Central States Fund’s Letters Stir Concerns

May 1, 2008: Hundreds of thousands of working Teamsters and retirees received a startling letter from the Central States Pension Fund in early April saying that the fund is in critical status.

That's also called the Red Zone. The notice is written in legalese and discusses a potential reduction in benefits.

Given the history of benefit cuts in Central States, it’s no wonder that thousands of Teamsters are calling the fund, their local unions, and Teamsters for a Democratic Union (TDU) for info.

Even UPS Teamsters, who exited the fund at the beginning of the year, got the letter because their retirement after age 65 will in part come from Central States.

The letter—or funding certification notice—was required by the Pension Protection Act, and the wording about “possible benefit reductions” was required by the law. But the Fund could have done a better job of explaining it so that so many Teamsters didn’t assume the worst.

No New Cuts

The good news is that Central States Teamsters and retirees will not face any new benefit cuts.

Those cuts were made four years ago. As a result, the fund has lowered its future benefit obligations. The cuts have driven the average retirement age up from 59 to 61. The fund has increased future income by requiring all new Teamster contracts to increase employer pension contributions by at least eight percent a year.

These measures mean more money will be coming in and less flowing out, so the fund’s balance sheet is expected to improve in the coming years, moving gradually toward being fully funded.

Small Pension Increases

Pension benefits will actually increase over the next several years—even with the fund in the Red Zone. That’s because the amount of retirement benefits that Teamsters earn each year (called “pension accrual”) is tied to employer contributions, which go up each year.

By August 2012, a freight Teamster will accrue nearly $200 a month in pension for a year of work.

Unfortunately being in the Red Zone means that this is the only pension improvement on the horizon in the Central States.

The April letter explains that if a company busts the union, or refuses to sign a contract with the eight percent increases, then cuts will be made in the affected members early-retirement (25- and 30-and-out) benefits.

Our union needs do whatever it takes to ensure that doesn’t happen to any Teamster. Most Central States Teamsters are already under contracts that include the eight percent pension contribution improvement.

The Long Run

No letter from the fund or anyone else can guarantee our pension fund will be secure for decades to come. Our only guarantee is a strong Teamsters Union and labor movement that can stand up to corporations who try to weaken or cut our pensions.

That’s what TDU stands for. We work to inform and unite Teamsters to defend and strengthen our benefit funds.

That’s why we opposed the International Union allowing UPS to buy their way out of the Central States Fund. In that case, corporate greed got its way, and our union leaders didn’t even put up a fight.

Elsewhere, TDU members have successfully mobilized Teamsters to defeat benefit cuts and win improvements.

We need to build our pension fund on the strongest and broadest base. We intend to make that happen.

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