More than a million retired and current truck drivers, construction workers and other union workers could see their pension benefits cut now that Congress passed a proposal aimed at shoring up some of the nation's biggest pensions.
Tacked on as an amendment to the government's $1.1 trillion spending bill, the proposal was approved by the Senate late Saturday night.
While those sponsoring the pension proposal say it is "the only available option" to save failing multiemployer pension plans, other groups -- like the AARP and the Pension Rights Center -- are crying foul.
Multiemployer pension plans cover more than 10 million workers and retirees in the trucking, manufacturing and other industries. But many of these plans have struggled in the last decade as they grapple with an aging workforce and major investment losses from the recession. Plus, many larger employers have pulled out of the plans.
That has put a major strain on the Pension Benefit Guaranty Corporation, the government agency that insures pension plans, which last month said its reserves are dangerously low.
The Congressional proposal would allow plans that are projected to run out of money in the next 10 to 20 years to cut the benefits they pay to both current and future retirees. Benefits would not be cut for disabled pensioners or those 80 years and older, while cuts would be lessened for those between 75 and 80.
The PBGC projects that more than 10% of the roughly 1,400 multiemployer pension plans, which cover more than 1 million workers and retirees, currently meet this criteria.
Under current law, cutting the benefits of those who are already retired is off-limits. Instead, troubled multiemployer plans can take other actions, like reducing the benefits employees earn going forward and raising employee and employer contributions to the plan.
If the Congressional plan passes, cuts would require participant and government approval first, although the largest troubled plans could slash benefits even if retirees vote against it.
Retired truck driver Glenn Nicodemus, 64, receives his pension checks from the Central States Southeast and Southwest Areas Pension Fund, which is struggling to cover more than 300,000 retirees, widows and others.
Under the Congressional proposal, Nicodemus could see his annual benefits plummet from around $40,000 a year to as little as $15,000.
"I am disappointed in the fact that such an important matter is being done is such an underhanded way with little or no discussion of the consequences to millions who will be effected," he said.
Groups like the AARP, the Pension Rights Center and some worker unions say that retirees like Nicodemus are counting on their pension benefits, which they paid for through decades of contributions, and that other measures should be taken to save plans like Central States.
But supporters of the legislation counter that allowing for benefit cuts -- along with other changes included in the legislation, like allowing troubled plans to merge with healthier plans and doubling the insurance premiums employers pay the PBGC -- will help preserve the plans for both retirees and current workers.
One Cleveland plan, for example, has said it would only need to cut current benefits by 10% in order to prevent insolvency, said Randy DeFrehn, executive director of a coalition of employers and labor unions that crafted the proposal the legislation is based on.
Without any cuts now, he said that plan expects to run out of money by 2028, at which point all participants would see their benefits cut by 50% or more.
That's because if a multiemployer plan goes insolvent, a retiree is guaranteed less than $13,000 a year. In contrast, a retiree in a single employer plan that goes bust is insured for up to $60,000.
To make matters worse, the PBGC's multiemployer insurance program is itself projected to run out of money in the next decade unless changes are made -- meaning that workers and retirees in failing plans could be left with no benefits at all.
UPDATED December 16, 2014: Get answers on the pension cut deal and what it means for you.
The ink is still drying on the pension cut deal that was attached in the dead of night to Congress's spending bill. Some questions can be answered now. We will update with new information as it becomes available.
Does this bill mandate pension cuts?
No. This bill permits “deeply troubled” pension plans, those which could become insolvent over the next 15-20 years, to cut already-earned pensions of retirees and active workers. These cuts will be up to the trustees of the pension fund; the trustees are 50% union officials, and 50% management reps. No cuts will go into effect immediately.
The Central States Fund states that "it is likely that it would take up to a year, before modifications [pension cuts] if any, take effect."
Could this affect other Teamsters, or just those in the Central States Pension Fund?
Most Teamster funds will be unaffected. The Western Conference Fund is in the “green zone.” Other large Teamster funds, such as New England, Local 705, Local 710, Local 804, Local 177, Joint Council 83, and most others will be unaffected, even if they are in the “red zone.” For example, Local 804 just won significant pension benefit increases in their recent contract.
Certain deeply troubled small Teamster funds may be affected. New York Local 707’s pension fund is nearly insolvent, as freight jobs dried up, and their biggest employer YRC got concessions to drastically cut their contributions to all pension funds. So we expect the Local 707 Fund to consider pension cuts.
