by John Galt
March 8, 2015 20:50 ET
There have been some rumblings sent through the internet by the various Teamster union members that the national union in coordination with the Federal government and possibly some state governments may begin the process of officially putting their pension funds into bankruptcy so as to divorce the national union from control and liability for said pensions and leaving the remainder of the benefits outstanding the responsibility of the taxpayer.
Rumors have been swirling since mid-February throughout the various branches of the Teamsters and other unions that to divest their responsibility of the various pension programs which could ultimately bankrupt the unions may indeed occur by the Teamsters and other unions declaring the pension programs insolvent, thus allowing them to place responsibility for funding the programs at 1/3 or less of their current benefits payout levels on the Pension Benefit Guarantee Corporation (PBGC).
The dark devious program apparently was promoted by union leadership which mismanaged or absconded with pensioner funds within government unions along with private unions and in turn now are facing insolvency with the next 15 to 20 years. Obviously the Teamsters along with many other unions have major problems with declining membership and absurd expectations of returns on investment after the 2007-2009 financial depression. Last year the program was put into force of law known as the Multiemployer Pension Reform Act of 2014 (MPRA) as signed by the Obama administration with bipartisan support. The PBGC website describes the impact of this law:
The Multiemployer Pension Reform Act of 2014 (MPRA) was enacted on December 16, 2014. In the new law, Congress established new options for trustees of multiemployer plans that will potentially run out of money.
Frequently Asked Questions on the Multiemployer Legislation
1. What is a multiemployer plan?
A multiemployer plan is a pension plan created through an agreement between employers and a union. The employers are usually in the same or related industries. For example, multiemployer plans provide benefits for people in industries such as transportation, construction, and hospitality.
2. How do I know if I’m in a multiemployer plan?
Contact your union. Participants in single-employer plans are not affected by the new law.
3. What kinds of multiemployer plans will be affected by the new law?
When the new law is implemented, trustees of a multiemployer plan that is expected to run out of money in less than 20 years (or 15 years in certain situations) will have the option to seek a reduction of benefit payments under the plan.
4. How does the new law enable pension benefits to be changed?
The new law provides that trustees of plans that are in danger of failing may apply for a temporary or permanent reduction of pension benefits. In order for changes to take place, the plan trustees have to submit an application showing that pension benefit reductions are necessary to keep the plan from running out of money. Participants will be notified of any proposal to reduce benefits and have the opportunity to comment on the proposal. The new law requires that the application be reviewed by the U.S. Department of the Treasury, in consultation with PBGC and the Department of Labor, to determine if it meets the requirements under federal law. If the application is approved, plan participants and beneficiaries will then have the right to vote on the proposed benefit changes before they can occur.
5. Does the law include protections for older or disabled participants?
Yes, benefits cannot be reduced for retirees and beneficiaries who are 80 or older. Retirees between ages 75 and 79 would face smaller benefit cuts than retirees under age 75. Also, plan benefits that are based on disability (as defined by the plan) cannot be reduced.
6. How much could my pension benefit be reduced?
If you are in a plan where benefits could be reduced, the new law states that your benefit cannot be reduced to less than 110 percent of the amount the PBGC guarantees. For example, if your plan currently provides a benefit of $1,500 a month, and if PBGC guarantees $1,000 a month, your plan could not reduce your benefit below $1,100, because that is 110 percent of the amount PBGC guarantees in this example. (The amount PBGC guarantees in a given case depends on various factors, including the rate at which your benefit is earned and your years of service under the plan.)
7. Do participants have a say in how benefits are reduced?
Yes. Participants will be notified of any proposal to reduce benefits and will have the opportunity to comment on the proposal.
In addition, if the trustees’ proposal to reduce benefits is approved by the U.S. Department of the Treasury, in consultation with PBGC and the Department of Labor, those participants and beneficiaries have the right to vote on the proposed benefit changes before they occur.
For most multiemployer plans, if the majority of participants vote against benefit reductions, they cannot occur. However, the trustees could prepare a new proposal to change benefits and start the process again.
Different rule for large plans
There is a different rule for particularly large and financially troubled multiemployer plans (referred to as “systemically important”). These are plans that will require PBGC assistance valued at more than $1 billion. Even if the participants covered by one of these large and financially troubled plans vote against the benefit reductions, the U.S. Department of the Treasury must permit the implementation of such benefit reductions or a modified version of such reductions developed by the U.S. Department of the Treasury in consultation with PBGC and the Department of Labor.
