The Government Accountability Office said it would investigate investment decisions made by Central States Pension Fund trustees.
“We accepted the request, but the work has not started yet, so we have no details on exactly what we will cover or any time frames,” Chuck Young, a GAO spokesman, told Trucks.com on Friday.
In May, the Treasury Department rejected a proposal by the Central States Pension Fund to slash the benefits of more than 270,000 Teamsters union retirees, including truck drivers and dockworkers, by as much as 70 percent. Trustees said the cuts were necessary because the fund was expected to run out of money in about 10 years.
The fund listed $16.8 billion in assets and $35 billion in retiree obligations as of year-end.
Fifty-one Democrats, including 41 House members and 10 senators, sent letters to the GAO on June 20 calling for an investigation into alleged “mishandling” of the fund.
“It’s astonishing to now read about how Wall Street firms hired by Central States invested retirees’ pension funds in Iraqi banks in 2008 right in the middle of a full-scale war in Iraq,” said Marcy Kaptur, D-Ohio. “Or how they invested in unstable Russian banks when the economy there is in shambles, or how they sunk $1.4 billion into risky Single-A-rated mortgage-backed bonds in the middle of the housing meltdown.”
Central States was not available for comment about the GAO decision on Friday
Kaptur and Sen. Bernie Sanders (I-Vt.) introduced companion bills in June 2015 that called for the repeal of the Multiemployer Pension Reform Act, which allows pension funds to slash retirees’ pensions if they are in danger of failing. The legislation was designed to relieve the burden of insolvent pension funds on the federal Pension Benefit Guaranty Corp.
The law was part of the Omnibus Spending Bill of 2014. However, lawmakers weren’t allowed to vote on the merits of the particular bill, and many didn’t have a chance to read the bill because it was attached to other legislation as a so-called self-executing amendment.
The GAO is also investigating the Department of Labor’s oversight of the Central States pension fund after a request by Sen. Chuck Grassley (R-Iowa).
“Concerns over the solvency of these plans are heightened due to large fiscal deficits currently facing the Pension Benefit Guaranty Corporation’s multiemployer guarantee program,” Grassley said. “As a result, should Central States, or another large plan become insolvent, PBGC would likely not have enough funds to make full guarantee payments to beneficiaries who would see much of their retirement savings wiped out.”
The pension fund has operated under a consent decree granted by the Labor Department in the mid- 1980s after an investigation into the fund found “gross mismanagement and self-dealing by fund managers,” Grassley said.
Grassley is calling for the review because there hasn’t been one since 1985. Because the fund has been facing solvency issues since the early 2000s, Grassley said he wants to learn if the Labor Department took appropriate actions when it became aware of the fund’s dire financial situation.
Other questions Grassley wants the GAO to answer include whether Central States investments are consistent with comparable pension plans that have remained solvent, such as the Western Conference of Teamster Pension Plan.
The pension fund said in a statement in May 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 said the only way the fund won’t run out of money is either through government funding, either directly to its pension fund or through the PBGC. The fund is urging pension participants to “call their congressional representatives to demand legislative action that protects their pension benefits.”
“In the coming months, we will do everything in our power to support a legislative solution that protects the pension benefits of the more than 400,000 Central States participants and beneficiaries, who should not have to bear the emotional trauma of waiting until the fund is at the doorstep of insolvency before Congress acts,” Central States said.