The Pension Benefit Guaranty Corporation (PBGC) is getting ready to implement a new law that allows distressed union multi-employer pension plans to reduce retiree benefits — if that can halt them from sliding into insolvency. On June 17, PBGC announced “interim final” regulations telling pension plans how to apply for permission to cut retiree benefits. And the same day, the U.S. Treasury Department appointed a “special master” to be in charge of reviewing those applications.
Meanwhile, U.S. Senator Bernie Sanders (I-Vt.) and U.S. Rep. Marcy Kaptur (D-Ohio) have introduced a bill in Congress to repeal the new law.
The new law, known as Kline-Miller Multiemployer Pension Reform Act of 2014, was tucked into a much larger bill to continue funding of the federal government, which passed in December. Kline-Miller allows a multi-employer pension plan to reduce pension benefits for current retirees if the pension plan is projected to run out of money over the next 15 years (or over the next 19 years if the plan is less than 80 percent funded or has a greater than 2-to-1 ratio of inactive to active members). The pension plans can’t cut benefits for retirees aged 80 or over, and retirees aged 75 to 79 are subject to smaller cuts than those under 75. Plans also can’t cut benefits more than needed to restore solvency, or below 110 percent of the PBGC’s own guarantee for retirees of plans that become insolvent.
The proposal at the heart of Kline-Miller was developed by the National Coordinating Committee for Multiemployer Plans (NCCMP), an organization that represents the interests of multi-employer benefit plans. Multi-employer plans, also sometimes called Taft-Hartley plans, are jointly sponsored by unions and groups of employers. There are about 1,500 such plans nationally, with about 10 million participants — active, inactive, and retired. The multi-employer plans are especially common in the construction industry. When they work well, which is most of the time, they provide an affordable benefit at a low administrative cost. But when they get into financial trouble — usually a combination of financial asset losses and large numbers of “orphaned” employees of companies that have gone bankrupt — their distress runs the risk of bankrupting the surviving union employers. PBGC has projected that about 10 percent of multi-employer pension plans are heading toward insolvency.
Which plans might seek to cut benefits?
In February, the Center for Retirement Research at Boston College put together a list of 100 plans that might seek permission to cut benefits. [See the list here.] The list uses data from financial reports that pension plans are required to file each year with the Department of Labor. But the list is speculative, because the reports, known as 5500s, sh0w what shape a plan is currently in, not whether it’s headed for insolvency. Also, even plans that are headed for insolvency might not seek to cut benefits; that would be up to trustees, and pension plan participants would get a chance to vote down the cuts.
No plans based in Oregon or Washington were on the list, but at least one national plan on the list has participants who live and work in the Northwest — the Bakery & Confectionery Union & Industry International Pension. That plan, which has 114,000 participants, is typical of the failing plans, in that it has more than three retirees for every active worker.
Multi-employer plans get their pension contributions from active employers, who pay a certain amount per hour under the terms of their collective bargaining agreements. When a plan has many more retirees than active workers, that can make it impossible to recover from financial market losses.
The biggest failing pension fund — and the one most expected to seek permission to cut benefits — is the Teamsters 411,000-member Central States pension fund, which has nearly five retirees for every active employee.
NCCMP executive director Randy DeFrehn says thus far he’s aware of only a handful of plans that are planning to use the law, including Central States, another Teamster plan in the New York area, and a construction industry plan in Ohio. DeFrehn said he’s not yet aware of any plans in the Pacific Northwest that are planning to ask for permission to cut benefits. And DeFrehn said the Ohio construction plan might be typical of what’s to come: The plan won’t be asking to cut all the way down to 110 percent of the PBGC guarantee, because partial reductions of about 25 percent will be enough to restore solvency: Retirees under 80 earning who earn about $3,500 a month now in the Ohio plan would looking at about a 25 percent reduction to about $2,600 a month. [That’s much more than 110 percent of the PBGC guarantee, a formula that would provide at most $1,179 a month.]