8. My pension plan’s trustees sent me a notice stating that the plan was in “endangered,” “seriously endangered” or “critical” status. Does that mean that they will cut benefits?
Not necessarily. Many plans that are in “endangered” or “critical” status have a path to work their way back to health over time, without reducing benefits. Trustees of “critical” status plans have a limited ability to adjust some benefits, but generally cannot reduce normal retirement benefits. Before there are any additional benefit reductions under the new law, your plan’s trustees would have to conclude not only that the financial condition of the plan is “critical,” but that the plan is projected to run out of money. This is referred to as being in “critical and declining” status. Further, the law requires that individuals participating in the plan be notified of any proposal to reduce benefits.
9. Aren’t there other ways to help keep multiemployer plans from running out of money besides reducing benefits?
The new law provides other options that, in combination with benefit reductions, could help certain plans. The new law allows PBGC to provide financial assistance to eligible plans to pay for certain benefits and to help financially weak plans merge with stronger plans.
10. When can trustees of multiemployer plans apply for temporary or permanent reductions of benefits?
Trustees should not submit an application until after application procedures have been published. The U.S. Department of the Treasury, in consultation with PBGC and the Department of Labor, will provide guidelines and procedures for preparing and submitting applications.
There are strong indications in the last few weeks that the Teamsters Union pension fund known as the Central States, Southeast & Southwest Areas Pension Plan in the Midwest may indeed be the first union to use this new law to divest itself from the obligations of paying the retirees and members still on a pension program yet to retire their full contractual obligations. There are 411, 238 members of this unions and it is currently only 53.9% funded. NBC -i4 in Columbus, OH did a story on the plight of pensioners on February 23rd of this year:
How bad could this get? From the article associated with the video above:
“In 1980…for every person that was drawing a pension there was probably 4 people working and paying into the fund” Wyatt said. “That’s just completely reversed now there are almost five people drawing a pension for each worker putting into the fund.”
While some multi-employer pension funds adjusted, others are now at risk of going bankrupt. Multi-employer pensions were created through collective bargaining agreements between labor unions and multiple employers affecting areas such as the construction and trucking industries.
The Multi-employer Pension Reform Act of 2014 was approved as part of the federal omnibus spending bill and was meant to give a specific group of severely underfunded pension plans a path to survival. But that path allows for cuts in benefits to current retirees.
Translation: Union leaders and fat cats like Hoffa and those who run the government and teacher’s unions in insolvent states like Illinois and California will be protected but the retired and soon to retire membership will have their lives destroyed by the Obama administration’s PBGC and Democrat lead unions which support this regime. Meanwhile, independent groups within the Teamsters and other unions are not taking this lying down. The Teamsters for a Democratic Union (TDU) published this piece on March 3rd:
From the article:
The Central States Pension Fund and several smaller funds in the months to come may seek to cut the earned benefits of retirees and active Teamsters. Teamster members have a right to know what the procedures would be, so that we can be better armed to fight back.
A detailed outline of the procedure and timeline is available here for review by concerned members and retirees. This outline explains that the process cannot be immediate; the law provides time for review, for the publication of opposition statements, a vote by all participants (active and retired), and in the case of large funds at least 10,000 participants, the appointment of a retiree representative.
Teamsters are not sitting back and waiting for the hammer to come down – retirees and active Teamsters are organizing now to change the law that requires the full burden of the economic meltdown to fall on working and retired Teamsters.
The list of union locals in trouble is mind-boggling at a minimum and frightening to think about should all of these union members engage in work place disruptions due to the actions of their financial leadership:
A cursory review of the numbers above indicates that over 800,000 union employees could immediately be impacted by action under the new law. What is not listed on this report above are the government unions which are even more insolvent than the Teamsters, UMW, AFL-CIO member unions, etc.
What makes the Teamsters situation is particularly disturbing are rumors being circulated that if the union leadership does in fact begin the process of reducing benefits under the MPRA, the older members will call for and get support for wildcat strikes in the transportation industry, along with other industries I’m sure, to shut down the country unless the government comes through with 100% funding for retiree benefits for all employees versus the possibly devastating 65% cuts they could face. If this were to occur after the Longshoreman’s strike which paralyzed the container ports on the West Coast, the economy could come to a grinding halt in the next month as other unions support this action.
This could be the second quarter mother of all Black Swans to hit the economy, stock market, and ability of Main Street to continue conducting commerce in a large portion of the nation. Stay tuned as if these rumors confirm and the move to use the MPRA to reduce benefits comes true in the days ahead, our economy could be in for a massive hit from which it may not recover due to the political impotence of Washington, DC.