January 6, 2009: In December, Congress passed a new law to help multi-employer pension plans ride out the financial crisis.
Most Teamster pension plans were hit hard by the meltdown on Wall Street. Teamster leaders and members demanded relief.
The Worker, Retiree, and Employer Recovery Act of 2008 loosens some of the strictest requirements of the Pension Protection Act and may prevent new cuts. But it gives no relief for Teamster members who are already dealing with cuts.
What’s changed, and what’s stayed the same? Teamsters for a Democratic Union consulted with pension experts to answer these questions.
What does the new law passed last month do?
The goal of the new law is to provide temporary relief to pension funds that are struggling to meet the funding requirements of the Pension Protection Act (PPA).
When the PPA went into affect on Jan. 1, 2008, many pension experts warned that its requirements were too strict—and that was before the meltdown on Wall Street.
The new law amends the PPA to loosen two restrictions:
- Funds can “freeze” their funding status from the previous year.
- Funds can extend their funding improvement plan by three years.
Under the PPA, pension funds must certify their funding level in three categories.
A fund is in the Green Zone if it is funded above 80 percent.
A fund in the Yellow Zone, or endangered status, is less than 80 percent funded.
The Red Zone, or critical status, means that the fund is seriously under-funded and also has a short-term credit balance deficiency (a technical calculation that indicates a more short-term problem than the funding level). Being under 65 percent funded will not automatically place a fund in the Red Zone.
The new changes means that a fund that was in the Green Zone last year can stay in the Green Zone even if its funding level has dropped below 80 percent.
What does a fund have to do if it’s in the Yellow or the Red Zone?
If a plan is in the Yellow or Red Zone, the plan trustees must approve a funding improvement plan to get the funding level up to 80 percent.
An improvement plan can include increasing employer contributions and decreasing future pension accruals.
Under the PPA, funds had ten to 15 years to get above 80 percent. The new law gives these funds three extra years to get to 80 percent.
Will the new law mean an end to some of the cuts that were made?
No. The purpose of this change is to give funds an extra year to make up their losses from 2008—not to end pension cuts that are already in place.
In 2008, some funds, like the Local 355 pension fund, cut benefits in order to stay in the Green Zone. These funds can stay in the Green Zone for an additional year—and the trustees of these funds can vote to eliminate the pension cuts at any time.
When will I know if my fund is making any changes this year?
Funds have until 120 days after the start of their plan year to announce their funding status. Most plans start their plan year on Jan. 1.
We expect most funds to keep their funding status from last year.
How can I find out more about how my fund is doing?
Each year, your pension fund must release a Form 5500 document that shows its assets, liabilities, and funding level. You have the right to request this document from your pension fund.
TDU members lobbied for and won access to new information from our funds under the PPA, including actuarial reports, financial reports from investment managers and fiduciaries, and certain other information.
The PPA gives members access to this information to encourage members and retirees to watch dog our funds. TDU members have already obtained this information for many Teamster funds. Contact TDU to help gain access to the information from your fund.
Are more changes needed?
The freeze in funding status in the new law only applies for one year. Funds will need additional protection if the recovery is as slow as many economists predict.
Congress spent $700 billion to bail out Wall Street. None of that money went to help protect the pension funds that provide benefits for millions of workers and their families. Teamster members still need change to restore the cuts made after 9/11.
Change is most likely to come when Teamsters members are organized and speak out. You can help by joining TDU and getting involved in our work to protect our pensions. Call or email TDU to find out how you can help.
Do you have a question about how the new pension law will affect your fund? Click here to send your question to TDU and an organizer will contact you.
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