Growing and strengthening west Michigan's middle class
DETROIT February 9, 2016– Frustrated Teamsters from across Michigan gathered in Detroit this week to speak out against proposed cuts to their pensions. The Central States pension fund covers 24,000 current retirees– more than half of which could now face reductions in their monthly checks if proposed cuts are approved.
The proposed rescue plan was submitted in September by the Central States, Southeast and Southwest Areas pension fund. Architects of the plan say it’s designed to help overcome shortfalls in funding.
The Central States pension fund had assets of $17.8 billion as of Dec. 31 but is projected to become insolvent in 2026, according to the Detroit Free Press.
If enacted, these cuts would be the first to take place under the Kline-Miller Multiemployer Pension Reform Act of 2014. This act requires that the U.S. Treasury Department approve any application if a pension fund’s potential claims are projected to cost the Pension Benefit Guaranty Corp. more than $1 billion. The pension law was amended as part of the omnibus federal budget bill, to allow for deep cuts to multi-employer pension plans.
Workers and retirees still have the right to vote on proposed cuts, but the Treasury Department has the power to carry out cuts regardless of the vote.
That means even if a majority of the Central States pension plan’s participants and beneficiaries vote against the proposed reductions to their benefits, the Treasury Department is now required by Congress to allow the cuts if the standards under the law are met, according to Kenneth Feinberg from the U.S. Treasury Department.
From the Detroit Free Press:
“I can’t change the law. I have no authority to do that,” said Kenneth Feinberg, who called for the Monday meeting and other public sessions that enabled Teamsters to speak out on a proposed rescue plan for the Central States Pension Fund. Feinberg has a role as the special master for the U.S. Department of Treasury’s implementation of a pension reform act involving multi-employer plans.
Feinberg said he’s heard countless objections including that the plan should be rejected in its entirety. He’s heard that the cuts need to be more equitable. He also heard complaints on the voting, which indicates that if someone does not return a ballot that is deemed to be a ‘yes’ vote.
Feinberg told the crowd of more than 500 gathered in Detroit Monday afternoon that about three members of Treasury were hearing their comments at the Wayne State lecture hall.
“I’m here to listen. I can’t explain how or why this law was enacted,” Feinberg said. But he said he was in Detroit to better understand the objections before he renders a decision on whether Treasury should approve a rescue plan submitted by the trustees of the Central States Pension Fund.
He noted that the Treasury department is looking at thousands of pages of the proposed rescue plan and is reviewing whether the assumptions are correct and would enable the plan to survive.
Many of the retirees who spoke out on Monday are facing the possibility that they won’t be able to make ends meet if the cuts are enacted– some said they may even lose their homes, according to Susan Tompor of the Detroit Free Press:
Frustrated and angry Teamsters showed up by the hundreds Monday and voiced their disgust with the proposed pension cuts at a public session at the Wayne State University in Detroit.
Dozens milled outside the lecture hall on the Wayne State campus with many holding signs saying “Pension Theft.”
Bill Peck, 64, rode a bus with about 25 other Teamsters from western Michigan to Detroit and held a picket sign that said “your government found a way to steal your pension.”
Peck, who lives in Grandville and belongs to Teamsters Local 406, said he worked 20 years for ABF Frieght and retired in 2011. Under the proposed rescue plan for the Central States Pension Fund, Peck said his monthly pension could be cut by 48%.
“It’s our money,” Peck said. “It’s not their money. It’s just like taking someone’s wages away.”
Bill Scott, 68, said before the meeting that his pension would drop to $1,200 a month from about $2,600 a month should the proposed cuts take place.
Scott, who lives in Detroit and is a member of Teamsters Local 299, said he feels he would not be able to afford his $900 lease on his townhouse and would be forced to move.
“We’re all upset because it’s really a backroom deal,” Scott said. “Who’s going to go back to work at 70 years old?”
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.
The first woman to speak broke down in tears after noting that the pension cuts are tough on the working class.
“We’re only asking for the money we earned over the courses of our careers,” she said.
Another speaker blamed a disregard for conservative investing in managing the fund and noted that other Teamster pension funds in the country are in better shape.
A 70-year-old retiree spoke out and and said he worked for five companies that went out of business and he didn’t see his final paychecks sometimes.
“If they cut my pension 60%, I don’t know what I’m going to do,” the retiree said. He noted that at 70, he’s divorced and facing plenty of bills.
“I’ve got 20 years left on my mortgage.”
Another speaker, who said his pension would be cut in half, said he could only explain his frustration one way.
“This is just plain robbery, that’s what it is,” he said.
One woman generated applause from the crowd after she spoke of her husband’s hard work as a truck driver for years. She noted her husband was on the road and didn’t get to go to a single graduation for any of their four children.
“He had to work,” she said.
The cuts could come as early as July, if a proposed plan is approved as submitted by the fund trustees. Under the law, some plan participants cannot have their benefits reduced at all, including retirees 80 years of age and older (partial protection beginning at age 75), and participants receiving disability benefits.
If the plan is approved as submitted, many retirees said they may receive only half of what they receive now in retirement checks. Others — who worked at some point for companies that went out of business and are called “orphans” — have reported being told of deeper cuts to their existing pension checks ranging up to 70%.
The term “orphans” is used by Central States, not the law. But the category itself is required under the existing law for troubled pension funds to receive more substantial cuts.
Thomas Nyhan, executive director and general counsel for the Central States Pension Fund, acknowledges that the cuts will be painful but sees no alternatives.
“If there was any realistic alternative, we would have pursued it,” Nyhan said in an e-mailed response to the Detroit Free Press. “Due to a combination of factors, the fund is projected to become insolvent in 10 years, at which point we will be unable to pay out benefits to retirees and beneficiaries.”
Nyhan noted that although the Pension Benefit Guaranty Corporation “theoretically guarantees” some coverage of benefits in the case of insolvency, the PBGC’s program that would cover the multiemployer plans, such as Central States, itself is projected to become insolvent in 9 years.
“If that happens, our participants’ pension benefits would be reduced to essentially zero,” Nyhan said in his e-mail to the Free Press.
Feinberg’s role is to determine if the Treasury Department will accept the proposed plan as is, seek modifications or reject the plan. Treasury has 225 days to review the plan. A decision is expected by May 7 from Treasury.
Karen Friedman, executive vice president for the Pension Rights Center in Washington, D.C., said she views the change in the pension rules as a way to torpedo federal protections that were passed in 1974.
“If this can happen to these retirees, it can happen to a lot of other retirees,” Friedman said.
Friedman spoke in Detroit Monday at the meeting and said the law needs to be changed and the proposal before the Treasury regarding Central States needs to be rejected. The room exploded into vigorous applause on her words.