Nearly 1 million workers retired or still working are covered by pension plans in imminent danger of insolvency, the Pension Rights Center reported Feb. 28.
Based on a law Congress passed in December 2014 — the Multiemployer Pension Reform Act — pension funds deemed to be in “critical and declining status” can apply to the Treasury Department for permission to slash retirees’ payments. And growing numbers of fund managers are doing just that. According to the center, 68 private-sector union pension funds fit that description today.
In February pensions for some 4,000 retired members of Teamsters Local 707 in New York were halted as officials announced the fund was insolvent. The same circumstances may soon be facing another 35,000 workers covered by the New York State Teamsters Pension Fund in the Albany region and 407,000 in the Midwest and South covered by the Central States Pension Fund.
“I had a union job for 30 years,” Local 707 retiree Tim Chmil, 71, told the New York Daily News. “We had collectively bargained contracts that promised us a pension. I paid into it with every paycheck. Everyone told us, ‘Don’t worry, you have a union job, your pension is guaranteed.’ Well, so much for that.”
Money managers seeking to turn a profit gambled away these funds speculating on stocks, bonds, hedge funds and other financial schemes. When the financial markets crashed in 2008, 40 percent of the Teamsters’ Central States Pension Plan’s investments went up in smoke.
And things have continued to get worse. As of last August, pensions run by companies in the S&P 1500 index were underfunded by $562 billion — up $160 billion in just seven months, reported the Financial Times.
The crisis is rooted in how these pension funds were set up — on a company-by-company basis, or in the case of multiemployer plans, industry by industry. Instead of basing pensions on the pipe-dream of the perpetual profitability of the bosses, retirement for all working people should be government-financed at union scale.
In February 2016 monthly pensions of Local 707 members were slashed by more than 30 percent in hopes of keeping the fund solvent. But a year later the fund went broke and retirees received even lower amounts from the Pension Benefit Guaranty Corp., a federal agency that insures union pension funds. Average monthly take home pay after taxes was only $570, agency officials said, with many Teamster retirees getting only one-third of what they were promised at retirement.
But the government’s Pension Benefit Guaranty Corp. itself will soon go belly up. “We’re projected to run out of money in eight to 10 years,” Tom Reader, the group’s director, told the media.
In Cleveland, Iron Workers Local 17 approved benefit cuts ranging from 20 to 60 percent for retirees at the end of January, in hopes of extending the lifespan of their “declining status” fund.
Joe Finley, 63, who regularly worked 12 hours a day and took weekend shifts to earn more credits for his pension, told the Washington Post that his monthly check is being reduced to $1,900 from about $3,500 — a gap equal to his monthly mortgage payment. “You play by all the rules,” he said, “and then they pull the rug out from under you.”
Last year several thousand Teamsters rallied at the U.S. Capitol to protest cuts up to 50 percent in retiree benefits proposed by Central States Pension Fund administrators. The action helped hold off the cuts. But the Treasury Department said it didn’t see anything that could prevent the fund’s collapse.
Pension funds for federal, state and city government workers are also in deep crisis, unfunded by more than $5 trillion. South Carolina alone has a projected shortfall of $24 billion, more than triple the state’s annual budget.
In Puerto Rico, a U.S. colony, the government Employee Retirement System, which owes $45 billion to nearly 100,000 retirees, will run out of cash this year. In a desperate effort to keep things afloat, managers had wrapped the fund’s assets up as bonds and sold them on the market. Today they’re close to worthless.
On the Picket Line
Wash. farmworkers join union, protest conditions
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