thewsi

Private Pensions Are At Risk Too!

Private Pensions Are At Risk Too!

Washington – — More than 1 million Americans who were promised secure, predictable retirement income probably will see part of their monthly benefit checks evaporate as Congress moves to stabilize some private pension systems veering toward insolvency. The expected congressional action to allow previously promised private-sector pensions to be cut is another sign that decades-old assurances that workers were given about retirement income are rapidly fading. The move comes after San Jose, Detroit and other cities have partially reneged on long-established contracts with government workers and retirees, shrinking benefit checks that were supposed to only increase over time. Traditional political alliances have fractured as the pension measure — attached to the money bill needed to keep the government open — has moved toward a final vote expected soon. Unions are bitterly split. Some are so panicked by the possibility that the entire system could collapse that they have joined with business leaders to implore Congress to act. “This is the only realistic way to avoid insolvency and preserve as much of the promised pension benefits as possible,” Joseph Hansen, international president of the United Food and Commercial Workers, wrote in a letter to lawmakers earlier this week. Other unions and retiree groups, including AARP, have denounced the plan as a betrayal of a promise, enshrined in federal law for four decades, that vested pension benefits would not be cut. The retirees whose pensions are at stake are mostly blue-collar workers, including mechanics, truckers and construction workers, who participate in what are known as multi-employer pension plans. The plans were designed to allow workers flexibility to switch companies with ease, guaranteeing them a stable retirement in fields where they were likely to move frequently between employers. Retirees in all 50 states are affected, although the biggest of the pension plans in danger of collapse is the Teamsters-affiliated Central States Pension Fund, which has about 410,000 participants in the Midwest and South. The average pension for Central States members is $15,000 per year. Federal officials have warned for years that multi-employer plans covering as many as 1.5 million workers were dangerously unstable. Shifts in the economy have left fewer workers paying into the plans, even as more retirees take money out of them. Stock market losses during and after the financial crisis of 2008 worsened the problems. Last month, federal pension officials reported the crisis had escalated, with a high likelihood...

Read More

Two Pensions Better Than One? Maybe Not!

Two Pensions Better Than One? Maybe Not!

Almost two years ago, Congress approved language that gave multiemployer pension plans the ability to dramatically cut benefits to their participants. Now some of those same lawmakers are threatening the retirement security of thousands again. Rep. John Kline, R-Minnesota, authored the Multiemployer Pension Reform Act (MRPA) that ultimately was included in the fiscal 2015 omnibus funding bill. Soon thereafter, the Central States Pension Fund (CSPF) attempted to take advantage of the provision to cut the pensions of hundreds of thousands of retired Teamsters by as much as 70 percent. The union stood up and vigorously opposed both MRPA and the pension cuts. And the U.S. Treasury Department ultimately ruled against CSPF’s proposal last May. So now Kline, chairman of the House Education & Workforce Committee, is trotting out legislation that changes pension funding rules by allowing multiemployer pension administrators to transition their defined benefit pension plans to a new “composite” plan. The bill, which was the subject of a hearing late last month, would have the effect of creating two underfunded pension plans that shortchange participants. First, it would significantly reduce contributions to the legacy pension plan. Under the proposal, pension administrators are permitted to refinance plan liabilities and pay them off over 25 years, about double the time permitted under current law. The same market forces facing legacy plans would create funding shortfalls for composite plans, requiring plans to either increase contributions, or probably more likely, deeply cut benefits. Given the same contributions are used to fund two plans, even devastating cuts to the benefits of composite plan participants in times of market volatility might not be enough to save the legacy plan from painful benefit cuts. In addition, Kline’s legislation would permit unprecedented cuts to retirees’ benefits. It doesn’t even contain the few procedural protections for plan participants offered under MRPA, making it much easier for composite plans to massively slash benefits. The proposal would also increase the likelihood of employers withdrawing from legacy plans. Under current law, a company’s withdrawal liability payments are calculated based on its pre-withdrawal contribution rate, ensuring that withdrawing employers are still paying their fair share of pension obligations. But under the Kline bill, the pre-withdrawal contribution rate is lower than it would be in a traditional defined benefit plan. By allowing employers to dramatically cut their legacy contribution rate, the proposed measure would also significantly reduce the cost of withdrawing from...

Read More

And The Hits Keep Coming!

And The Hits Keep Coming!

