When Multiemployer Pensions Fail: Teamsters Local 707
by meep
The Teamsters Local 707 pension has gone bust, and it’s been taken over by the “insurer” of last resort: the PBGC.
[reminder: the PBGC covers only private pensions in the U.S. There is no backstop for public pensions.]
Teamsters Local 707 is a NY local of the Teamsters union. I looked for an official website, and found this one, which was last updated in 2014…kinda There’s this page on the Teamsters International site, but all it tells me is the office is in Hempstead, which is on Long Island. That the last update I can find from the pension docs is 2013…. well, I think you can see where I’m going with this.
This is not really the sign of a situation where the members have necessarily been kept well in the loop. Perhaps snail mail notices has been enough, but I doubt it.
There is a Facebook group, which I will get back to in a bit.
NY Daily News has been all over this story recently.
NEWS COVERAGE OF FUND FAILURE
In the backseat of his beat-up car, Tim Chmil stashes what he refers to as his new retirement fund — bags and bags of recyclable bottles and cans.
Every time he spots a bottle on the street, he bends down to pick it up.
“Even if it’s just 5 cents, it’s money, and I need it,” the 71-year-old said.
It’s not the way the ex-trucker — a member of Teamsters Local 707 — expected to fund his senior years.
Chmil is one of roughly 4,000 retired Teamsters across New York State suffering a fate that could soon hit millions of working-class Americans — the loss of their union pensions.
Teamsters Local 707’s pension fund is the first to officially bottom out financially — which happened this month.
“I had a union job for 30 years,” Chmil said. “We had collectively bargained contracts that promised us a pension. I paid into it with every paycheck. Everyone told us, ‘Don’t worry, you have a union job, your pension is guaranteed.’ Well, so much for that.”
Also on the brink of drying up are the pensions for two Teamster locals — 641 and 560 — in New Jersey, union officials said. Plus 35,000 Teamster members upstate who are part of the money-hemorrhaging New York State Teamsters Pension Fund.
Bigger than all of New York’s Teamster locals combined is the Central States Pension Fund — another looming financial disaster that could leave 407,000 retirees without pensions across the Midwest and South.
And there’s still more beyond that, in various industries, officials say.
“It’s a nightmare, it has just devastated all of our lives. I’ve gone from having $48,000 a year to less than half that,” said Chmil, one of five Local 707 retirees who agreed to share their stories with the Daily News last week.
“I don’t want other people to have to go through this. We need everyone to wake up and do something; that’s why we’re talking,” said Ray Narvaez.
Narvaez, 77, got a union certificate upon retirement in 2003 that guaranteed him a lifetime pension of $3,479 a month.
…..
But the monthly checks still came — including a bonus “13th check” mailed from the union without fail every Dec. 15.Then Narvaez, like 4,000 other retired Teamster truckers, got a letter from Local 707 in February of last year.
It said monthly pensions had to be slashed by more than a third. It was an emergency move to try to keep the dying fund solvent. That dropped Narvaez from nearly $3,500 to about $2,000.
….
The stopgap measure didn’t work — and after years of dangling over the precipice, Local 707’s pension fund fell off the financial cliff this month. With no money left, it turned to Pension Benefit Guaranty Corp., a government insurance company that covers pension.Pension Benefit Guaranty Corp. picked up Local 707’s retiree payouts — but the maximum benefit it gives a year is roughly $12,000, for workers who racked up at least 30 years. For those with less time on the job, the payouts are smaller.
Narvaez now gets $1,170 a month — before taxes.
…..
The trucking industry — almost uniformly organized by Teamsters — has suffered enormous financial losses in its pension and welfare funds due to a crippling combination of deregulation and stock market crashes, Nyhan said.“This is a quiet crisis, but it’s very real. There are currently 200 other plans on track for insolvency — that’s going to affect anywhere from 1.5 to 2 million people,” said Nyhan. “The prognosis is bleak minus some new legislative help.”
I have mentioned before PBGC guarantees for MEPs is very low:
That is puny. Let’s say you have 40 years of service. The amount being guaranteed is $1430/month or $17,160/year.
This accords with what we’re seeing with the Local 707 retirees. They will have very little from the PBGC. These are very large cuts.
McCaffrey has watched Local 707’s pension fund sink deeper into debt over the past 20 years — until the 2008 stock market crash sent it into a death spiral.
Like many union shops in the private sector — especially trucking, the teamsters bread-and-butter — Local 707 is a victim of bad timing and industry deregulation, experts say. The New York State Teamsters pension fund and the Central States Pension Fund are also teetering on the brink of insolvency.
Local 707 thrived in the 1980s — and its teamster workforce paid into a pension that was maintained by multiple employers with trucking enterprises.
The idea of a centralized pension plan initially worked well. No single company had to bear the brunt of pension payouts, and workers could move to different companies within the plan and not lose their accrued pension.
But deregulation in the 1990s chipped away at the multiple-employer plan foundation. With each industry contraction, there were fewer workers and fewer companies paying into it.
