will break some hearts and retirement dreams as the pension plan administrators thought they were investing in safe, sane instruments only to find out, like the taxpayer, they’ve been conned.
