The Pension Protection Act: What It Means for You

March 27, 2008: In April, hundreds of thousands of Teamsters will be getting a report from their pension fund on its funding status.

A new law, the Pension Protection Act (PPA) of 2006, requires that these reports be mailed to members that participate in pension plans that are less than 80 percent funded.

Get the facts on your funding notice and what your pension plan’s funding level could mean for your benefits.

What information will be in the April funding notice?

Most participants—Teamsters and retirees—in Teamster pension plans will get a notification of their plan’s funding status in April.

These notices will contain a lot of technical terminology, but basically will reveal whether the plan is well-funded (in the “Green Zone”), endangered (“Yellow Zone”) or in critical status (“Red Zone”).

This determination is based on the funding ratio and also whether the fund anticipates a situation in the next 5 to 7 years in which more would be paid out in benefits than is coming in from employer contributions and investment earnings.

Will all Teamster funds send out notices in April?

Most will. The PPA requires all funds to send out a notice within 120 days of the end of their fiscal year. The fiscal year for most Teamster plans runs from Jan. 1 to Dec. 31. So the 120-day deadline falls at the end of April.

But some Teamster plans set their fiscal year differently. The New England Fund is on a Oct.-Sept. fiscal year so they are not required to send out a funding notice until next January.

The Local 710 fund’s deadline is May. The Local 688 plan’s notices do not have to go out until September.

Will the notice tell me whether the plan will be making cuts or improvements?

In most cases, no. Some Teamster plans may issue statements at the same time saying what they are planning or what they anticipate in the future.

Does it mean there will be pension cuts if a fund is in the Yellow or Red Zone?

No. Being in the Yellow Zone or even the Red Zone does not mean there will necessarily be any benefit cuts.

For example, the Central States Plan has already cut the accrual rate and made a rule that employer contributions must go up by eight percent per year. The director has stated that there will be no further cuts.

All funds that are in the Yellow Zone or Red Zone must adopt a plan to improve funding over a specified period of years (normally more than 10 years) to reach specified levels of funding.

A Funding Improvement Plan or Rehabilitation Plan does not need to be adopted until Dec. 1—and even later in some cases. These plans must go into effect by next year.

Some funds are acting more quickly and implementing cuts ahead of schedule—without any prior notification or consultation with Teamster members.

Who makes these decisions?

The fund trustees do. Half of the trustees are appointed by the union, and half by the employers. Teamster leaders control 50 percent of the votes and have a lot of power over the fund, if they choose to use it.

Can the trustees cut benefits that I have already earned? Can retirees’ benefits be cut?

Retirees’ benefits cannot be cut. In most cases, it is also illegal to cut pension credits that working Teamsters have already earned. There is an exception for funds in the Red Zone: they could cut some already-earned benefits of Teamsters who are not yet retired. Hopefully this extreme case will not come to pass.

How can concerned Teamsters have a voice in these decisions?

First, we can get informed.

Under the Pension Protection Act, our pension funds are required to provide unprecedented information to members, including actuarial valuations and financial reports. The right to this information was won after a lobbying effort by Teamsters for a Democratic Union and the Pension Rights Center.

Now TDU is assisting members in acquiring this information from their pension funds.

Second, we can demand accountability from our union trustees.

Teamster members should not be blindsided by pension cuts. Our union officials that serve as pension fund trustees can and should report to members on what cuts, if any, employer trustees are proposing, what union trustees are counter-proposing, and how working Teamsters can be affected by the options being considered.

These funds belong to working Teamsters. It’s our money. We have the right to be in the loop about the decisions that are being made about our retirement.

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