DeFrehn said plans that are going to need to cut benefits should do so sooner rather than later, because cuts would need to be bigger the longer they wait.
So far, no plans have asked the Treasury Department for permission to make retiree benefit cuts, because the rules were just released. And the Treasury Department says it does not expect to approve any applications until these proposed temporary regulations are finalized after a public comment period which ends August 18, 2015.
New pension cut administrator is a disaster specialist
The new “special master” in charge of approving the applications is attorney Kenneth Feinberg. Feinberg has held a number of previous special appointments: He was in charge of the executive compensation restrictions banks were subject to under the Troubled Asset Relief Program (TARP) following the financial crisis, and he was the administrator of benefit programs set up to compensate victims of the Deepwater Horizon oil spill, the September 11 attacks, the Boston Marathon bombings, and the Virginia Tech shootings.
On June 18, the day after Feinberg’s appointment and the new rules were announced, Senator Sanders and Representative Kaptur announced the introduction of the “Keep Our Pension Promises Act,” which would repeal the pension-cut provisions of the Kline-Miller Act. Instead, the bill would allow distressed plans to partition off “orphaned” participants into separate plans, relieving participating employers from the burden and risk of paying benefits to employees of defunct employers. To pay the promised benefits of the orphaned participants, the bill would create a legacy fund within the PBGC, paid for by closing tax loopholes used by the very wealthy to accumulate expensive art and avoid estate and gift taxes. Sanders and Kaptur said closing the two loopholes would raise $29 billion over 10 years. Thus far, the bill has seven co-sponsors in the House and three co-sponsors in the Senate (none from Oregon or Washington).
Senator Bernie Sanders and Senator Marcy Kaptur have introduced the Keep Our Pension Promises Act on June 18,2015 that would repeal the MEPA of 2014 that lets them cut active and future retirees benefits. A Public Comment period is open until August 18, 2015. See the following information and spread the word. Where is the reporting on this bill?
We worked for our pensions government has no right to cut our pensions cut government large pensions who taxpayers supply the money for downsize government use our money for people in USA government could help our pensions
Our government needs to help us poor people that earned these pensions. They only want to help themselves and the wealthy. This makes me want to move to Mexico, thats where the jobs are that was once here. No more voting for anyone for me.
If Central States Pension Fund is allowed to proceed and alter our pensions of 411.000 retirees this just the beginning of what the pension companies will do to keep our earned and paid money. There will be millions of of lives ruined. Why not investigate Central States and other pension companies and find out where all of this money has really gone. Central States received billions from the UPS buyout and where did all this money go (corruption, outrite theft, payoff, overpayments to employees, etc.? In other words lets ivestigate and regulate the ones that are in control of our monies.
Also how about the “Back Door” way this bill was proposed and signed into law with it’s corrupt and illegal voting system, the no sue provision and the fact if the vote is no the Treasury Department has the final say anyway. Every elected senate/house person I have talked to said they didn’t even read this bill before they voted.
Went to work UPS 1973-2004 UPS THRIFT PLAN was best plan of all only put six dollars a week in with 15 – 20 percent return based on UPS profit. Around 1989 UPS STOPPED PLAN
when stock went public this it same pattern as CSPF CUTS make UPS bigger, stronger, richer and make middle class weaker. We EARNED OUR FULL PENSION. We worked hard to help UPS the company it is today. If UPS had not taken away THRIFT PLAN because of greed I would have had a million used five percent income five thousand a year with one million left for family. Check out how UPS can find away to keep taking from labor and find ways to use employees retirement to buy there way UPS TOOK OUR THRIFT PLANS AND THEY WANT OUR HARD EARNED PENSIONS.
How many people wanting to make PENSION CUTS could take $18,000.00 a year pay cut? My family and myself cannot meet our budget and will
lose our home. This has got to be the worst thing against CIVIL RIGHTS and LABOR since the early 1900’s when three or four men caused men and women to be part of one of first STRIKES and UNARMED HUMANS WERE SHOT BY POLICE SO I HAVE REID ALSO ON HISTORY CHANNEL.