Still, in 1999, Local 707 was 100% funded. The tech bubble — followed by 9/11 — ruined that. The trust lost 30% of its assets. And companies started going out of business. Three of Local 707’s largest employers merged in 2004 — purchased by Yellow Freight, which borrowed cash to buy two competitors. When the 2008 crash came, Yellow Roadway Carrier couldn’t make its payments. The bank told it to force concessions from the unions or face liquidation, McCaffrey said. It employed 35,000 teamsters — 1,600 from Local 707. Employees took a 15% pay cut and gave up vacation time and other benefits.
Yellow Roadway was allowed to skip its pension contributions for 18 months. When the company started paying again, it was at 25% of the previous rate. The fund began to topple, with roughly 700 workers paying into a fund supporting more than 4,000 retirees. Local 707’s fund pays out $48 million a year — and takes in $7.5 million in contributions, McCaffrey said.
“I’ve been lobbying Congress and asking anybody I can find for help for the last five years,” he said.
“The really horrible thing is, even though we saw this coming, we couldn’t do a thing to change it — because by law, we can’t touch pensions.”
In 2014, Congress passed a law meant to give relief to multi-employer pensions — but when Local 707 applied for restructuring, it was denied.
Because they couldn’t cut enough and stay solvent.
Teamsters Local 707 is not alone.
Almost one million American worker pension plans on verge of insolvency
Nearly one million working and retired Americans are currently covered by pension plans that are in in imminent danger of insolvency, according to an organization trying to help people keep their retirement earnings.
The union pension funds have been designated as being in “critical and declining status” — which means trustees are eligible to apply for cuts on their payouts.
Reducing the payout load lengthens the life expectancy of the stressed fund — but does little to alleviate the suffering of seniors who see their checks cut to about a third of what they were promised upon retirement.
According to the Pension Rights Center, which works with seniors facing a downgrade of their retirement checks, a small iron workers union shop in Ohio recently had to accept a pension cut.
The payouts for retirees dropped by as much as 60%, the center said.
I wrote about the Ironworkers cuts in this post on Jan 30, 2017.
There are 68 — including several from New York — that have been listed as having “critical and declining status,” meaning they too will soon have to apply for permission to cut retiree payouts.
A few have enough funding to carry them for 20 years, according to the list compiled by Pension Rights Center using data collected from The Multiemployer Pension Reform Act of 2014.
But many of the funds in critical status have a life expectancy of 10 years or less — some as few as three years.
The Pension Rights Center urges working Americans to take steps to educate themselves about the looming pension crisis.
Not that the knowledge will help them that much, other than encourage people to privately save money outside of these plans.
Of course some people are trying to do something.
ACTION: BUT WHAT WILL IT DO?
Retired Teamster to meet with Paul Ryan, Bernie Sanders in hopes of saving crumbling retirement fund
Faced with a potentially devastating meltdown of their pension fund, retired Teamsters across the country are mobilizing to save themselves.
Across 37 states — mainly in the Midwest and South — ex-truckers who had hoped to be living out their retirement in a state of relaxation have turned to political activism, building a grassroots network that rivals anything put together by a professional operative.
On Monday, retired Teamster Bob Amsden will show up again in Washington — a trip he’s made more times than he can count over the past decade. On his visiting list are all the officials from Wisconsin — including House Speaker Paul Ryan — and from Milwaukee.
…..
Amsden’s group and its 37 other chapters — all part of The National United Committee to Protect Pensions — are hopeful Sanders will get broad bipartisan support for his plan to salvage the Teamsters’ crumbling Central States Pension Fund, which is already on life support and due to expire within a year and a half.If the pension fund collapses, 407,000 retired and active Teamsters will be left with no payouts to support them — a fate that’s already befallen 4,000 retired truckers who worked in Local 707 in New York.
The Teamsters Local 707 fund, beset with the same financial problems as central states fund and the New York State Teamsters Pension Fund — officially went broke this month after suffering nearly 20 years of looming bankruptcy.
Its 4,000 retirees are now dependent on a monthly payout from the federal Pension Benefit Guaranty Corp. But that only covers about a third of what the ex-truckers were promised. Local 707 retirees saw their pensions slashed from as high as $3,500 in some cases to less than $1,000.
“The problem is, PBGC is only funded itself for another 10 or so years,” says Amsden. “Central States Pension is so big, if we go under ourselves, we will swamp PBGC. It can’t cover us all.”
Yup. That is an issue.
The GAO put out a report on High-Risk Areas of government, and the PBGC was listed there.
Let’s see what it has to say:
With nearly $100 billion in assets, the Pension Benefit Guaranty
Corporation’s (PBGC) financial portfolio is one of the largest of any
federal government corporation. Through its single-employer and
multiemployer insurance programs, PBGC insures the pension benefits of
nearly 40 million American workers and retirees who participate in nearly
24,000 private-sector defined benefit plans. PBGC’s financial future
remains uncertain, due in part to a long-term decline in the number of
traditional defined benefit plans and the collective financial risk of the
many underfunded pension plans that PBGC insures. We designated the
single-employer program as high risk in July 2003 and added the
multiemployer program in January 2009.Since fiscal year 2013, PGBC’s financial deficits have more than doubled.
