I haven’t touched on multiemployer pension plans much here, though I’ve keep a watch thread at the Actuarial Outpost since 2013. I have an MEP tag on the blog, too, but only a few posts are there so far (and my category archive template doesn’t work quite right.)
I absolutely expect MEPs to come up politically this year, because there are a couple plans in really bad shape and Congress punted last year. Unlike public pensions, where they at least have some power to tax people to keep the cash flowing, many multiemployer plans have gone from lots-and-lots-of-employers to only-a-few-employers-in-a-dying-industry. The guarantees for MEPs are extremely skimpy, so when these plans fail, it’s a lot worse when single employer plans fail (which have higher guarantees.)
You will also hear of multiemployer plans as union plans, as John Bury does in his Union Plans in Crisis Series. The concept is that members of a union could move around between employers, working as a truck driver, say, but you want the defined benefit pension to be portable. That’s the way MEPs “work” – there’s some union of a certain class of employees that dictates payscale & benefits for those employees in an industry. It makes it easier for those employees to move around between employers.
That’s one of the big issues with defined benefit pensions — if you work a few years for this employer, and a few years for another employer, you accrue very little in the way of guaranteed pension income. That’s why defined benefit pensions are often considered golden handcuffs.
Supposedly, having multiple employers involved was supposed to make the guarantee more stable than if there were only a single employer sponsoring the pension. This doesn’t work so well in struggling industries, like mining.
This seems to be my first post on MEPs at STUMP — Multiemployer pensions, Social Security, and Public Pensions: Choices Have Consequences :
But multiemployer plans are an especially sticky subject, because of all sorts of bad incentives baked into how these plans are regulated.
Here is one bit of info: when pensions (whether single employer or multiemployer) are put onto the PBGC because they’ve gone bankrupt, the pensions are guaranteed only up to a certain amount. Those with small pensions may get their full amount, but those with higher amounts get whacked down. A lot.
At least those in MEPs are qualified to receive Social Security benefits. Not necessarily so for public employees.
But back to the NYT piece. He not only talks about MEPs and the incipient disaster there. He also mentions public pensions, which are not covered at all by any backstop. No PBGC for them. If you’re a Prichard, Alabama retiree, you can tell others that yes, the money can run out and you get nothing.
The reason taxpayers will not boost them up is because there’s not going to be enough of us. And bringing in a bunch of low income once-illegal aliens is not going to do much for them, either, except perhaps provide some low cost workers for their assisted living centers.
That was from December 2014. From May 2016, I went into further why there will be no bailouts:
I agree it sucks to have a constituency getting stiffed, and across a huge geographic swathe, meaning many politicians are there to be pressured.
However. The sympathy level is going to be fairly low from many other people.
Anyway, my nutshell answer (muuuuuch longer below):
- We ain’t got the money of
- It’s become very clear to everybody we ain’t got the money of
- If we can’t pay for all our wants, then there is going to be choosiness.
- Keeping relatively generous pension promises topped up ain’t going to be chosen
Now, to be sure, Central States may slip in before Bailouts R Us completely shuts down. But I don’t think it will.
CENTRAL STATES TEAMSTERS PENSION
That’s not the only time I wrote about Central States.
From October 2015: Central States, the Teamsters, and MEPs: Cuts to Begin – no, the cuts didn’t begin. But they were trying to sell it like a done deal.
Central States pension plan, which is a Teamsters multiemployer pension (meaning it covers Teamsters members in a certain area, and they’ve worked for multiple employers — think UAW pensions here, as well — union members theoretically could switch between employers and be covered by the same pension) has sent out letters telling current retirees and pension plan participants that they have to cut payments.
Here’s one Hoffa’s take:
‘James P. Hoffa, president of the International Brotherhood of Teamsters, has written a letter to the Central States leadership arguing that such cuts should not be made. Hoffa acknowledged he has no authority over the operations of the Central States fund.
‘Hoffa wants Congress to pass a “Keep Our Pension Promises Act.” He maintains that the Multiemployer Pension Reform Act unfairly shifts the consequences of unfunded pension liabilities to retirees and participants.’
And exactly where does he think the money will come from?
There’s a reason the sponsors can’t really increase contributions. Maybe the participants could increase their contributions…. any takers? No?
SEARCHING FOR THE MAGIC MONEY TREE
Yes, that magic money tree that fulfills all desires, without having to cut anything.
