Today is a first. Instead of being alerted to a news story on the internet, I heard about this one from my neighbors. They are a retired couple in their mid-60’s – he was a truck driver and she was a school bus driver. A few months ago they got word that his pension was going to be seriously reduced. So lately they’ve been trying to figure out where they can make big reductions in an already limited budget. This week they were informed that the pension cuts were not going to be implemented. She came over to my house to tell me the news and celebrate. After she left, I went to Google to check out what happened.
The Central States pension holds retirement funds for 407,000 trucking industry workers [Teamsters] and retirees. The fund faces insolvency in 10 years. Its struggles include a shrinking trucking industry, reduced numbers of contributing younger workers, the 2008 stock market crash gutting investment income and the exit of major employers that left too few employers contributing to the fund to cover its obligations.
That prompted Central States to do the following:
Anger predictably ensued when Central States administrators proposed cuts for 270,000 drivers and retirees as part of their rescue plan. The average cut would have been 23 percent, though some would have been much higher.
Multi-employer pension funds such as Central States are required to have these plans approved by the Treasury Department. This month, Kenneth Feinberg (who has been tasked with that responsibility) rejected theirs. That eliminates the immediate issue of pension reductions, but doesn’t solve the underlying problem.
If you’d like to get into the weeds about this issue, I suggest reading Joshua Gotbaum’s testimony on it before the Senate Committee on Finance about a month and a half ago. The big takeaway is that, beyond Central States, this has the potential to affect the more than 1 million workers and retirees currently involved with multi-employer pension funds. I suspect that a valid solution would look something like the negotiations the Obama administration completed with the auto makers and unions with leverage from TARP funds. But that would require Congress to weigh in. Meanwhile my neighbors will enjoy the temporary relief.