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One of the nation's biggest and best-known multiemployer pension plans says it is considering cutting promised benefits in order to survive.
In a newly launched website, the Teamsters Central States, Southeast & Southwest Areas Pension Plan said “significant and painful retirement benefit reductions must be considered” in order “to prevent a real risk of a total loss benefits.”
Such cuts are explicitly authorized under legislation Congress passed in 2014. Before cutting benefits, the 2014 law requires plans to obtain authorization from the Treasury Department. Earlier this week, the Treasury Department announced the appointment of attorney and veteran arbitrator Ken Feinberg to review benefit cut applications from financially troubled multiemployer plans.
On its website, the Teamsters plan, whose trustees include employers and union members, laid out its dire financial condition. For every $3.46 that the plan pays out in benefits, only $1 is collected, generating a $2 billion annual shortfall.
At year-end 2014, the plan, which has more than 400,000 participants, had $35 billion in liabilities and just $17.8 billion in assets.
Among the reasons for the plan's dire financial condition are a surging number of retirees and a decline in union-represented employees.
“Baby boomers are retiring in record numbers, and the union workforce has been steadily declining. As a result, the fund currently has more than three times as many retirees as active members, so far fewer contributions are coming in than benefits being paid out,” the Teamsters website said.
In addition, two major recessions have driven down the plan's investment assets and pushed a large number of employers into bankruptcy or out of business. Deregulation of the trucking industry in the 1980s also resulted in the loss of thousands of employers that used to contribute to the plan, the Teamsters plan website noted.
The Pension Benefit Guaranty Corp. said Tuesday it has paid out more than $284,000 — the first of what will be millions of dollars in payments — to cover benefits for 365 participants in two insolvent multiemployer pension plans.