As Pamela Gaskill walked through San Francisco's blighted Tenderloin district one day in 2000, she had an epiphany.
Observing impoverished residents of single room occupany hotels, she realized she had no financial resources for her own retirement. Gaskill, a slendor, weathered woman who has driven trucks since the 1970's thought, "This is what happens if you don't have a pension. People end up in a tiny little room with nothing."
Click here to read more.
If you’re a participant in a pension plan, you’ve probably received or will soon receive what’s called the plan’s “annual funding notice.”
The notice, which employers are required to send each year to all plan participants, tells you:
How well your pension is funded.
The value of your pension plan’s assets and liabilities.
The total assets and liabilities of the plan for the current year and the two preceding years.
The key question we all want answered is: Does the pension plan have enough money to pay its participants? Specifically, will it be able to pay me my benefits when I retire?
The annual funding notice is supposed to give an idea of the plan’s financial health, but it’s not that easy to understand.
“The intent was to provide meaningful information, but it’s a challenge to interpret,” said Bruce Cadenhead, chief actuary for the U.S. retirement, risk and finance business of Mercer, a consulting firm. “You’ve got two sets of numbers, and they look very different.”
Before I get into those two sets of numbers, it’s important to understand pension plans and how interest rates affect a fund’s obligations.
“A pension plan is a series of payments that companies are going to make in the future — as many as 50, 60, 70 years out into the future,” said Donald Fuerst, senior pension fellow at the American Academy of Actuaries.
To ensure that the plans have enough money to pay those future benefits, they must comply with minimum funding rules.
If the value of the plan’s assets is lower than its funding target, employers must contribute to the plan to cover the funding shortfall.
Contribution amounts are based on complicated formulas that take into account current and projected interest rates.
Low interest rates mean that employers have to contribute more money than expected into their pension plans. When rates are low, companies will earn less interest and so need to contribute more money today to cover future pension benefits.
Conversely, when rates are high, employers are able to earn more interest and need to contribute less money to the pension plan.
This is why interest rates are key to interpreting the two figures that Cadenhead referred to, both of which are found in the “MAP-21 Information Table” portion of the pension funding notice.
MAP-21 stands for the Moving Ahead for Progress in the 21st Century Act, which became law in 2012.
The law is primarily known for authorizing funding for the nation’s highways and for extending low interest rates for federal student loans. But it also included a package of pension provisions.
The law changed the required interest rate that companies use to calculate their pension liabilities to one based on a 25-year average.
Since the 25-year average rate is higher than today’s market rate, the end result is that employers are required to contribute less money to their pension plans.
So in the MAP-21 information table, you have two figures: one that calculates how well your plan is funded using the MAP-21 interest rates, and one calculated without.
Which figure gives a more accurate picture of a pension’s financial health?
The one calculated without the MAP-21 rate, Fuerst said.
“Look at those for the three years [the current year plus the two preceding]. They’re based on market rates, and that gives you some meaningful insight into how the funded status of the plan is changing over those three years,” he said.
“You hope that it’s improving. A constantly decreasing funded ratio is a bad sign.”
Beyond those figures, a critical question to ask is how well your employer is doing overall.
“Is your company in financial trouble in other ways?” said Nancy Hwa, spokeswoman for the Pension Rights Center, a nonprofit consumer organization. “They’re not necessarily always a parallel relationship because there are companies that have been in severe financial trouble but have well-funded pension plans because they made the contributions and invested well.”
On the other hand, “just because your company is doing well doesn’t necessarily mean that your plan is doing well.”
May 2, 2014: Surrounded by corporate lobbyists who support pension cuts, the President of the IAM denounced efforts to change pension law and reduce pensions. While the IAM speaks out, Hoffa is MIA.
Corporate lobbyists and some pension plans, including the Central States Pension Fund, are pushing to change federal law to allow “deeply troubled” plans, to drastically slash benefits.
But they’re catching heat from union leaders and the AARP.
“Troubled plans deserve at least the same support and protection that Congress gave to the Wall Street bankers who caused the problems in the first place,” Tom Buffenbarger, President of the International Association of Machinists (IAM) told a crowd of lobbyists at a forum on the issue.