At the end of fiscal year 2016, PBGC’s net accumulated financial deficit
was over $79 billion—an increase of about $44 billion since 2013. At the
same time, PBGC estimated that its exposure to future losses for
underfunded plans was nearly $243 billion.1 The single-employer
program, composed of about 22,200 plans, accounted for $20.6 billion of
PBGC’s overall deficit (see figure 21). The multiemployer program,
composed of only about 1,400 plans, accounted for about $59 billion.
According to PBGC, these dramatic increases were attributable to broad
economic factors and financial conditions of the plans PBGC insures.
Here’s the financial position:
That’s quite ugly.
It’s not going to get better.
But I want to address one of the recommendations:
Proactive Monitoring of Multiemployer Plans. To implement better
and more effective oversight practices, we recommended that PBGC
develop a more proactive approach to monitoring multiemployer
plans, such as assigning case managers to work with the plans that
pose the greatest risk to the agency and providing non-financial
assistance to troubled plans on an ongoing basis before the plans
became insolvent. PBGC has taken numerous actions since 2011 to
implement better and more effective oversight practices including: (1)
re-assigning four attorneys to work primarily on multiemployer plan
matters; (2) awarding an audit services contract to allow PBGC staff
time to develop nonfinancial assistance to plans; (3) initiating
proactive efforts to identify plans that would benefit from PBGC
technical assistance and informal guidance; (4) contacting troubled
multiemployer plans to obtain data on the plan’s financial situation and
to create avenues to improve plan health and the financial assistance
process; and (5) authorizing five additional positions to administer and
oversee financial assistance extended to troubled multiemployer
plans.
As John Bury noted, it’s not clear to me how a bankrupt program is really going to be able to help MEPs become more solvent. This is a bit ludicrous.
Here’s an easier-to-read set of pages on the GAO findings on PBGC.
Separately, Ed Siedle is running a Kickstarter campaign to have the asset management of the Local 707 plan investigated.
Siedle has done forensic investigations before of pension funds.
In some cases, he has found questionable practices and high fees… but looking at his results, in almost all the cases, it’s been the liabilities driving the trouble, enticing plans into ever-riskier behavior to try to make up for undercontributions.
Not much of an investigation to say “Not enough money was put in.” That’s not exactly news for many pensions.
And, as mentioned, there’s the Concerned Teamster Local 707 Retirees facebook group. It looks like it’s mainly reposting Donald Rumsey’s own posts (not sure who he is).
Thing is, as noted by the GAO and others, the Local 707 is not alone. It’s far from the largest MEP in trouble.
And I don’t think there will be any bailouts. Yes, this is the Trump era, but bailouts would actually have to be passed by Congress… and… they don’t seem to be doing much of anything. Not only on pensions but…just.. anything.
DON’T CRY FOR ALL MEPS
Above is bad news for the Local 707 folks, and yes, there are many more on that path.
But not all MEPs are doing poorly.
Hollywood MEPs are doing quite well:
Despite the recent wave of difficulties facing multi-employer pension plans in other industries, Hollywood’s are on relatively sound financial footing, according to an analysis conducted for Deadline by the Illinois-based Society of Actuaries. And that’s good news for the industry’s retirees and future pensioners.
“Multi-employer pension plans have faced funding challenges across industries, but several of the entertainment industry plans go against the trend and show above-average funded status,” said Lisa Schilling, the Society’s retirement research actuary. “The DGA plan has the highest funding level of the five plans analyzed, at 98%. The WGA and AFTRA plans both exceed the industry average funding level of about 85%. The SAG plan is about average at 84% percent, and only the Motion Picture Industry Pension Plan falls below average at 72%.”
That means that all five of the industry’s multi-employer pension plans are in the so-called “Green Zone,” meaning that their funding levels are not critical or endangered and should be able to meet all current and future obligations.
On average, Schilling found, WGA and DGA retirees receive the largest annual pensions – $32,000. The average SAG pensioner receives $19,400, the average AFTRA retiree receives $15,600, and the average retiree of the Motion Picture Industry Pension Plan receives $17,000 a year.
Combined, the industry’s five multi-employer pension plans have more than $14 billion in assets and nearly $17 billion in liabilities, leaving a funding gap of nearly $3 billion. Half of that under-funding, however, belongs to the industry’s largest and most underfunded plan, the Motion Picture Industry Pension Plan, which covers Hollywood members of IATSE, Teamsters Local 399 and the Basic Crafts.
The SAG Pension Plan, which was rocked by an embezzlement scandal in 2009, “is in good financial health and funded just below the multi-employer industry funding average of 85%,” Schilling said, basing her analysis on the plans’ latest annual reports – called Forms 5500, which are filed with the U.S. Department of Labor. “The SAG Plan has $3.6 billion in assets against $4.3 billion in benefit liabilities. The $700 million funding gap is unchanged from the previous year. There are 24,897 active participants and 12,492 retirees currently receiving pension benefits.”
Interesting.
SOA analysis of Hollywood and sports MEPs can be found here.
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