Have some companies gone to for on production
harressment and being greedy? Working people deserve a fare days pay for a fare days work as IBT, UPS AND RETIREES SIGNED MANY CONTRACTS IN ORDER TO PAY INTO OUR EARNED FULL PENSION.
If UPS or COMPANIES can change already EARNED PENSION and SIGNED ON EACH and EVERY CONTACT BY UPS OR COMPANIES, IBT and RANK AND FILE. WHEN RANK AND FILE BE COME RETIREES WE SHOULD BE ABLE to PAY DUES AND VOTE ON EVERY CONTRACT BEING RATIFIED. THE WAY IT STANDS NOW WE HAVE TO GO THREW HELL TO KEEP AND PROTECT EARNED PENSIONS THAT STRESS OUR FAMILIES WHILE COMPANIES AND THE HELP OF WHO ELSE. THIS CAN NOT BE LEGAL FOR STRONG THRIVING companies to destroy the very humans that helped make the companies
this is first degree greed. KOPPA
When I started work UPS 1973 we could put six dollars a week in THRIFT PLAN which drew 15 to 20 percent based on UPS PROFITS. Why did UPS decide to stop PLAN AND GO PUBLIC WITH
STOCK hourly employees would have had the very best PENSION. When UPS WENT Public ONLY MANAGEMENT HAD STOCK AND MANAGEMENT MADE A BUNDLE WHILE EMPLOYEES WOULD HAVE BETTER WITH UPS THRIFT PLAN. WHY, DID UPS STOP OR TAKE THIS PLAN FROM EMPLOYEES AND CREATE WEALTH FOR MANAGEMENT. NOW UPS IS PLAYING A MAJOR ROLE IN THE VERY
SAME WAY AS UPS THRIFT PLAN. WE EARNED THE MONEY WE PUT IN C.S.P.F. SAME AS SIX DOLLARS a week INTO UPS THRIFT PLAN. WOULD SOMEONE CHECK THESE TWO FINE PENSION PLANS AND UPS
DESTROY PLANS FOR HOURLY EMPLOYEES
AND HAVE PRIVATE MEETING TO TAKE AND PUT MANAGEMENT. WHAT KIND OF “CIVIL RIGHTS” and “LABOR MOVEMENT” IT MOVES
BLUE COLLAR WORKERS BACK TO EARLY 1900’s. “KOPPA”
I read in HR 83 the government has to balance the budget. With CSPF CUTTING RETIREMENT HOW DO WE BALANCE OUR FAMILIES BUDGET ALREADY ON FIXED INCOME. WE WORKED VERY AT UPS AND OUT COMPANIES AS WELL. NOW UPS HAS GROWN TO 200 countries around the world. The hard work of the men and women made this possible. This is not the first time UPS STOP RETIMENT PLANS I WOULD LIKE FOR SOMEONE TO LOOK AT UPS THRIFT PLAN WHEN STOCK WENT PUBLIC MANAGEMENT ALREADY HAD SHARES HOURLY EMPLOYEES WANT TO KEEP THRIT PLAN. WE PUT ONLY SIX DOLLARS A WEEK IN PLAN AND RECEIVED 15 to 20 percent based on UPS PROFITS the thrift plan was the best. WHY DID UPS RUSH TO STOP THIS PLAN? Check CEO RETURN WHEN STOCK WENT PUBLIC AND ALL MANAGEMENT MADE BIG BUCKS THEY ALREADY HAD SHARES HOURLY EMPLOYEES LOST UPS THRIFT PLAN. WE WANT TO KEEP THRIT PLAN.
Thanks to Ronald Reagan , remember the traffic air controllers ?, the writing was on the wall
Was ups thrift plan funded with pretax fundscharles