The AARP’s Director of Legislative and Government Affairs spoke out at the forum too.
Hoffa did not even attend the forum. The entire Hoffa-Hall administration has been silent on the issue since last fall when Hoffa reversed the union’s official position and sent a letter to Congress objecting to any cuts to retirees’ pension benefits.
Less than 24 hours after the letter was issued, Central States Pension Fund Director Thomas Nyhan testified as the lead witness in a Congressional Hearing in favor of changing the law to allow pension plans to cut retirees’ benefits.
So which side is the IBT really on?
Teamsters for a Democratic Union (TDU) has joined forces with the Pension Rights Center, the AARP and other unions to oppose this legislation and supporter alternatives that would strengthen union pension funds, including increasing funding to the Pension Benefit Guaranty Corporation, which insures troubled pension plans, and allowing alliances and mergers of poorly-funded and healthy plans.
We’re bringing members and retirees together to protect our benefits. Teamsters have packed TDU Pension Meetings in Ohio and Minnesota to get updated by pension experts and build a grassroots network to protect our pensions.
To learn more and to get involved in organizing to defend the pension in your area, contact TDU at 313-842-2600 or click here for more information.
Click here to read an IAM press release.
Mike Walden, a retired YRC Teamster from Akron Local 24, reports that the Northeast Ohio Committee to Protect Pensions has held three organizing meetings in the follow up to their well attended March meeting on pension issues. Committee members have organized a phone tree and email list to get the word out to other active and retired members.
The committee has made plans to lease a bus for a trip to Washington, D.C. for the next round of Congressional hearings. The group has met with representatives of Senator Sherrod Brown.
The Northeast Ohio Committee to Protect Pensions can be contacted through TDU. These committed Teamsters can give you pointers on how to organize to defend our pensions in your area.
April 15, 2014: The Central States Pension third quarter 2013 financial report shows that assets increased to $18.2 billion, due to the run-up of the stock market last year.
The fund made 12.2% return on investment for the first nine months of 2013, which explains the growth in assets. The report indicates that the fund has 63,000 active participants and 210,000 retirees.
This information is contained in the Financial and Analytical Report and the Independent Special Counsel Report for the 3rd quarter of 2013. No year-end report is yet available. TDU will make it available to members as soon as it issues.
The report reveals that the Teamster Union’s appointed Trustees to the Central States Board are supporting legislation to allow the fund to cut the pensions of existing retirees and Teamsters who have earned their pensions (see pgs 4-5 of the Independent Special Counsel Report).
We call upon the union trustees, who are 50% of the board, to reverse that stand and defend our pensions. The pension fund should be in the forefront of mobilizing the power of our union to defend pensions, not waving the white flag.
Teamsters for a Democratic Union, AARP, the Pension Rights Center, various unions, and also the International Union are against this proposed legislation. We are working to create positive alternatives, before resorting to slashing the pensions of retirees. Our goal is to kill this legislation and work with allies for better alternatives, and to build a movement to defend pensions.
The Teamsters Union could put thousands of retirees and Teamsters on the streets in Washington, and broaden the issues to defend pensions in this country that are under corporate attack.
If you want to learn more or join the movement to defend pensions, click here.
The Financial and Analytical Report also details the finances of the Central States Health and Welfare Fund, which is in healthy shape and operating in the black. It now has 20 months of reserves on hand. It has 82,500 active participants and 8,400 retirees.
The pensions of millions of Americans are being threatened because of trouble in a part of the retirement world long considered so safe that no one gave it a second thought.
The pensions belong to people in multiemployer plans — big pooled investment funds with many sponsoring companies and a union. Multiemployer pensions are not only backed by federal insurance, but they also were thought to be even more secure than single-company pensions because when one company in a multiemployer pool failed, the others were required to pick up its “orphaned” retirees.
Today, however, the aging of the work force, the decline of unions, deregulation and two big stock crashes have taken a grievous toll on multiemployer pensions, which cover 10 million Americans. Dozens of multiemployer plans have already failed, and some giant ones are teetering — including, notably, the Teamsters’ Central States pension plan, with more than 400,000 members.
In February, the Congressional Budget Office projected that the federal multiemployer insurer would run out of money in seven years, which would leave retirees in failed plans with nothing.
