June 20, 2008: Right after the Pension Protection Act was passed in 2006, the New York Times warned “the new Pension Protection Act will do little to protect most Americans.”
The main goal of the Pension Protection Act is to raise each fund’s funding level, the amount of money they have on hand compared to the amount of benefits they expect to pay out.
The worthy goal of better funding was taken advantage of to put stringent new restrictions on funds—and to make it easier to cut members’ benefits.
Under the law, funds that fall in the Yellow Zone (less than 80 percent funded) or the Red Zone (less than 65 percent funded, as well as a poor credit balance) have to develop a rehabilitation plan to get above 80 percent funding.
Funds can raise their funding level by increasing employer contributions or by cutting members’ benefits. In extreme cases, funds in the Red Zone can even cut benefits that members (but not retirees) have already earned—money trustees could not touch before the new law.
Even when funds are healthy, the new law makes it less likely that they will improve benefits. Raising benefits lowers the funding level—something fund trustees are less likely to do with the threat of slipping into the Red Zone.
Coalition with Employers
The PPA got its start in 2005 when UPS and the Hoffa administration teamed up to lobby for new pension legislation.
They joined the Multiemployer Pension Protection Coalition, which included other unions and major Teamster employers like Yellow Roadway.
UPS had been gunning for years to get out of Teamster plans—and the new law aimed to get rid of the anti-cutback provision in ERISA, the Employment Retirement Income Security Act.
The IBT Legislative Director complained that, “Trustees are limited by ERISA and can only affect [cut] future accruals.” The coalition wanted to get rid of the anti-cutback law so that funds could cut benefits members had already earned, even retiree pensions!
UPS was happy to go along. In 2004, they donated $10,000 the campaign of Ohio Republican representative John Boehner. In June 2005, Boehner introduced the Pension Protection Act.
Members Step In
“It wasn’t right to pass a law that could take away what you worked all your life to earn,” said Tommy Burke, a retired feeder driver in North Carolina Local 391.
“It was up to members to defend the anti-cutback part of ERISA,” Burke explained. “TDU was instrumental in getting members organized nationwide.”
Members organized three trips to lobby their representatives and senators, and they worked overtime to get members involved, too.
With members lobbying hard to protect their pensions, Hoffa switched his position in December 2005, and came out against letting funds cut accrued benefits.
“It was inspiring to go to Washington with so many members and retirees. But the people we met with said they only heard from Hoffa when he was pushing the original version of the bill,” said Walter Taylor, a commercial mover in New York Local 814.
“It was a missed opportunity—our International Union should have filled Congress with members telling our representatives not to take away what we had already earned.”
What We Accomplished
Without the backing of our union, members were not able to stop the Red Zone amendment to the Pension Protection Act. In August 2006, the new law passed Congress, and President Bush signed it into law.
But Teamster members did win some protections, thanks to their hard work. Members defeated a section of the bill that would have let funds cut benefits for retirees.
And Teamster members and TDU also successfully lobbied to get greater access to information from their funds, including actuarial valuations and financial reports.
A Corporate Attack
It’s no secret that UPS and other corporations want to eliminate the pension plans that Teamster members worked decades to build and improve. The Pension Protection Act is part of that plan.
The long-term effect of the Pension Protection Act is to make multi-employer funds less attractive to members.
“What it really does is reinforce the trend of the last few years to put the burden of retirement savings on the individuals and wean them off the employers,” accountant Avery E. Neumark told the New York Times shortly after the law was passed.
Under the new law even healthy funds will find it harder to make improvements.
Protecting Our Benefits
Thanks to the members who lobbied against the new law, Teamsters have new tools to get informed and hold our plans accountable.
“Our union won improvements to our pensions through the 1990s, and it all started with just a few members,” said Tommy Burke. “We can do it again. It starts by getting members informed and organized.”
Using the new language in the law, TDU has already helped members request an unprecedented amount of information that was previously unavailable.
“Our Local 814 fund is now in the Yellow Zone,” said Walter Taylor. “We’re using the new information we’re getting to watch our fund. We’re going to hold our trustees accountable and we expect them to vote on our side.”
New York Local 804 is a good example of what members can do. After the accrual was cut there in 2006, members got organized and reversed the cuts last year.
Now members are getting organized in other locals to watchdog their funds, reverse cuts, and win improvements. We can protect our benefits and turn the tide on the corporate attack on our pensions when we’re organized. Want to find out more? Contact Teamsters for a Democratic Union to find out how you can help protect your pension.
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