Teamsters retirees await word on deep pension cuts

May 4, 2016 in News by RBN

via: Detroit Free Press

More than 13,000 Teamsters retirees in Michigan face cuts to their pensions as early as July. Some pension checks could be cut in half for retired truck drivers and others.

Thousands of Teamsters retirees anxiously await a decision this week on whether the U.S. Treasury will allow their pension checks to be cut by half or more as soon as July.

The troubled Teamsters Central States Pension Fund — which has more than $16 billion in net assets — proposed a rescue plan in the fall of 2015 that’s designed to save the fund from financial fallout. But the outlined strategy cuts deep into existing pension checks for retired Teamsters truck drivers and others.

Some retirees have said that under the plan, their pension checks could drop to about $1,200 a month from more than $2,700 now.

Kenneth Feinberg, who has duties as “special master” for the Treasury, is required to review the plan and decide by May 7 if the Treasury accepts the plan, asks for changes, or reject it outright.

The cuts would be the first under the Kline-Miller Multiemployer Pension Reform Act of 2014, which is meant to address financially troubled plans.

The new law is highly complex. The proposed cuts could set the precedent for other cuts at big pension plans. Big name players, such as Atlanta-based United Parcel Service (UPS), have much at stake.

Steve Gaut, a UPS spokesperson, said the company filed comments with Treasury, suggesting the agency reject the plan. UPS could be on the hook for up to $3.8 billion in supplemental retiree benefits, if the Central States Plan is approved.

In case of approval, UPS intends to take legal action, claiming the proposed cuts do not not follow an “ordering rule” set out in the Kline-MIller law. As a result, UPS employees and retirees would take far more drastic cuts than retirees who worked elsewhere, Gaut said.

UPS paid $6.1 billion to the Central States fund in 2008 to withdraw and establish its own single-employer plan. About 8,700 UPS employees who retired prior to Jan. 1, 2008, would only be covered by the Central States plan.

But about 48,000 employees and people who retired in 2008 or afterwards could be covered by what’s known as a “backstop” that was part of a collective bargaining agreement with the Teamsters in 2007. Under that agreement, UPS could end up paying $3.2 billion to $3.8 billion before taxes in benefit payments, if Treasury approves the Central States proposal as it is now. UPS disclosed the amount in a call to investors last week.

The backstop agreement stated that in the event that Central States ever lawfully reduced benefits to those retiring in 2008 or after, UPS would provide a supplemental retiree benefit, Gaut said in a telephone interview Tuesday.

Teamsters retirees across the country — including those who worked for trucking firms that went out of business — expressed great frustration at the process and the drastic cuts.

The Central States fund said it covers 24,205 current retirees in Michigan — and 13,179 now face benefit reductions. Reduced pension benefits also would hit about 18,757 plan participants in Michigan who are not yet retired.

Nationwide, the proposed cuts by Central States trustees would affect about 270,000 people.

Feinberg has held town halls in Detroit, Kansas City, Milwaukee, Indianapolis and elsewhere to let thousands of retirees have an opportunity to speak out publicly about how the cuts will impact their households.

Retirees have complained to Feinberg, he says, that Congress passed the pension-related law after “very little public input.”

“I have been committed to making sure they feel the opposite is true of our review of the Central States Pension Plan’s application,” Feinberg said in a March 14 statement.

He noted that he has received more than 2,500 comments as part of the application review. He also has held a weekly conference call with retirees to listen to comments and answer questions.

“Hundreds of retirees have dialed into these calls every week,” Feinberg said.

The act requires the Treasury Department to approve an application if a pension fund’s potential claims would cost the Pension Benefit Guaranty Corp. $1 billion or more.

Central States has said it would run out of money in about a decade, reflecting the deregulation of the trucking industry, loss of membership and jobs, and a group of employers that went out of business or filed for bankruptcy since 2008.

“For every $3.46 that the fund currently pays out in pension benefits, only $1 is collected from contributing employers, which results in a $2 billion annual shortfall,” Central States said in a statement.

Joellen Leavelle, communications and outreach director for the Pension Rights Center, an advocacy group in Washington, D.C., said Teamsters retirees have been phoning the center in the last few days in anticipation of the announcement.

“We’re pretty much in a waiting game,” Leavelle said.

The Pension Rights Center has spoken out against the deep cuts and offers a resource page for Teamsters retirees.

“The process used by the Central States Pension Fund to distribute benefit cuts among participants is flawed and results in an inequitable distribution of benefits cuts,” according to the comments submitted to Treasury by the Pension Rights Center.

The Pension Rights Center maintains that dozens of other multi-employer pension plans that areeligible to make retiree pension cuts under the law are waiting for the Treasury Department’s decision on the Teamsters before deciding whether to move forward with their own applications to cut retiree pensions.

Other pension plans that could make such applications to Treasury regarding proposed cuts cover retirees who had worked as cement masons, bricklayers, bakery workers, electrical workers, machinists, iron workers, and others, according to the Pension Rights Center.