Pension Fund Cuts Benefits for 300,000 Truckers
A proposal submitted to the Treasury Department by the Central States Pension Fund (CSPF), one of the country’s largest pension funds, has many truck drivers and their families who rely on their pension checks concerned about their future. The fund said over 400,000 retirees, about 300,000 of them teamster truckers, will have to undergo significant monthly cuts to their benefits if the fund is to continue paying out to its retirees. The reduction will affect the pensions of 407,000 members.
Benefits under pension plans have always been treated as sacred or untouchable, and are only meddled with when situations have become dire. But the U.S. government passed a controversial law last year letting companies cut current retirees benefits, “to address the fiscal distress being faced by some of the nation’s multi-employer pension plans.” CSPF is the first to propose a pension reduction under the new law, but others are likely to follow, as similar funds realize they are running out of funding as CSPF did. Over 10 million workers in America are covered by funds such as this one.
The CSPF said the extreme move is mandatory to save the program from bankruptcy within the next 10 years. “Without changes in its benefit formula, the pension plan is on course to be insolvent by 2026,” Executive director of the CSPF, Thomas C. Nyhan. He also noted that the plan has been in the works for some time and they couldn’t continue waiting to make the change. “A realistic rescue plan is needed now,” Nyhan said. “The longer we wait to act, the larger the benefit reductions will have to be.”
The average participant will have their pensions reduced by about 23%, but the fund has made additional preparations to take lessen or remove the cuts from the plans of the disabled and elderly. Older retirees, such as those above 80, will still see overall cuts but they will be smaller. Those that are disabled will experience no reductions and pensions will remain the same for them. A stipulation has also been included that those who previously worked for companies who are continually late on making pension fund contributions will undergo higher cuts.
This begs the question: what’s the problem? Over 1,500 companies from many different industries (trucking, construction, etc) have current and former
employees relying on the CSPF each month. Each of these companies pay into the fund to keep it operating, but changes are afoot that are creating problems for the fund: Laws are being renewed, the economy is changing, and retirees are living longer.
For every $1 it brings in, the fund pays out $3.46. Anyone can do that math on that one. Every year the fund pays out about $2 billion more than what it has to give. And in the 80s when the trucking industry was deregulated, the CSPF was hit hard with many participants dropping their membership. Before deregulation, each retiree had four active workers to cover their benefits. Now, there are five retires for every one active worker. The recent Great Recession took even more out of it as investments were lost amid the economic crisis. While investments are now returning a 13% gain, it’s not near enough to keep the fund afloat.
Not surprisingly, advocacy groups are speaking out against the move. James P. Hoffa, general president of the International Brotherhood of Teamsters said, “Pension fund participants and beneficiaries did not cause the problem of underfunding. They worked day in and day out to earn their pension credits. It is monstrously unfair that they will end up holding the short end of the stick.” Union leaders and those that support them, including Democratic presidential candidate Bernie Sanders, want the government to pump money into pension funds. Sanders has even proposed a bill that would repeal the measure.
The Treasury is allowed 225 days to go over CSPF’s plan. If approved, plan participants would then vote on the cuts, but even if they vote against it, the new law allows for the fund to still take the cuts.