Central States, Southeast and Southwest Areas Pension plan’s propose to cut retired workers benefits. If you are not directly involved with this union, you may be inclined to say, so what? However, besides the human suffering this will cause, there are lessons here.
Multi-employer Union plans pay $27 per participant for federal pension insurance (private employer plans pay $64 per participant) to protect a portion of earned pensions.
Absent reform of union pensions and the PBGC’s multiemployer program, current workers and retirees could be left with mere pennies on the dollar in promised pension benefits, or taxpayers could be forced to bail out the often reckless actions of union pension trustees.
Many union pensions have taken advantage of favored rules and regulations, engaging in reckless actions and assumptions that contributed to financial shortfalls and insolvencies.
In other words, if Congress does not act, you may foot the bill. Read the paragraph I have highlighted below. That is a good description of a similar problem facing Social Security; there is no longer enough tax revenue to pay the benefits to people who are retired.
In the final analysis, both these problems have as their root cause inaction by Congress or poor or poorly enforced regulation. Remember that the next time a politician bemoans the plight of the middle-class.
As the deadline for submitting comments nears, close to 2,000 participants in one of the nation’s biggest multi-employer pension plans are voicing their concerns about the financially troubled Central States, Southeast and Southwest Areas Pension plan’s proposal to cut benefits.
“I worked at United Parcel Service for 30 years. I gave them 100% every day. Now that I’m retired, I expect 100% of the pension that I earned and was promised me under our contract for life. I was told I would have to take a 50% cut. A cut of this size will destroy our quality of life,” plan member Wade Blackwelder of Bessemer City, North Carolina, wrote to the U.S. Treasury Department.
His comment is among the nearly 2,000 letters that participants have sent to the federal agency that has the final say on the plan’s proposal to cut benefits to prevent its insolvency. Earlier, the financially distressed plan, which has more than 400,000 participants, reported that it had $35 billion in liabilities and just $17.8 billion in assets at the end of 2014.
From Pension Rights Center
A variety of factors led to Central States Pension Fund’s dire underfunding problem:
- The deregulation of the trucking industry in the 1980s resulted in the loss of more than 10,000 employers that used to contribute to the Fund. The challenges in our industry continue today, and we’ve experienced the loss of many employers even in the past five years.
- Many employers went bankrupt or out of business without making their full contributions to the Fund. About half of all benefit payments currently go to “orphaned” retirees, whose employers never fully paid the Fund to cover their pensions.
- Since 2008, Allied Systems, Hostess Brands and Leaseway/E&L Transport went bankrupt, leaving the Fund short $1.7 billion. Recently, employers such as YRCW have substantially scaled back their contributions and many other employers have withdrawn completely.
- Baby Boomers are retiring in record numbers and the union workforce has been steadily declining for years. As a result, for every $3.46 that the Fund pays out in pension benefits, only $1 is collected from employers, resulting in an annual shortfall of $2 billion. That math simply doesn’t work.
- Additionally, two major recessions since 2000 torpedoed the U.S. economy, driving down the Fund’s investment assets and pushing many contributing employers out of business or into bankruptcy.
If action is not taken soon to address this funding problem, by 2026, Central States Pension Fund will run out of money and be unable to pay any benefits to current and future retirees.