“Unless Congress acts — and acts very soon — many plans will fail, more than one million people will lose their pensions, and thousands of small businesses will be handed bills they can’t pay,” said Joshua Gotbaum, executive director of the Pension Benefit Guaranty Corporation, the federal insurer that pays benefits to people whose company pension plans fail.
“If Congress allows the P.B.G.C. to get the money and the authority it needs to do its job, then these plans can be preserved,” he added. “If not, the P.B.G.C. will run out of money, too, and multiemployer pensioners will get virtually nothing. This is not something that can wait a few years. If people kick the can down the road, they’ll find it went off a cliff.”
So far, efforts to keep multiemployer plans from toppling, and taking the federal insurance program down with them, are giving rise to something that was supposed to have been outlawed 40 years ago: cuts in benefits that workers have already earned.
For example, after Carol Cascio’s husband died of a heart attack at 52, the pension office of his union, the United Food and Commercial Workers, told her his 33 years as a supermarket meat manager had earned her a widow’s pension of $402.31 a month for life. It would start in three years, on what would have been his 55th birthday.
She waited, but just before her first payment should have come, she received a letter instead saying that the pension plan had been “terminated by mass withdrawal” and that she would receive nothing.
“Now I’m in a real pickle,” said Ms. Cascio, 62, a stay-at-home mother in Brooklyn who had already borrowed against the promised pension to pay for her daughter’s education. “I have no one. I have a mortgage on my house. I have my daughter. How do you do this to someone?”
“Only a few years ago, it would have been inconceivable that anyone would have their benefits reduced,” said Karen W. Ferguson, director of the Pension Rights Center, a watchdog group in Washington. “The law hasn’t caught up with what’s happening here.”
The law she was referring to is the Employee Retirement Income Security Act, or Erisa, the landmark federal employee-benefits law enacted in 1974. It contains a well-established provision known as the anticutback rule, which holds that companies can freeze their pension plans at will, stopping their workers from building up any additional benefits, but they cannot renege on benefits their workers have earned through work already performed.
In the multiemployer world, the anticutback rule was amended in 2006, permitting the weakest plans to stop paying certain benefits to people who had not yet retired, including disability stipends, lump-sum distributions, recent pension increases, death benefits and early retirement benefits. The goal was to help those plans conserve their money while they try to rehabilitate themselves. Experts say the measures have helped, but some multiemployer plans may still fail if they cannot cut payments to retirees as well.
Ms. Cascio’s pension turned out to be in a category subject to cutting: pensions for widows whose husbands died before retirement. They must be cut if their plans have fallen to “critical status,” defined as having less than 65 cents for every dollar of benefits they owe. That is supposed to save money so the plan can keep on paying other retirees their “nonforfeitable benefits” while it negotiates bigger contributions from participating companies, or tries to attract new companies into the pool.
That could not happen in Ms. Cascio’s case. A few months before her husband died, all the supermarkets in his plan decided to disband the pool. He told her not to worry. Each company was making a final contribution to what is known as a “wasting trust,” which would have enough money to pay everyone’s pensions for the rest of their lives. Then the stock market crashed in 2008. Much of the money in the pool melted away, and there was no one left to turn to for more.
Her house, in Gerritsen Beach, was flooded by Hurricane Sandy, and she scraped along for eight weeks that winter without heat, electricity or hot water. Some days, she sat for hours on a city bus, just to keep warm.
Congress made the multiemployer insurance much less comprehensive than the single-employer version because multiemployer plans were supposedly so safe they did not need much insurance.
The P.B.G.C. is supposed to be self-supporting, financing its operations with premiums paid by companies rather than tax dollars. Its single-employer program has the power to take over company pension funds before they run out of money so the assets can be used to help defray the costs. But the multiemployer program must wait until a failing plan’s investments are exhausted, so it gets nothing but bills. It now has premiums of about $110 million a year to work with. All it would take is the failure of one big plan to wipe out the whole program.
The Central States plan, for example, pays $2.8 billion a year to retirees but takes in only about $700 million from employers. It must rely on investment returns to keep from exhausting its assets, but Thomas C. Nyhan, director of the pension plan, said it would take returns of at least 12 percent a year, every year, to come out even, and that is not realistic. Its modeling suggests it will run out of money in 10 to 15 years — most likely around 2026, if nothing is done.