While the cuts may only hit some Teamsters now, this attack on workers’ pensions could affect all Teamsters eventually – and we are all in this fight for pension justice.
How will it affect Teamsters in the Central States Fund?
The Director of the Fund, Thomas Nyhan, was a principal lobbying force for this bill, and has stated that CSPF will impose cuts on retirees and active Teamsters. The Trustees of the fund, who are 50% management and 50% Teamster officials politically aligned with Hoffa, support the bill and support cutting pensions. They will make the decisions – we will demand accountability.
Have Central States officials indicated how much they will cut?
In the past, Al Nelson, the Benefit Services Director of Central States, stated that a cut of about 30% would be what is needed.
But now the legislation has changed that. It requires that workers (so-called “orphans”) who retired from companies that went bankrupt (such as CF, Allied Systems, Preston, or Hostess, for example) be cut first and hardest.
This horrendous language is contained on page 81 of the pension legislation.
At this point, no one knows what the cuts will be, because we do not know how this legislation will be interpreted or applied. The next move will be by the Central States trustees.
The legislation also has protective language for some retirees: those over 80, those receiving only a disability pension, and to a partial degree, those who are 75-80.
How will this affect UPS retirees in the Central States Fund?
UPS bought enough influence in Congress to save an estimated $2 billion through a special interest loophole that shifts the company's cost burdens on to Teamster retirees who will face additional pension cuts as a result.
On pages 81-82 of the pension legislation there is a loophole dedicated to exactly one corporation, UPS. This loophole means that CSPF will probably not be able to cut the pensions of UPS workers who retired after January 1, 2008, because they are “Priority 3” in order of cuts (the best priority).
UPS retirees do not benefit one cent from this loophole because their pensions are already protected by the contract. Article 34, Section 1 of the current UPS master agreement, requires UPS to make up the full pension to UPSers if CSPF imposes cuts.
UPS's special interest loophole means the company won't have to make up for any pension cuts. As a result, all non-UPS retirees will face $2 billion more in pension cuts. Retirees are footing the bill so that UPS doesn't have to pay the obligations it agreed to in the contract.
It is not known if the "UPS Exemption" also covers UPS Teamsters who retired from Central States before January 1, 2008. These Teamster retirees deserve to know their status and if they may face pension cuts.
Will Teamsters and retirees get a vote prior to any cuts?
A ‘fact sheet’ issued by the bills sponsors claims that workers and retirees will get a vote before cuts could be made. But this is no fair vote.
First, those in Central States can have their vote overruled, because it is a large fund and its failure could seriously impact the Pension Benefit Guaranty Corporation (PBGC).
To add insult to injury: a majority of all participants – not just voters – would be required for a No result.
Who gets to vote?
It is our understanding that all participants would get to vote: retirees and working Teamsters. Even if the vote can be overruled – as explained above – it can be a very important tool for us to organize and unite Teamsters and retirees, and we plan to use it.
If Central States makes these cuts, will the fund be secure?
Certainly slashing the benefits would improve the bottom line. But in the long run a pension plan needs contributing employers, and here is where the Hoffa administration has failed badly. They severely undermined the Fund by letting UPS pull out 45,000 participants, and they have not organized new companies into the fund. Central States set up a special “hybrid” kind of plan to allow new companies to join the fund with zero withdrawal liability. It was designed for organizing. But it has not been used for new companies. That has to change.
Will Hoffa and Central States officials have to take cuts?
Thomas Nyhan, the fund director, is paid $662,060, so he probably isn’t worried about any pension cut. Neither is Hoffa: he is in the lucrative Family Protection Plan, which covers only International officials and staff, and pays far more than a working Teamster could dream of collecting.
Central States has restrictive reemployment rules. Can we get those lifted?
If pensions as slashed, many Central States and other retirees will need to return to work, and we will demand that Central States revise its reemployment rules for anyone subject to pension cuts.
Can we file a suit and overturn this?
This law was passed by the US Congress. It is highly unlikely it would be found to violate the US Constitution, which does not guarantee anyone a pension. But, as reported on the national conference call by the attorneys, we will pursue all legal avenues to curtail damage done to retirees. Our effort will be on-going.
What’s next for fighting back?
We are moving forward with Campaign for Pension Justice which we invite you to join. We will continue to partner with allies to fight this law and to demand accountability from any Teamster plan that seeks to slash pensions.
What can we do to get rid of the Hoffa leadership?