I agree with the Central States retirees and participants that they are not at fault for the pension underfunding.
But the “plan”, such as it was, before the law got passed, was that you had to wait until the pension really was in a hideous situation, and if the plan got dumped onto the PBGC, the cuts would be even worse for retirees.
So there is a trade-off: take a smaller (but still big) cut now to avoid getting hit with catastrophic cuts later.
I know they would rather take the choice not on offer: no cuts at all.
The money will come! The taxpayers will bail us out! After all, Wall Street got bailed out! Why not us?
From one of the links in there, Central States is paying out about $3.50 in benefits to every $1 collected from employers. That would not necessarily be a problem if the plan were well-funded.
(Psst, it’s not)
From May 2016, I wrote Treasury to Central States: You Didn’t Cut Enough and Central States: I Guess the Plan is To Run Out of Money. From that second one:
THE PLAN: FAILURE
So, there’s no current cut to the plan, which means everybody keeps getting their full benefit til the money runs out. At which point the benefits get drastically reduced. Much worse than what was proposed by Nyhan.
Remember, they’re showing that the maximum pension for 30 service years will be about $12K. That’s a lot less than current Central States benefits.
I’ll do the math: that works out to $13,824 in payouts per retiree — and that’s just an average. Many of them will have had far less than 30 years of service.
In that post, I also look at Ted Siedle’s call for investigating the asset management of these failing pensions. I will deal with the investigative aspect on asset management in a later post, because I’m seeing the same calls in public pensions, and I don’t think it is really much of anything.
In any case, Central States is going to run out of money. According to this piece from August 2016, the horizon for running out of funds is projected to be between 10 and 15 years. That’s not going to be considered crisis til they actually run out of cash.
And just wait for when there are self-driving trucks and fewer Teamsters are needed for shipping.
MEP BENEFITS TO BE CUT FINALLY?
While the plan to cut Central States benefits was nixed, as well as other MEP benefit cut plans, there has been one acceptance by Treasury (from John Bury).
Ironworkers Local 17 Pension has had their cuts accepted. The next steps are for pension plan participants to vote on this plan.
If the trustees’ application to reduce benefits is approved by the Treasury Department, in consultation with PBGC and the Department of Labor, those participants and beneficiaries have the right to vote on the proposed benefit changes before they occur. A statement from the plan trustees in support of the benefit reductions and a statement, based on public comments, in opposition to the benefit reductions are both required to be included on the ballot that is provided for the vote.
For most multiemployer pension plans, Kline-Miller requires that if the majority of all participants and beneficiaries in the plan vote against benefit reductions, they cannot occur. However, the trustees could submit a new application to reduce benefits and start the process again.
So, we shall see. Prior applications by four other plans were denied, as mentioned by Bury, and this pension actually withdrew their application and resubmitted.
As I write, there are five MEP benefit cut applications in review. We shall see how those end up, so we can figure out what makes an application be rejected versus accepted. One thing I noticed was the projected return on assets, which was lower than the other applications, I believe.
Looking at the lag time of the other notification letters, I expect most, if not all, of these applications to be ruled on one way or another in the first quarter of 2017. So that will be something to look at.
COAL MINERS PENSION
This is the big one overhanging from 2016, that Congress punted on.
Here are the last news items I could find on this issue:
Senators Vow to ‘Use Any Means Necessary’ to Ensure Taxpayer Bailout of Private Union Pension Plan — that’s Democrat senators, you see. They didn’t really use any means, because this didn’t happen.
WASHINGTON, D.C. — House Republicans haven’t extended health and pension benefits for 16,000 retired miners for a full year because they couldn’t find other cuts to pay for it, a spokeswoman for House Speaker Paul Ryan acknowledged Tuesday.
But that explanation isn’t satisfying advocates for the retired miners who wanted more than a four-month extension in the spending bill passed Friday.
“It just prolongs the agony,” said Carl Shoupe, a retired coal miner and leader of Kentuckians for the Commonwealth, which has been pushing for more stable funding for the health and pension plans.
As part of stopgap spending bills approved last week, Congress extended the benefits, which were set to expire at the end of the year, until April.
The government in 1946 agreed in a deal with union leaders to guarantee pension and health benefits for miners. But with the coal industry’s decline, the benefits fund supported by mining companies has shrunk and is set to run out of money at the end of the month.
