This story appears in the Oct. 3 print edition of Transport Topics.
Draft legislation that’s intended to preserve retiree pensions has surfaced in the House of Representatives, but the proposal won’t offer any relief for about 400,000 Central States Pension Fund Teamsters who face an uncertain financial future.
The House Education and the Workforce Committee on Sept. 22 convened a hearing about the proposal advanced by Chairman John Kline (R-Minn.). His plan would allow solvent pension funds to create “composite plans” to blend existing defined benefit payments with a defined contribution plan, similar to a 401(k) arrangement.
Kline’s plan surfaced as some 20,000 union mine workers face an end to their pensions at the end of 2016, and the Teamsters have said it is trying to build support for new legislation to address the plight at Central States, whose funds could run out in about 10 years.
“Under the draft proposal put forth by Congressman Kline, multiemployer pension plans that are in critical status or in critical and declining status, such as Central States Pension Fund, may not transition to a composite plan design,” Executive Director Tom Nyhan told Transport Topics last week. “We appreciate efforts by members of Congress to strengthen the multiemployer pension system, and we would again urge additional action to safeguard the retirement benefits of Central States participants, as well as the hundreds of thousands of other multiemployer plan participants.”
Kline, who was co-author of a 2014 multiemployer pension law, didn’t respond to TT’s requests for comment about any plans to address funds in Central States’ situation. The 2014 law prompted Central States to create a plan to reduce benefits for most retirees by about half, which was rejected in May during a Treasury Department review.
The union, which hasn’t yet disclosed how it would like to resolve underfunded pension plans, urged Kline’s committee “to go back to the drawing board.”
“This is simply not the right fix,” Teamsters General President Jim Hoffa said in a statement. “This legislation provides inadequate funding for composite plans and weakens the funding base for existing plans. That’s not going to help workers or retirees.”
During the hearing, Rep. Phil Roe (R-Tenn.), who leads the Health, Employment, Labor & Pensions Subcommittee, noted that 10 million Americans rely on multiemployer pensions. The 2014 law revised provisions in the Employment Retirement Income Security Act that was passed 40 years earlier.
Since then, active membership in Central States and some other Teamsters funds has shrunk, draining $3.46 in payouts per $1 of contributions last year at Central States as many union carriers failed and some investments lost money.
YRC Worldwide and ArcBest’s ABF Freight unit, as well as some car haulers, still participate in Central States. YRC and ArcBest rank Nos. 5 and 12, respectively, on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers.
The union also urged Congress not to address “a complex and consequential proposal in the short [session] time remaining this year.”
The draft document has the support of other unions, including those that represent building trades and plumbers. The U.S. Chamber of Commerce also has endorsed Kline’s plan.
His proposal would allow refinancing of plan liabilities over 25 years instead of the 10 permitted now. Trustees would be given latitude to cut benefits or raise employer contributions as needed to address shortfalls.
It also would exempt the composite plans from a requirement for the federal Pension Benefit Guaranty Corp., which is facing its own questionable financial future, to pay benefits if a composite plan failed. That step would help to shore up PBGC.
Roe said the pension issue is “vitally” important to Americans from all walks of life. Strengthening retirement security has always been a difficult challenge.
“America’s workers deserve better than retirement plans based on empty promises and designed for yesterday’s workforce,” Roe said.