407,000
Workers Stunned As Pension Fund Proposes 60% Cuts, Treasury Says "Not
Enough", Submitted by Tyler Durden, 5/21/16, Submitted by Michael Shedlock via MishTalk.com,
407,000 private sector workers are about to lose
most of their pensions. I first wrote about this on April 21, in One of Nation’s Largest Pension Funds (Truckers) Will Reduce Benefits or Go
Broke by 2025.
The Central States Pension Fund, which handles the retirement benefits for current and former Teamster union
truck drivers across various states applied for reductions under that
law.
Currently the plan pays out $3.46 in pension
benefits for every $1 it receives from employers. That’s a drain of $2 billion annually.
The plan filed for 60% cuts in pensions. The
Treasury Department has the final say. The verdict came in today: “cuts not
deep enough”.
The Central States Pension Fund has no new plan
to avoid insolvency, fund director Thomas Nyhan said this week. Without
government funding, the fund will run out of money in 10 years, he said.
At that time, pension
benefits for about 407,000 people could be reduced to “virtually nothing,” he
told workers and retirees in a letter sent Friday.
In a last-ditch effort, the Central States
Pension Plan sought government approval to partially reduce the pensions of
115,000 retirees and the future benefits for 155,000 current workers. The
proposed cuts were steep, as much as 60% for some, but it wasn’t enough.
Earlier this month, the Treasury Department rejected the plan because it found
that it would not actually head off insolvency.
The fund could submit
a new plan, but decided this week that there’s no other way to successfully
save the fund and comply with the law. The cuts needed would be too severe.
Normally, when a multi-employer fund like
Central States runs out of money, a government insurance fund called the
Pension Benefit Guaranty Corporation (PBGC) kicks in so that retirees still
receive some kind of benefit.
But that’s not a great solution in this case.
For one thing, the amount is smaller than what pensioners would have received
under the Central States reduction plan, and is based on the number of years a
retiree worked. A retiree would receive
a maximum $35.75 a month for each year worked, according to the fund’s website.
(That amounts to $1,072.50 a month for retiree who worked 30 years.)
But there’s yet another problem. The PBGC itself
is underfunded and isn’t expected to be able to cover all the retirees in the
Central States Pension Fund.
About the
Fund
Message from the Board of
Trustees
Central States Pension Fund is one
of the nation’s largest multiemployer Taft-Hartley defined benefit pension plans.
With more than 400,000 participants across the country, Central States Pension
Fund is jointly administered by an eight-member Board of Trustees consisting of
four Labor Trustees and four Employer Trustees.
Established in 1955 to provide
pension benefits to Teamsters in the trucking industry, today, Central States
Pension Fund has more than 1,500 contributing employers representing
60,000 participants in a variety of industries, including car-haul, tank-haul,
pipeline, warehouse, construction, clerical, food processing, dairy and
trucking.
At year-end 2014, Central States
Pension Fund had assets of $17.8 billion with a liability for promised benefits
of $35 billion. The Fund pays out over $2.8 billion in pension benefits per
year. To date, nearly $62 billion in retirement benefits have been paid by
Central States Pension Fund to Teamster retirees and their families.
Comments
The
Teamsters had always required “host corporations” to contribute to the Central
States Pension Fund, but never bothered to control benefit levels to fit
revenues. Unions always negotiate their way into oblivion.
Defined
Benefit Pension Plans have been terminated by the vast majority of corporations
that once sponsored them. They remain in
government, utilities and a handful of suicidal dinosaurs like Boeing and
others. We began terminating these plans
in the 1980s and 1990s because they were destined to fail. We allowed employees to transfer their
pension fund balances to 401K Plans and some of us set up separate Age-Weighted
Defined Contribution plans to subsidize older employees. We knew that the PBGC couldn’t handle these
defaults. All “defined benefit plans”
including Social Security were offered in the 1930s based on the supposition
that beneficiaries would die at age 65. But now life expectancy is age 78 and
beyond.
If Social
Security had been structured as a portable private investment account instead
of a method to dump cash into a federal government “slush fund”, we would all
have tripled our deposits and we would own them. If we had contributed $500,000 over 40 years,
we would have had $1.5 million.
Norb
Leahy, Dunwoody Tea Party Leader
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