The Treasury Department on Friday rejected a proposal by the Central States Pension Fund to cut the benefits of more than 200,000 Teamsters union retirees by as much as 70 percent.
The ruling, seen as a victory for the pensioners, was handed down by Special Master Kenneth Feinberg, just a day before a deadline Saturday.
Feinberg is a noted victims’ compensation consultant who administered compensation funds for the Sept. 11, 2001, terrorist attacks, the Deepwater Horizon oil spill in the Gulf of Mexico and other high-profile incidents. He was named by the Treasury Department in June to decide whether the Central States plan complied with the Kline-Miller Multiemployer Pension Reform Act of 2014.
The Multiemployer Pension Reform Act allows pension funds to slash retirees’ pensions if they are in danger of failing. The legislation was designed to relieve the burden of insolvent pensions funds on the federal Pension Benefit Guaranty Corp.
Central States said the cuts were necessary because the fund was expected to run out of money in about 10 years. As of year-end, the fund listed assets at $16.1 billion but said it needed $11 billion in additional funding to remain solvent.
Feinberg rejected Central States’ proposal, stating that the plan didn’t “stand up under the law.”
“This is an important step, I think, for retirees who are relieved their benefits aren’t being cut,” Feinberg told Trucks.com.
He said there’s still the looming question of what will happen to the fund.
“My job was to review the plan,” Feinberg said. “By comparing it to the law, it was pretty clear to me that this plan didn’t meet the legal requirements.”
The pension fund said in a statement that filing a plan that would slash retirees’ benefits was “gut wrenching,” but that it was disappointed with Treasury’s decision, “as we believe the rescue plan provided the only realistic solution to avoiding insolvency.”
Central States urged the pension participants to “call their congressional representatives to demand legislative action that protects their pension benefits.”
Feinberg said he rejected the plan because it made unreasonable financial assumptions, including using a 7.5 percent annual investment rate of return for its calculations and overstating the number on younger workers who would participate in the plan, making less money available to pay retirees.
Another problem, he said, was that retirees simply couldn’t understand the language used in the federal regulations under which it was filed.
Retirees praised the ruling.
Carolyn Thomas of Grain Valley, Mo., spent most of Friday afternoon calling about 50 retirees after learning that the proposal had been rejected. Her husband, Jerry Thomas, who worked as a union driver for 27 years, stood to lose around 58 percent of his benefits if the proposal had passed.
“This is wonderful news for us and for so many other people,” Thomas said. “It’s so good to be able to call people and say, ‘We did it.’”
However, she said, only half the battle has been won and there’s still more to do.
“We have to make sure this doesn’t happen again. No retiree should have to fear having their pensions taken away, and we need to fix this,” Thomas said. “It’s nice to know our voices have been heard.”
Dave Schneidt of Olathe, Kansas, worked for Roadway Express, now part of YRC Worldwide, for 32 years. He is the director of the Missouri-Kansas City Committee to Protect Pensions, which started with 20 to 25 members but attracted crowd of more than 500 union members in recent weeks as word spread about the proposed cuts.
“For now, we are going to take a deep breath and not worry about paying our bills for now, but we are not going to rest on our laurels,” Schneidt said. “Now we need to start the problem-solving stage because destroying people’s lives by taking away their pensions is not the answer.”
A huge weight has been lifted off retirees’ shoulders after Feinberg’s decision, said John Murphy, Eastern region international vice president of the International Brotherhood of the Teamsters.
But he said more must be done to protect the retirement security of American citizens.
He was critical of the Multiemployer Pension Reform Act.
The law was part of the Omnibus Spending Bill of 2014. But Murphy said that lawmakers weren’t allowed to vote on the merits of the particular bill and that many didn’t have a chance to read the bill.
“I talked to a number of legislators who, even as late as the summer of 2015, still had not had a chance to read the bill,” he said. “So I think what this really means is attaching bills to other bills with self-executing amendments should be rarely used, if at all.”
Murphy said the Teamsters will attempt to secure funding for the troubled pension plans. He said his hope is that within the next 60 to 90 days the union will have a plan “we can share with the public.”
“We have to come up with a funding solution, particularly for Central States Pension Fund,” Murphy said, “because they cannot invest their way to solvency and they can’t cut their way to solvency.”