August 13, 2010: Are you worried about the future of your pension, and want answers? You’re not alone.
We talked to Teamster pension experts and attorneys to answer some of the most frequently-asked questions about Teamster pensions.
Do you have a question about your pension? We can help. Call TDU at (313) 842-2600, or email info [at] tdu.org.
Q: Is Central States about to go bankrupt?
No, not next week or next year. Nor are any new benefit cuts projected at this time. But over the long haul, the fund is in bad shape.
That’s mainly because so many active participants have left the fund. It all started in the last bargaining round, when the union let UPS pull 44,000 active members out of the fund and into an inferior company plan.
By February 2009, the number of active participants was down to 81,000. One year later, that had dropped to a little more than 54,000 active participants, because of YRC’s suspended payments.
As of February 2010, the fund was paying benefits to 214,000 retirees.
On May 27, Central States Pension Director Thomas Nyhan told the Senate Health, Labor and Pensions Committee that the fund could become insolvent within 10 or 15 years if the Senate didn’t pass legislation to help secure members’ retirement.
Q: Why are some funds in better shape than others?
This is a complex question with no single answer.
One important element is the degree to which a pension fund has a broad base of participating companies, including in growing or healthy industries. The Western Conference Fund, for example, maintains a broad base of participating employers.
The Central States Fund has lost its base in UPS and at YRC, and is dependent on ABF, carhaul, construction, and grocery distribution companies.
Most funds do not include UPS part-timers as participants, but a few do. This is a young and growing demographic which helps to support a healthy fund. Unfortunately, only the Upstate New York, New England, and Western Conference Funds include UPS part-timers.
There are a number of other factors, including investment strategies, fund level policies, and benefits structures.
These factors affect the health of the fund and also the level of benefits that the fund can provide. TDU has produced a special report on the benefit divide at www.TDU.org/pensiondivide
Q: My pension fund is in the Red Zone. What’s going to happen to my pension?
The “Red Zone” means a fund is seriously underfunded. Some funds in the Red Zone have cut benefits, and some haven’t.
The Pension Protection Act and other federal laws say what benefits can and cannot be cut.
The fund can cut your future pension accruals, which are the amount your pension will go up each year in the future. The law prevents funds in the Red Zone from cutting the accrual rate below one percent, unless the accrual rate is already below one percent.
The fund can also cut early retirement benefits.
Being in the Red Zone doesn’t mean your benefits will be cut. For example, Central States has not made any additional cuts since going in to the Red Zone.
Funds in the Red Zone must implement a “rehabilitation plan” which usually includes increased funding (such as requiring employer contributions to go up eight percent a year, for example) and possible pension cuts as well, such as additional requirements to qualify for early retirement benefits.
Q: My employer wants to get out of our benefits fund. What could happen to my pension?
You could suffer serious benefit cuts. In the event of a pull-out, most pension plans will eliminate all “subsidized early retirement” benefits, such as 30-and-out, and provide only those benefits that are protected from cuts by law. So Teamsters taking early retirement would be big losers. And it could affect those already retired, too.
Teamsters at the Minneapolis Star Tribune newspaper suffered such big cuts; their employer was in bankruptcy and bargained out of the pension plan. So did Waste Management Teamsters in Milwaukee; WM is a giant, profitable corporation with many unionized operations. Worst of all, the IBT agreed to let UPS out of the Central States Pension Plan in 25 states. UPS is so rich that they sweetened the pot by paying the lost early retirement benefits of current pension plan participants.
The members and union leadership should fight this concession vigorously. A pension plan, once lost, will likely never be regained. And other employers will be encouraged to try to end pension plans, and substitute a company plan or 401k. Our Teamster pension plans are a key part of Teamster power—we need to protect and expand pensions, not backtrack.
Q: What can Congress do to help secure workers’ pensions?
Plenty. One thing would be to pass the “Employee Free Choice Act” to give workers the right to join a union without employer harassment. That would strengthen workers’ rights and unions, and thus strengthen workers’ pensions.
Another bill in Congress that could help protect pensions for Teamsters and millions of other Americans is the Create Jobs and Save Pensions Act, sponsored in the Senate by Bob Casey (D-Pa) and in the House by Earl Pomeroy (D-ND) and Pat Tiberi (R-Ohio).
If passed without being gutted or watered down, this bill would allow seriously troubled pension plans to “partition” their liabilities attributable to closed and bankrupt companies to the Pension Benefit Guaranty Corporation, with no loss of benefits to retirees. You can find more information about this issue on the web, starting at www.TDU.org/pension-bill