Central States Cuts in Place Until 2028?

May 16, 2008: The Central States Pension Fund plans to extend the 2002 pension cuts until approximately 2028, according to plan documents obtained by Teamsters for a Democratic Union (TDU).

The fund does not foresee any more cuts in benefits. But it also does not project moving to a well-funded situation that would allow an increase in pension accruals until 2028.

This information – and more – is contained in the “Rehabilitation Plan,” which is the plan guiding the fund’s policies. Teamsters for a Democratic Union (TDU) obtained a copy of the plan under the disclosure provisions of the Pension Protection Act.

Central States is currently 73% funded, with $26 billion in assets.

For the most part, Central States is continuing the same course it has been on since implementing pension cuts in late 2002. Those cuts reduced annual pension accruals to 1 percent—the minimum amount permitted for plans in the Red Zone.

As employer contributions increase each year, Central States Teamsters will experience pension improvements. But Teamsters won’t see a big increase until the 1 percent accrual is increased.

Without an accrual increase, the pension gap between Central States and other regions will grow wider. If current accruals remain in place until 2028, freight Teamsters in the West will earn annual benefits that are 2 ½ times as large as those Teamsters in the Central States earn.

Eight Percent Rule Will Increase Funding

To boost its income and funding status, the Rehabilitation Plan requires all contracts bargained to have an 8% per year increase in employer contributions. Almost all contracts are in compliance. The majority of Central States’ contributions come from employers under the freight, carhaul, and DHL contracts. Two of those contracts are settled, and carhaul is being bargained now. They have set the standard of a 65 ¢ an hour pension contribution increase each year, for five years.

The 8% rule is a hardship on many locals and members, because a good bit of a local’s bargaining power has to be used to meet that requirement, leaving less money for wage increases and health care. In the next contract round, beginning in 2013, the requirement will be reduced to 6% and then 4%, according to the Rehabilitation Plan.

“Default Schedule”

One new policy of the fund has worried many Teamsters, and has lit up the phone lines at the fund, locals and TDU. This change is the “default schedule.”

This schedule comes into play if a company busts the union, breaks out of the fund, or refuses to agree to the 8% increase in contract bargaining. In this case, the fund’s policy is to eliminate early retirement benefits, and only pay the contribution-based benefit at age 65, or pay benefits reduced by 6% for each year under 65.

When UPS left the fund in December, the fund implemented this rule, and thus UPS has to provide the full pension to Teamsters retiring after January 1, 2008, until they reach age 65. At that point they will receive two checks, one from Central States and one from UPS.

While all national contracts and the vast majority of local contracts comply, some Teamsters are still concerned. In many cases, needlessly so. The fund needs to provide more information to members.

Teamsters concerned about pension rights, and building a strong future for our union and pension plan, can contact TDU with your concerns, or join TDU.

To view a copy of the Central States Fund Rehabilitation Plan, click here.


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