June 15, 2010: The New York State Teamsters Pension Plan will end 25-and-out and 30-and-out benefits at the end of the year, due to the fact that the plan is underfunded and in the “red zone.”
According to the Fund’s Annual Funding Notice, dated April 30, 2010, the fund was 57 percent funded at the beginning of 2009. This puts the fund in Critical Status, called the red zone. With the run-up in the stock market last year, this level has probably improved a bit.
The fund has $1.75 billion in the kitty. It has 14,794 active participants and 15,925 retirees.
The fund, which covers Teamsters in most of New York state (but not New York City), has good benefits. For example, UPS workers can retire with 30-and-out with $5,500 per month. This is nearly double the amount paid by the UPS company plan, which covers 25 states in the south and central regions.
Effective January 1, 25- and 30-and-out benefits at any age will end, as part of the fund’s “rehabilitation plan” to start to get it back to full funding. The rehabilitation plan’s summary has five options (A through E), which each require increased employer contributions bargained in contracts. The five options increase the age for unreduced 30-and-out to 55, 57, 60, 62 or 65. In addition to increasing the age for unreduced 30-year benefits, the rehabilitation plan cuts the annual pension accrual, the amount that pensions improve each year.
Option E, the most generous pension option, protects 30-year retirement at age 55, but is also the most costly option. The first year (2011), it requires a 6.5 percent increase in employer contribution, but then requires a whopping 11.5 percent increase for each of the next three years. This would be over $1 per hour each year for Teamsters in the top benefit levels, and will almost certainly cause diversion of wage money.
UPS Teamsters are already considering the possibility of diverting future wage increases to cover the pension contributions, as they await more detailed information.
The fund and the local unions are holding educational meetings across the state to inform members of the situation and the options faced by each bargaining unit. There could be votes by members in some bargaining units later this year on various options.