Retirement Blog

Finance Blogs » Retirement » Should union pensions be cut?

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.

«
»
Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
205 Comments
Walt
June 16, 2014 at 7:57 pm

Whomever takes my pension benefit better have GOOD security.

ED
June 16, 2014 at 6:55 am

I WORKED 32 YEARS IN THE TEAMSTER UNION AN I GET MY PENSION BUT NOW I SEE DRIVERS BECOMING B/A AN TRUSTEES AN GETTING 2 PENSIONS
AN THIS IS JUST WRONG AN THE PREKS THAT GO WITH THESE JOBS ARE OFF THE CHARTS

evelyn
June 15, 2014 at 3:39 pm

my husband risked his life climbing utility polls for 40 years how many in the gov. risked there lives

evelyn
June 15, 2014 at 3:39 pm

my husband risked his life climbing utility polls for 40 years how many in the gov. risked there lives

Russ
June 15, 2014 at 3:25 pm

The cost too taxpayers is 40,000 to 60,000 dollars a year too keep a Prisoner in a Federal Prison. Health care and dental care and tv are free.I worked all my life paying into a pension in lew of wages. Who would be better off under this idea, the prisnoner or the old person ,think about it.Russ

chuck
June 15, 2014 at 2:45 pm

There is plenty of blame to go around, including greed on the part of some unions, and politicians who were all too quick to agree with benefits that were impossible to sustain, in order to get the union support in municipal elections. The economy crashed some years ago, and will likely not bounce back to what it was prior to the crash, now everyone is pointing the finger at each other. The one thing that seems unmistaken is this impending doom on pensions should have been addressed before now. Do you really believe they just suddenly realized the scope of the trouble they are in? Adjustments have to be, unfortunately for some, justifiably for others, or more cities will file for bankruptcy. It's time to pay the fiddler.

Jack
June 15, 2014 at 2:08 pm

First a investigation into where all the money went and the why and who for needs to be address. People need to go to jail over this and money recovered. Sell the real estate holding of the union and put the money back into the pension funds , why sucker the taxpayers into it.

Herbert Beach
June 15, 2014 at 2:06 pm

My Sheetmetal International Union Pension Plan has already cost some loss of benefits.

Union pension plans suffer from the "no work-no pay" syndrome

plus administration officials were and are overcompensated.

Administration fees seem to be to high.

dan di
June 15, 2014 at 2:00 pm

I WILL TAKE THE SAME PENSION CUT THE POLITICIANS TAKE.NO ONE SHOULD GET A PENSION FOR 4 YEARS OF WORK AND FULL MEDICAL FOR LIFE JUST BECAUSE YOUR A POLITICIAN.MAKE THEM USE MEDICARE AND PAY FOR SECENDARY INS. AS EVERYONE HAS TO.YOU WILL THEN SEE HOW FAST EVERY THING IS FIXED.

Jeff
June 15, 2014 at 12:44 pm

There is a reason Ponzi schemes are illegal. They don't work in the long run. Governmental social security wages, and predominantly involved union pension plans are antiquated ideas that depend on continued growth of the populations paying into them just like the Ponzi scheme. This sucks for those current retirees and it will be worse for those retiring in the future who remain in these plans for the next 20 or so years. We've already heard SS will run out in about 20-25 years so if you are in a pension plan AND counting on it and SS for retirement, you better come up with a plan C. But don't listen to me or just a few other individuals. Do your own research and come up with a plan.

Add a comment

(Comments may take 5-10 minutes to appear)