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Should union pensions be cut?

By Jennie L. Phipps · Bankrate.com
Friday, June 6, 2014
Posted: 4 pm ET

Congress is expected soon to consider the recommendations of a coalition of unions, pension administrators and employers supporting tough measures to save its pensions. The National Coordinating Committee on Multiemployer Plans, or NCCMP, offers several solutions to the problem of pension underfunding in its report, "Solutions not bailouts."

One of its solutions calls for drastic cuts to the benefits of current as well as future recipients.

"Find a better solution," says Karen Ferguson, director of the nonprofit Pension Rights Center. She calls the suggested cuts "draconian. ... They are saying to older people with no other resources -- many barely making it already -- 'We’re going to break the promise that you would have a secure lifetime income.' It's unconscionable."

Multiemployer pension plans require companies that employ union workers in a particular industry to contribute to the retirement plans at levels negotiated through union bargaining. When employees retire, they receive benefits from the pooled contributions. Many of the 1,510 active multiemployer old-fashioned, defined benefit pension plans covering about 10 million participants are in good shape. But some of them -- notably, some of the largest -- are deeply troubled. The Pension Rights Center estimates that 150 to 200 plans covering 1.5 million workers could run out of money in the next 20 years, according to information from the Pension Benefit Guaranty Corporation, or PBGC, the quasi-government organization that guarantees private pensions.

One pension fund facing eventual bankruptcy

The Teamsters' Central States Pension Fund is one of the largest multiemployer plans -- and one of the least solvent. The plan covers 212,000 retirees and about 65,000 current workers, and it reportedly has liabilities that are nearly double its assets. If nothing is done, Central States' Executive Director Tom Nyhan told Congress in 2010 that the fund will be bankrupt in "10 to 15 years," a retirement planning disaster.

One solution crafted by NCCMP would cut average current pensions by at least two-thirds, Ferguson says. Her organization has posted two online calculators, and she is urging union members and their families to plug in what they currently are receiving or expect in pension benefits and see what the proposal would do to that number. A second calculator shows what would happen if the PBGC took over. Note that the PBGC guarantees multiemployer pensions at a much lower level than it guarantees single-employer pension plans.

How retiree pensions may look after cutbacks

Monthly Annual
Typical Teamster pension $3,000.00 $36,000.00
Pension after NCCMP* cutbacks $983.13 $11,797.50
Pension if PBGC** takes over $893.75 $10,725.00

*NCCMP = National Coordinating Committee on Multiemployer Plans

**PBGC = Pension Benefits Guaranty Corporation

Source: Pension Rights Center. Calculations assume 25-year work history.

Ferguson's organization supports other changes to the plans to improve their financial stability, including thoroughly analyzing each plan to evaluate exactly how insolvent it is and what can be done to fix that plan specifically. She's in favor of allowing more mergers among plans to cut administrative costs, and also advocates getting rid of the "13th" bonus check, an extra check that retirees get at the end of a year if the pension fund performed better than expected. They date from the time when these plans were overfunded and in some cases are still mandated.

The Pension Rights Center also suggests finding new ways to raise money, including increasing the PBGC's employer premiums and, perhaps, spending tax dollars. In its report, the center writes: "Plans are facing funding stresses in large measure because of the actions of financial institutions that caused the recession. Our country infused money into those institutions. Should consideration be given to assisting troubled pension plans that are facing problems not of their own making?"

Says Ferguson, "These are problems that can be solved over the long term. There are lots of ways to go, but cutting benefits to the already retired shouldn't be one of them."

What do you think? Is it fair to cut pensioners' benefits after they've already begun receiving them?

Read more about multiemployer plans.

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213 Comments
Thomas Conti
December 21, 2014 at 1:48 pm

I seems to me that years of republican control in many states has contributed to this problem.Why,because of the policies put forth,Ex:Indiana 4yrs ago put in place "Right to work state" allowing any worker to be in a union shop and enjoy all the benefits the union has to offer,but not pay any union dues.If you don't contribute into the systematic,it will erode.Another Ex.Why does the Post Office have to pay 75 yrs of retiery benifits in a 10 yr period.No companies in existence has to go through this.This bill was crafted in 2006 lame duck congress under Bush who signed it.So what I'm getting at is I feel the GOP has contributed greatly.It is not fair to the hard working people of this nation to give up what they had worked for most of their lives.I feel its going to get wosrt until unions have been eliminated by the GOP control.One more Ex:In Tennessee the Volkswagen plant workers wanted union representation,but two republicans stood in the way.Retirees should keep their pensions in tacked.Stop ALEC and further erosion of the unions.Look at the Teachers union the past 4yrs.

jim allen
December 18, 2014 at 6:32 pm

Why is it that the Senate and Congress do not have to cut their pensions by 50% or 60%? We worked hard for our pensions. Please come up with some other way to solve this issue without hurting those of us that worked to get what we deserve in our later years. You will be hurting us drastically if you allow this to happen to the retirees.

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