Detroit — A federal appeals court has ruled in favor of Detroit in a lawsuit by city retirees whose pensions were cut in a plan to get the city out of bankruptcy in 2014. Some retirees sued, saying they deserve the pension that was promised before the city filed for bankruptcy in 2013. But in a 2-1 decision Monday, Judge Alice Batchelder of the 6th Circuit Court of Appeals said it’s “not a close call.” The court says Detroit’s emergence from bankruptcy in 2014 was the result of a series of major settlements between the city and creditors and must not be disturbed. Thousands of retirees saw their pensions cut by 4.5 percent. Altering the pension cuts, the judges said, would be a “drastic action” that “would unavoidably unravel the entire plan, likely force the city back into emergency oversight and require a wholesale recreation of the vast and complex web of negotiated settlements and agreements.” In dissent, Judge Karen Nelson Moore says retirees deserve their day in court. She said they have been left “with the impression that their rights do not matter.” She added Batchelder and Judge David McKeague were citing a “questionable” legal standard to dismiss the case. “It has real-world consequences for the litigants before us — retirees who spent their lives serving the people of Detroit through boom and bust, and who feel that the city’s bankruptcy was resolved through a game of musical chairs in which they were left without a seat,” Moore wrote. Jamie Fields, a retired Detroit Police Department deputy chief and an attorney for about 160 retirees, said Monday that Moore, a Clinton appointee, validated his legal battle in her dissent. “With all the people who said we were crazy for filing this, at least there was one judge who said they agreed with me. I feel some vindication that one person didn’t say I was crazy,” he said. Fields said he will ask for the full appeals court to hear the case. “The next step after that would be to take it to the Supreme Court. The odds of them taking it are small, but the retirees deserve it, and we have no choice but to go forward,” Fields said. Detroit Mayor Mike Duggan declined to comment at an afternoon jobs event since he had not seen the ruling. Detroit Corporation Counsel Melvin Hollowell also declined comment on the...

Read More

More Cities At Risk!

More Cities At Risk!

Grand Rapids — Michigan has “a real problem” with the unfunded government retirement costs in its cities that has caused a mortgaging of “the future for far too long,” a former head of the nation’s government accounting office said Monday at the West Michigan Policy Forum. The state has $51.4 billion worth of unfunded retirement cost liabilities and ranks in the country’s bottom 10 at No. 42 among states for its “relative financial positions” that includes state assets and debts, according to a report prepared by former U.S. Comptroller General David Walker. The report commissioned by the Grand Rapids Chamber of Commerce also showed the cities of Grand Rapids, Ann Arbor, Lincoln Park, Saginaw, Port Huron, Kalamazoo and Traverse City have $1.69 billion in unfunded retirement liabilities. The seven cities have another $1.15 billion for other retirement plan liabilities, especially in health care where “considerable uncertainty exists” on costs and those could balloon, according to the report. It is a dire picture for public-sector retirement costs that needs to be addressed quickly, said Walker, senior strategic adviser at accounting firm PricewaterhouseCoopers. “For many, many years, deals were struck between career politicians and labor leaders and nobody represented the taxpayers,” he said. “It’s time to recognize that reality and make it right.” The former head of the Government Accountability Office said business and government leaders need to find a solution that is fair to both retirees and taxpayers “because we’ve mortgaged the future for far too long.” The policy forum annually brings business and political heavyweights to discuss problems and often form conservative-leaning solutions. The conference was the backdrop for 2008 discussions on repealing and replacing the Michigan Business Tax and making Michigan a right-to-work state — both of which the Republican-led Legislature approved and Gov. Rick Snyder signed into law after taking office in 2011. The Republican governor briefly noted the pension issue during his 30-minute address and told reporters afterward it is a problem that needs to be addressed. “Some of these liabilities, depending on the jurisdictions, can be very large or could be major burdens over the long term,” Snyder said. “And how do you strike the right balance?” “Because you want to do right by the employees to make sure they’re treated appropriately, you know, you’re not taking things away from them,” he said. “But you’re building a better future for all of us. And I...

Read More

Temporary Deals Don’t Solve Problems!

Temporary Deals Don’t Solve Problems!

Washington — More than 30,000 Michigan current and retired workers avoided pension cuts — for now — when the Treasury Department rejected a Teamsters Central State Pension Plan proposal that would have started in July. Treasury Secretary Jacob Lew said in a letter to members of Congress released Friday that while the decision blocks the pending pension cuts for 273,000 current and retired workers across the country, it does not resolve the issue because the pension plan remains severely underfunded and is projected to become insolvent within the next 10 years. The review was conducted by Kenneth Feinberg, the outside attorney selected by the Treasury Department to review the case. Feinberg has worked with victims of the Sept. 11 terrorist attacks and General Motors’ ignition defect recall. Lew said the rejection of the proposed cuts was based on Feinberg’s findings that the plan failed to demonstrate the reductions would keep the pension plan from becoming insolvent or show they were being equitably distributed. It would have affected retired truck drivers, warehouse workers, dock workers and their widows and spouses. Michigan congressional Democrats and the Teamsters union welcomed the rejection of the plan, which would have imposed cuts of 60 percent to 70 percent this summer. Teamsters General President Jim Hoffa praised Feinberg and Treasury for the decision, saying it protected thousands of retired workers from “massive cuts that would destroy so many lives. … We will find a solution to this problem that will allow members and retirees to continue to retire with dignity.” U.S. Rep. Debbie Dingell, the Dearborn Democrat who led a bipartisan 88-representative coalition in opposition to the proposal, said retirees and their advocates must continue to fight because potential pension cuts still loom. “While we are pleased that Treasury agreed that placing an inordinate burden on workers and retirees is not the only option for Central States, it is now time for all stakeholders to return to the negotiating table to find a solution that guarantees workers the pensions they have earned and doesn’t threaten their security in their retirement years,” Dingell said in a statement. “We will not stop fighting until these retirees get the benefits they deserve.” Although the multiemployer Central State Pension Fund’s executive director said trustees would “carefully consider the most appropriate next steps,” he said the rejection makes it more difficult to craft a viable alternative. The fund has said...

Read More