Multi-Employer Pension Funds Need Relief, Yes, But First Union Reform

January 28, 2005: There has been a great deal of discussion lately about pension relief from many sources. The IBT releases regular statements regarding the need for relief, and in the July/August issue of Teamster Magazine the IBT called for Teamsters to “join [John] Kerry in his fight for legislation that provides meaningful relief for multi-employer pension plans.”

Our committee couldn’t agree more that our pension funds need help but isn’t reform more important than relief?

Interestingly, Timothy P. Lynch, president and CEO of the Motor Freight Carriers Association (MFCA), agrees with the IBT that relief is needed but he also claims reform is necessary. The Central Pennsylvania Teamsters Reform Committee agrees! However, his idea of reform is skewed almost entirely on behalf of the companies he represents, naturally!

We Might Be Able to Agree

In testimony before Congress Mr. Lynch made a number of points we might be able to agree on. For example:

“The employers...are concerned about the current framework for multi-employer plans and strongly believe that if not properly addressed, the problems will only get worse, thus jeopardizing the ability of contributing employers to finance the pension plans and ultimately putting at risk the pension benefits of their employees and retirees.”

Note that the employees and retirees come last in regards to his concerns.

The main point of his testimony was that the companies have no control over how the funds are maintained. He reiterated this point near the end of his statement:

“Employers cannot be expected to bear ultimate responsibility for the financial viability of plans, but at the same time be precluded from any ability to hold the plan and its trustees accountable.” 

Mr. Lynch’s statement conveniently forgets this position is set by ERISA, the law covering pension benefits and that we working Teamsters pay for our retirement and medical benefits with our labor, skill, and dedicated service. Our benefits are negotiated and earned; they are not a gratuity or a gift. 

Lynch is quick to point out the costs of our benefits and that they are part of the National Master Freight Agreement but one gets the impression from reading his testimony that their contributions are something they do willingly instead of something they are contractually obligated to do. Lynch complains, “because of the legal restrictions placed upon trustees in furtherance of their fiduciary responsibilities, there is very limited control by our companies over the actions and decisions of trustees.”

Turn Over Control?

So are we to assume the solution is to turn over all control to the companies instead of trustees who are legally obligated to act in the best interests of the participants?

You really need to read the entire testimony to see Mr. Lynch’s motives. I wonder if the only reasons Mr. Lynch testified were to:

  • Eliminate the excise tax (avoid company liability),
  • Gain control of the pension funds (avoid additional liability),
  • Reduce the total number of Teamster pension funds from around 22 to one or two: “If two pension plans can cover 85% of the country, there is no reason why we need 20 to cover the remaining 15%,”
  • And last but certainly not least—get rid of the pesky fiduciary responsibility.

Committee Has Suggestions, Too

Our committee also has some suggestions to reform pensions but I wonder if we will ever get the opportunity to share them with Congress:

    1. Every citizen/participant has the right to expect the utmost loyalty and diligence from individuals and companies who safeguard and administer the benefits plans that we Americans depend upon for our retirement security and health (more fiduciary responsibility).

    2. When pension laws are violated intentionally or recklessly, then those who are responsible for the violation can be held liable for punitive damages in order to punish and prevent such violations, just as with other important rights under federal law (consequences for breaching fiduciary responsibility).

    3. Enact extremely harsh penalties for pension improprieties, with effective enforcement tools built into ERISA (validity to existing laws).

    4. Make available to all participants all information concerning their pension fund, barring access to nothing. (tools the participants can use to educate themselves).

    5. A complete, annual, in-depth audit by an independent firm must be made of each pension fund. All aspects of every fund must be examined and made available to participants (honesty).

    6.  All pension fund changes must have complete plan changes and complete documents written and filed with the IRS and the Department of Labor before implementation. All plan participants must be notified of the proposed changes 60 days prior to any plan change (accountability).

    7. Any money paid to a fund on behalf of, or by, a participant must become an accrued benefit for that participant upon the fund’s acceptance of that money.

    8. A company’s withdrawal liability must be paid before a company can be sold or merged.

Many more items could be added to this list. Isn’t it time our union put its political clout behind winning these kinds of protections?

Overhaul PBGC Rates

Finally, any meaningful reform should include overhauling the Pension Benefit Guaranty Corporation’s (PBGC’s) insurance rates for multi-employer pension plans. Single-employer funds pay $19 per worker per year for coverage but multi-employer funds pay only $2.60 per worker. Is $16.40 per year the sole reason my potential PBGC insurance reimbursement (if the plan fails) is only one-third that of my single employer brothers?

The double standard goes further. If a single employer plan fails (and almost all failures are single-employer plans) the maximum benefit from the PBGC is $3,580. If a multi-employer plan fails the maximum is only $1,072 per month.

The squeaky wheel gets the grease. Mr. Lynch squeaked pretty loudly testifying before Congress, and the employers will likely step up their campaign in the future. The Bush Department of Labor has so far ignored the needs of pension plan participants.

How much noise do we have to make before we too can be heard?


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