Labor officials, business groups, members of Congress and others have been quietly discussing a proposal to extend multiemployer plans’ life spans by letting them roll back even retirees’ pensions. Such plans are often found in mature sectors, in which retirees outnumber active workers and cuts affecting only the existing workers do not produce enough of a saving as a result. And once a multiemployer plan gets to that stage, officials have discovered, new companies will not join the pool, because they do not want to be stuck paying for extinct companies’ orphaned retirees.
“Arithmetic is going to trump everything here,” said Mr. Nyhan of the Central States plan, which has about five retirees for every current driver.
The Central States plan achieved lasting notoriety in the 1960s and 1970s, when it was run as a virtual bank for organized crime; even today, it still operates under federal court supervision. But today its problems are radically different. First, it lost so much money in the dot-com rout that its supervising judge gave permission to start reducing some benefits as early as 2003. Then, in 2007, it lost its biggest company, United Parcel Service, which paid $6.1 billion to leave the pool. The payment was supposed to cover U.P.S.’s share of the plan’s total shortfall forever, but the shortfall grew by billions of dollars in 2008, when the market crashed and U.P.S. was no longer around to help.
That left a much bigger shortfall to be divided among a smaller pool of employers. George Kerver found that out the hard way. He is president of Fastdecks, a company near Detroit that makes big concrete beams and pillars for construction sites. For years, Fastdecks had one part-time Teamster on the payroll, earning a small pension from Central States. But business slowed to a creep, and in 2011 the lone Teamster resigned, saying he needed a job with more hours.
By law, that meant Fastdecks had to pay a withdrawal liability, just as U.P.S. did. But by 2011 the math was worse. Fastdecks received a bill for $465,774, its pro rata share of the fund’s enlarged $22 billion shortfall.
“We didn’t think we should have to pay it, because we weren’t planning on leaving the union,” Mr. Kerver said, noting that he started as a laborer at Fastdecks 37 years ago and still employs union carpenters and laborers. His lawyers told him if he did not pay, the bill would snowball by accruing penalties and interest.
“What are we supposed to do?” he said. “That was our retirement. Now we owe everything to the Teamster fund.” Bankruptcy was not an option, so he arranged a 20-year payment plan with Central States.
“They lost a union company,” he said, “because we’re never going to have another Teamster again.”
April 8, 2014: The Northeast Ohio Committee to Protect Pensions (NOCPP) is organizing to defend retirement security.
The committee was formed at a pension meeting on March 8 in Richfield, Ohio, and consists of retired and active Teamsters working together to protect our Teamster pensions.
“Our first organizing meeting was very focused, commented Mike Walden, a YRC retiree from Akron Local 24. “There were a few TDU guys and other retired Teamsters who volunteered at our Richfield meeting. We are all working together because we know how important it is to protect our pensions.” Walden arranged the meeting at Post 102 of the Army-Navy Club in Akron.
The committee set up a phone tree and email list to inform other Teamsters. Assignments were made and taken to contact Teamster retiree clubs, Teamster locals in the area, and Congressional offices. The plan is to send delegations to various meetings and offices to inform and advocate around the issue. The committee also decided to investigate the cost of securing rental vans or buses for a trip to Washington to lobby and speak out on pension rights.
The committee discussed a number of goals: educating active and retired Teamsters on the pension issues; building unity among all Teamsters to defend our pensions; make sure that Congress understands the impact of potential pension cuts on the economy; engage the media on this issue; work with the AARP and veteran groups; reach out to other unions and members who are also under attack; and continue to research and explore other alternatives and solutions to pension cuts.
If you are interested in getting involved in the Northeast Ohio committee or would like to organize a meeting or committee in your local or area, contact TDU.
April 2, 2014: Local 745 members held a TDU meeting in El Paso, Texas to talk about enforcing their contracts, the future of the union and rebuilding Teamster Power.
Teamsters in El Paso are members of Local 745 in Dallas which is 635 miles away!
