Retirement funds seek permission from feds to cut benefits
Five union pension plans are heading toward bankruptcy in the next 20 years if the federal government does not approve benefit cuts to retirees.
In March, four unions filed applications with the U.S. Treasury Department requesting relief under a program established by the Obama administration that allows multi-employer pension plans to cut benefits in order to sustain the long-term health of the plan. The applications from United Furniture Workers Pension Fund, Alaska Ironworkers Pension Fund, Southwest Ohio Regional Council of Carpenters, International Association of Machinists of Motor City Pension Fund, and Teamsters Local 805 Pension & Retirement Plan are all being reviewed by the department, according to the Pension Rights Center. If the cuts are approved on all four applications, as many as 20,309 union members could see their retirement money drastically reduced.
The United Furniture Workers, which has merged with IUE-CWA, is the largest pool of funds and the unhealthiest. It represents 9,896 members and retirees and is projected to become insolvent in the next five years if nothing is done, according to its March 15 filing.
"The Pension Fund is now projected to become insolvent by 2021, which means that at that time there will likely be insufficient funds available to pay monthly pension benefits," it says.
The four other pension funds represent between 1,200 and 5,578 members and retirees. Only one—Teamsters Local 805—is projected to collapse within the next decade. It has projected a six year run until insolvency, while the others have enough money to sustain benefits for the next 15 to 20 years.
A United Furniture Workers official declined to comment, while union and fund representatives for the other three organizations did not respond to interview requests about the state of their retirement funds.
The five applications are the latest in a string of troubling news for those who planned their retirements around the pensions promised to them by unions. Many labor funds, already on shaky ground following the 2008 financial crash, have been threatened by the bankruptcy of companies that previously contributed to the plans, as well as an aging workforce that has led in some cases to retirees outnumbering union members.
In February, Teamsters Local 707 announced that its pensions accounts had run dry. The Pension Benefit Guaranty Corporation (PBGC), an independent federal agency funded by contributions from pension funds, took over responsibility for the payments given to 4,000 members. It slashed benefits by more than 60 percent. The PBGC, however, is on equally shaky ground as more and more private sector and union retirement funds file for relief.
"The insurance program for insolvent multiemployer plans is in dire financial condition and, absent reform, is likely to run out of money by 2025," PBGC Director Tom Reeder said in March.
To avoid draining the PBGC, the federal government adopted legislation in 2014 that allow multi-employer pension plans to cut benefits, which were previously treated as earned compensation that could not be taken away. Those cuts could only be implemented with approval from the Treasury Department. Numerous labor organizations have applied for relief although most applications are rejected or withdrawn.
In January, the Treasury Department approved drastic cuts to the Ironworkers Local 17 pension fund that devastated retirees. Only those who retired for disability reasons or those over 80 were spared cuts. Dan Wargo began working as an ironworker in 1973 and retired 10 years ago. He has seen his monthly pension plummet from $2,557.50 to $1,086. He said that the plan's funding pitted younger workers against older retirees.
"The guy who worked harder got hit the hardest," Wargo said. "If you could prove that it [the cuts] would keep the plan solvent for 100 some odd years I'd take it, but it's baloney. There are other ways this could have been mended instead of singling out a group of people."
The Treasury Department review of the five applications under review is expected to conclude in October.