Deadline Nears for Pension-Rescue Bill
Building Trades, Features, Law and Politics, National, Transportation

Deadline Nears for Pension-Rescue Bill

February 6, 2018

By Steve Wishnia

WASHINGTON—Retired truck driver Tom Brady might have a lot more to lose this week than his quarterback namesake did in this past Sunday’s Super Bowl.

Millions of pensions could hinge on passage of the Butch Lewis Act.

During the 30 years he spent behind the wheel, the Ohioan paid into the Teamsters Central States Pension Fund—which is one of the multiemployer pension funds that has asked the federal government for permission to cut benefits to keep from becoming insolvent.

Now, he’s pinning his hopes on the Butch Lewis Act, a bill sponsored by Sen. Sherrod Brown (D-Ohio) and Rep. Richard Neal (D-Mass.), which would set up a Treasury Department agency to make loans to multiemployer funds deemed “critical and declining,” in danger of becoming insolvent within 20 years.

“They’re saying if this Butch Lewis Act doesn’t get through, in a few years we’ll have no pension,” Brady says in a video put out by Rep. Marcy Kaptur (D-Ohio).

With Congress needing to pass legislation to keep the federal government going by midnight on Thursday, Feb. 8, the act’s backers are trying to round up Republican support for attaching it to a budget bill or continuing-appropriations resolution.

 “Congress cannot avoid this issue,” says Teamsters International Vice President John F. Murphy, trustee of the union’s benefit funds. “It’s going to come at them whether they like it or not.” He predicts the issue will “come down to the wire” this week.

About 10.5 million American workers and retirees are enrolled in multiemployer plans, which were developed for industries where people regularly work for multiple employers—trucking, mining, and construction, as well as both performers and stagehands in theater, film, and music. But the decline in union employment in some industries, particularly trucking and mining, has devastated these funds. The federal Pension Benefit Guaranty Corporation, a backup that pays partial benefits if funds go under, estimates that 150 to 200 of them are “critical and declining,” says Karen Friedman, executive vice president of the Pension Rights Center in Washington.

More than 1.3 million current workers and retirees are in those plans, says Murphy, and more than one-third of them are Teamsters. The Central States Fund, which with more than 400,000 participants is the largest one, is paying benefits to almost five retirees for every active workers contributing, he says. Other large plans on the endangered list include the Bakery and Confectionery Union and Industry International Pension Fund, with more than 110,000 people enrolled, and the United Mine Workers of America 1974 Pension Plan, with more than 100,000.

A 2014 law, the Multiemployer Pension Reform Act, allows these plans to reduce benefits, subject to Treasury Department approval. Four so far have won that approval, including the 35,000-member New York State Teamsters Conference Pension and Retirement Fund, which last October cut benefits by 18% for active participants and 29% for retirees and beneficiaries, with exceptions for people over 75.

The Butch Lewis Act would establish a new Treasury Department agency called the Pension Rehabilitation Administration, which would sell bonds to investors and loan the money raised to make low-interest loans to endangered pension funds. “Pension plans would use the money they borrow to purchase safe investments, like annuities, that would cover the cost of paying current retiree benefits each month,” Sen. Brown’s office tells LaborPress. “Since the borrowed funds would cover the cost of paying current benefits, the underlying pension fund would be allowed to focus on making smart investments to get back in long-term solvency.” The funds would be prohibited from making risky investments with the borrowed funds, and would have to submit reports every three years to demonstrate that they “are on track to getting back on solid footing.”

The worst-off plans, including the Central States fund, would need aid from the PBGC, it adds.

The bill would also let the funds that have already announced benefit cuts apply for loans to reverse them, says Friedman.

Democratic Congressional leaders Sen. Charles Schumer (D-N.Y.) and Rep. Nancy Pelosi (D-Calif.) have committed to including the measure in any budget compromise, says Murphy. A handful of Republican House members, he adds, “understand the importance of saving multiemployer plans. It’s a senior-citizen, middle-class issue.”

So far, however, only a handful of Republicans have signed on to the bill, among them Rep. Peter King of Long Island. Meanwhile, White House budget director Mick Mulvaney on Jan. 20 accused Democrats of “bailing out union pension funds.” The House Committee on Education and the Workforce did not respond to phone calls and email messages from LaborPress, but both chair Virginia Foxx (R-N.C.) and pensions subcommittee chair Tim Walberg (R-Mich.) have indicated they believe cutting benefits is the fiscally responsible way to keep the funds solvent.

Friedman finds that hypocritical. “It’s not a bailout, it’s a loan program,” she says. And Congress “just passed a tax bill that’s going to put the country $1.5 trillion in debt to help the richest Americans.”

Multiemployer pension funds were the first “portable” benefits, says Murphy. But factors such as the decline of coal mining and the deregulation of trucking in the 1980s, which caused many union haulers to go bankrupt, meant their “contribution base shrank.” To play catchup, he continues, they adopted riskier investment strategies, seeking—and overly optimistically projecting—returns as high as 7-8% a year, only to get decimated by the dot-com bust of 2000 and the 2008 recession.

“As Congress works to develop legislation to fully fund the government for the rest of the year, it is critical that a solution to the looming multiemployer pension crisis be included in that bill,” United Mine Workers of America International President Cecil E. Roberts said in a statement Jan. 23. The union’s fund was strong 10 years ago, he added, but the 2008-09 recession and a series of bankruptcies in the coal industry over the last six years have put it “on the cusp of insolvency… one more coal company bankruptcy away from going under.”

The average pension the fund pays is $586 a month, Roberts added.

“These are people who have worked very hard and paid into their plans,” says Rep. Kaptur. “It’s not their fault.”

Many companies, she notes, used bankruptcy proceedings to get out of their pension obligations. “The number of workers who were spit out by these companies is overwhelming.”

One was the Minneapolis Star-Tribune newspaper, which in as part of its 2009 bankruptcy reorganization pulled out of the Central States fund for its drivers—and in 2016 criticized the Obama administration for rejecting proposed cuts of 23% or more to the fund’s benefits as “rooted in election-year politics.”

“The money belongs to the workers,” Kaptur says. “It really was a broken promise.”

Part 2 will appear tomorrow.

February 6, 2018

Leave a Reply

Your email address will not be published. Required fields are marked *