We are starting now to build for a new leadership in 2016. We are fed up with Hoffa’s lies, excuses and cover-ups. If you agree, join us to help make it happen.
The Pension Rights Center’s backgrounder on the pension-cut bill.
December 13, 2014: Congress has officially passed the spending bill that includes pension cut legislation that was attached as an amendment to the budget bill.
The legislation guts federal pension protections and will pave the way for pension cuts in the Central States Pension Fund.
Teamsters have questions and deserve answers. TDU lays out what the bill means for Teamsters in our Frequently Asked Questions.
The biggest question of all may be: how did Hoffa let this happen in the first place?
While Hoffa was MIA or worse, TDU fought a grassroots campaign to protect Teamster pensions.
We partnered with the Pension Rights Center and AARP and launched a coalition for pension protections, not cuts.
We sounded the alarm when a Congressional sneak attack attached the pension cut deal to the end-of-year spending bill. Growing number of unions spoke out in opposition. We even forced the Hoffa administration to make a show of opposition.
The Hoffa administration was worse than MIA. His allies at the Central States Pension Fund were leading proponents of the pension cut deal. Central States Executive Director
Thomas Nyhan was a leading proponent of the pension cut deal. He was paid $662,060 by our pension fund last year. How big of a cut will he take?
Hoffa waited until the day before the legislation passed, Hoffa issued a last-minute letter opposing the pension rip-off. The IBT emailed members calling on them to make phone calls. This wasn't even a matter of too-little-too-late. It was a cover-up.
Hoffa stayed quiet to signal politicians that he backed the pension cut bill; then when the bill's passage was secured, he put on a show of opposition to the membership to cover himself politically.
Teamsters expect Congress to play politics. But they deserve more from their own union leadership.
The Hoffa administration has spent the last year imposing contract concessions, healthcare cuts and pension cuts. It's time for change.
If you agree, get involved in the movement for change in our union.
Send us a message and tell us what TDU should do next to fight for our union.
Join with Teamsters working to defend pensions, and change the leadership of the Teamster Union. Together, we can rebuild the Teamsters!
December 12, 2014: Thomas Nyhan testified in Congress and lobbied hard – with our pension money and staff – to get the pension-cut bill passed. Now, he got his wish: a 163-page bill sneaked through Congress, tacked onto the budget.
We propose some small measure of equality of sacrifice, which is a basic principle of the labor movement.
The executives of the Central States Pension and Welfare Funds should take a 30% cut, to show their sincerity when they talk about the need for sacrifice.
Let’s start with Thomas Nyhan, who was paid $662,060 in 2013 and Al Nelson who was paid $305,811. There are plenty of other fund executives in their bracket: in our review of the 5500 forms for Central States Pension and H&W Funds, we found 13 pulling down over $200,000, and seven over $300,000.
What do you think?
December 11, 2014: We need your help NOW! The House is poised to vote on the omnibus spending bill, which includes provisions that would allow pension plan trustees to cut the hard-earned pension benefits of current retirees – as a purported solution to shoring up certain financially-troubled multiemployer plans.
Click here to contact your members of congress and tell them to strip the pension cut ammendment from the omnibus bill.
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At last the actual language has been released of the backroom, last-minute congressional deal allowing benefits of millions of retired workers to be shredded.
It's even worse than its critics anticipated.
We've tracked this inexcusably hasty, secretive maneuvering during the last week, reporting that it allows extreme, potentially premature cuts in benefits for retirees who are members of multi-employer pension plans. Such plans typically are sponsored jointly by unions and employers in given industries, like trucking. See our posts here and here for more background.
Click here to read more at the Los Angeles Times.
Dave Erickson of Isanti, Minn., believed his pension benefits were guaranteed when he contributed a fixed portion of his pay into the Teamsters Central States Pension Fund.
On Wednesday, Erickson learned that those benefits might be cut under a provision that Minnesota Rep. John Kline aims to tack onto the new federal budget bill.
Click here to read more at the Star Tribune.
A bipartisan group of congressional leaders reached a deal Tuesday evening that would for the first time allow the benefits of current retirees to be severely cut, part of an effort to save some of the nation’s most distressed pension plans.
The measure, attached to a massive $1.01 trillion spending bill, would alter 40 years of federal law and could affect millions of workers, many of them part of a shrinking corps of middle-income employees in businesses such as trucking, construction and supermarkets.
Click here to read more at The Washington Post.