That kind of distance takes the “local” right out of local union. So members decided to cook up some Teamster Unity of their own and organized a TDU meeting in El Paso.
The meeting was organized by Teamsters at UPS and UPS Freight. Different generations of Teamsters came together with the common goal of building a stronger union for the future.
Members shared strategies for dealing with contract violations, including seniority,
supervisors working, excessive overtime and production harassment.
How to stop concessions at UPS and UPS Freight was another hot topic.
“When we spoke up at the contract vote here in El Paso, they told us, ‘If you don’t like it, get out of the union,’” one UPS Freight Teamster said. “No way are we getting out of the Union. We’re getting even more involved.”
Rebuilding Teamster Power by informing and involving members. That’s what TDU is all about.
April 2, 2014: Legislation is expected to be introduced soon that would allow the Teamster Central States Plan and other “deeply troubled” pension plans to slash pensions.
This makes the fight-back to stop this legislation and push for more positive alternatives all the more urgent.
As TDU has reported over the past year, the National Coordinating Committee for Multi-Employer Plans (NCCMP) has been lobbying both the House and Senate for a bill that would revoke the anti-cutback language in pension law.
The bill is currently being drafted by Republicans on the House Education and Workforce Committee. Because of the Congressional elections this fall, it will either move forward soon or likely be delayed until next year.
The NCCMP includes employers like UPS and ABF, pension funds like the Central States, unions like the Teamsters, and other affiliates. The Central States Pension Fund has become the poster child for funds in “troubled status” and is the main focus for the proposed changes. Tom Nyhan, executive director of the Central States, testifying last October, called on Congress to allow Fund Trustees to be able to make cuts on pensions for those already retired as well as reductions in benefits for those Teamsters still working. Currently, pension law protects retirees and active participants from any cut in already accrued benefits.
Concerned Teamsters are organizing opposition to the proposed NCCMP changes.
In northeastern Ohio, a meeting of over 120 initiated a Pension Action Committee to spread the word in Akron Locals 24 and 348, Cleveland Locals 407 and 507, Canton Local 92 and Mansfield Local 40. In St. Paul, Minnesota a similar meeting of over 80 decided to continue the work initiated by the meeting organizing committee. They formed a group consisting of Teamsters from Locals 120, 638 and 1145 to make plans to visit retiree groups, local membership meetings and area congressional offices.
Bob McNattin, a Minnesota Local 120 retiree said, “We were made promises and are owed the same considerations and protections that Congress gave the bankers when they faced their meltdown in 2008. TARP money was found to save their skins. Now those same bankers can help Central States make good on the pensions we earned.”
TDU is in this battle along with the AARP, the Pension Rights Center, the International Association of Machinists, Steelworkers, and others—now including the Teamsters International. We all are calling for the continued protection of those already retired and have raised positive alternatives to slashing retiree benefits.
We will ally with all Americans who care about the future of pensions in this country, for private sector and public sector workers. It’s time for federal government to defend the
people who gave a lifetime of honest work and earned a pension, rather than Wall Street bankers.
If you are ready to organize in your area or want to learn more about the campaign to defend Teamster pensions, contact TDU.
April 2, 2014: Teamsters are getting active to defend pensions and oppose legislation which would allow retiree benefits to be slashed.
“We’ve formed a committee in the Cleveland area, and we’re going to make our voices heard,” said Alex Adams (speaking in the picture), retired past President of Local 407. “It starts with contacting Teamsters and retirees, who are worried about the future, and letting them know that something can be done if we get together.”
An initial small committee met and with the help of TDU held a March 8 meeting of 120 retired and active Teamsters, where the committee was expanded. The meeting was built by reaching out to retiree clubs, talking with the media, the internet and leafletting. Now the expanded committee is planning to:
- Continue to outreach to Teamsters and retirees
- Talk with every retiree club and local union in Northeast Ohio
- Set up meetings with Congressional Reps and Senators during the April recess
- Prepare to later send a delegation on a bus or van to Washington to lobby
Help Defend Our Pensions
Teamsters—retired and active—are organizing to defend our pensions and stop legislation that would cut accrued benefits and retirees’ pensions. TDU can help initiate a committee in your area or organize a meeting to inform other Teamsters and their spouses. Click here to contact us.