Many Teamsters are celebrating the rejection of the Central States Pension Fund’s plan to cut thousands of monthly retirement checks by half or more to save the fund from insolvency. But this move is not a long-term solution.
Retired Teamsters had received letters telling them to expect cuts in their pension starting July 1. Exhaustive hearings, including one in February at Bartle Hall, were held by Kenneth Feinberg, a mediator appointed by the U.S. Treasury.
On Friday, he determined that the pension fund’s proposal failed to meet standards in a 2014 law, which is supposed to make cuts possible to severely underfunded plans so they don’t run out of money. He said the Central States’ proposal didn’t show it would avoid the fund’s insolvency, failed to equitably distribute the cuts in benefits and didn’t provide notices that could be easily understood by average beneficiaries.
Central States trustees will have to determine whether to submit a new proposal under the 2014 law. Central States is $11 billion short of what’s needed to cover the 400,000 participants’ current and future benefits.
Retired Teamsters were justified in protesting the cuts, saying they were too draconian and without merit because the retirees had earned the benefits through years of work.
The ruling means more than 200,000 retired Teamsters will continue to get their full monthly benefit checks. But the Central States fund itself still remains headed toward insolvency.
The Central States Fund covers workers and retirees in 37 states and at many companies, including some that went out of business. The fund’s difficulties include federal intervention amid charges of mob involvement, the collapse of trucking businesses that failed to pay Central States what was owed and losses on financial investments because of the Great Recession.
Central States’ problems are far from unique. Many other pension funds are in financial trouble. Some also have applications pending with the Treasury to reduce benefits for retirees.
Ultimately, Congress needs to revisit the 2014 law and come up with a better fix to troubled pension plans. Or it needs to see whether future problems can be solved through the Pension Benefit Guaranty Corp., a federal agency created in 1974 to protect private sector pensions.