With the extension, the retirees still face losing benefits — in a few months.
So be expecting some jawboning about this in the new Congress.
From the World Socialist Web Site: US coal miners face cutoff of health, pension benefits:
More than 120,000 retired coal miners are threatened with the cutoff of health and pension benefits over the next several months as the United Mine Workers Health and Retirement Fund runs out of money.
This includes 16,000 retired miners from Patriot Coal in West Virginia, Ohio, Indiana, Kentucky and Illinois who are threatened with the loss of medical coverage by April, and another 6,500 who could see their health benefits terminated later in the year.
In addition, 89,000 miners and family members, and another 22,000 miners whose pensions are vested but who have not received payouts, face the loss of their pensions or severe cutbacks if the union retirement fund goes bankrupt or is dumped into the government’s nearly insolvent Pension Benefit Guaranty Corporation.
The tragedy that is unfolding is the outcome of decades of betrayals by the United Mine Workers of America (UMWA), which have left the miners—historically the most militant and class-conscious section of the American working class—facing destitution.
I’m not giving background on this now, but this is sure to come up, and there will be a lot of noise about this with the new Congress getting seated, before Trump even becomes President.
Thing is, there will be so many things people will be yelling at Congress (and Trump) about this year (many aren’t waiting for Trump to actually be president before blaming him for stuff), I wonder if this will just get punted again.
So look forward to the mineworkers pension to come up on the news in short order, but it may get drowned out along with everything else that Trump does not tweet about. Watch that twitter feed!
SAVE THE PENSIONS!
In May 2016, when I wrote on why there would be no bailouts, I took a look at what was proposed in Congress at the time:
Okay, maybe not completely nothing. The email-writer mentioned KOPPA [Keep Our Pension Promises Act[. Let’s check out what that is.
It was sponsored by Bernie Sanders. In 2015. There are currently 10 sponsors in the Senate. Of those 10, three signed on soon after Sanders put it out, four more by the end of 2015, and then the final three this year, with one, Barbara Boxer, signing on one week ago.
It’s all Democrats (for now). Here’s the House bill, with 51 co-sponsors. Again, only Democrats sponsoring.
Now, this can be positioning for the election, and it’s certainly possible for the Democrats to take over both the House and Senate again. And even if not this year, perhaps two years into a Trump presidency, sure.
Well, Trump as President may change everything, and perhaps he will back something like KOPPA. After all, it’s the Rust Belt states that put him over the top — where a lot of these MEP participants are. Let’s see if there’s anything in the first 100 days promises….….nope.
So I have no idea. I’m not going to predict what will happen, other than if there are MEP bailouts, they’re going to be fairly limited.
I went searching the op-eds, and found these: President-elect Trump, please help protect Cleveland ironworkers’ pension rights: Karen Friedman (Opinion) and Coal Communities Ask Trump To Honor His Promises. The first is on the plan that got the application to cut benefits approved (but has yet to be voted on by members). The second is not only about pensions, but pension and health benefits are a big part.
There are direct interests by those in these pensions, so they will be writing about this stuff, even if everybody else is caught up in whatever we’re accusing Russia of doing this week.
The problem with blaming coal country for backing Republicans who will strip their health care
It’s probably fair to say that liberal political writers don’t spend a lot of time thinking about the details of retired coal miners’ pensions. But in mid-December, the issue became a flashpoint when Markos Moulitsas, the editor and founder of Daily Kos, told his readers not to care what happened to 120,000 coal miners in Appalachia whose pensions and health care are about to expire without federal help.
“Be happy for coal miners losing their health insurance. They’re getting exactly what they voted for,” his headline blared.
Donald Trump, meanwhile, hasn’t taken any position on the legislation at all. He’s campaigned on a pledge to revive coal mining by killing government regulations — a promise he’ll struggle to live up to but that certainly makes some sense.
Earlier this month, Vox’s Sarah Kliff interviewed an Obamacare beneficiary and Trump voter who was surprised to learn that the Republican government would try to take away her benefits. This is a different story. Coal country Republicans really are mostly standing up for miners’ interests — and the miners are voting for politicians who vow to protect them.
So in the case of the coal miners, at least, they may get their bailout. We shall see.
Unlike Social Security, this is sure to come up in politics this year.
When Multiemployer Pensions Fail: Teamsters Local 707
It's Happening: First Union Voted to Reduce Retiree Benefits
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