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George Bauer talks about retirement rules

New government rules make it tough for retirees and their pensions
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New government rules make it tough for retirees and their pensions

George Bauer of Troy and Bill Randolph of Collinsville both worked at the old Pevely Dairy processing plant in South St. Louis. After long, rewarding careers at the plant, they retired expecting to receive a Teamsters pension check each month for the rest of their lives.

But now the two longtime friends and former classmates at Collinsville High are fighting to keep those checks from being sharply reduced on July 1.

“We’re sick about this whole deal,” said Randolph, whose pension may be slashed 37 percent to about $1,100 a month. “The country is going haywire. If they do it to us, they’ll do it to everybody’s pension,” said Randolph, who worked 28 ½ years at the dairy plant operated by Pevely and then later bought by Prairie Farms.

We’re sick about this whole deal.

Central States retiree Bill Randolph of Collinsville

“People are not going to sit still and take this. Lose their home. Lose what they have at their age,” Bauer said. “There are many people who are not going to be able to survive this. We are going to have a tough time ourselves. It will take almost $8,400 a year from us.”

“We worked all our lives to achieve this. After all, this is what you worked for, the opportunity to be able to retire,” said Bauer, who spent 33 years at the dairy plant. He said his pension may drop from $2,000 a month to $1,300.

Bauer, 71, and Randolph, 73, are among the more than 200,000 Teamsters who face cuts because the managers of the pension fund, which is called Central States, believe the reductions are necessary to prevent the fund from becoming insolvent in 10 years.

Central States is the first pension fund to seek pension check reductions permitted under a law signed by President Barack Obama in December 2014. The law — known as the Multiemployer Pension Reform Act — was included in a spending bill narrowly approved by Congress. The U.S. Treasury Department has to approve the reductions before they take effect.

This is a gut-wrenching decision that we do not take lightly.

Thomas C. Nyhan, executive director and general counsel for the Central States Pension Fund

“This is a gut-wrenching decision that we do not take lightly,” Thomas C. Nyhan, executive director and general counsel for the Central States Pension Fund, said in an email. “The alternative to these benefit reductions is that all of our participants would receive nothing when the fund becomes insolvent in 10 years.”

The Central States Pension Fund, which is based in Rosemont near Chicago, has $17.3 billion in assets but $35.1 billion in obligations, according to the latest records available. In 1980, the fund had four workers for each retiree but now there are five retirees for each active worker.

$17.3BCentral States Pension Fund assets

$35.1BCentral States Pension Fund obligations

Along with the declining membership, the pension fund said it suffered investment losses in two “devastating” recessions since 2000.

“For every $3.46 in pension benefits the fund pays out in pension benefits, only $1 is collected from employers, resulting in an annual shortfall of $2 billion. That math simply doesn’t work, and it never will,” Nyhan said.

The Central States Pension Fund was established in 1955 by Jimmy Hoffa and is known as a multiemployer fund because participants can work for different companies during their career. The fund has been overseen by a group of banks since the early 1980s as the result of a federal consent decree designed to sever Teamster ties to organized crime and end the union’s investments in Las Vegas casinos, according to The New York Times.

The majority of Teamster retirees were truck drivers and the deregulation of the trucking industry in the 1980s caused a drop in union membership as thousands of trucking companies closed. Central States said truckers no longer comprise the majority of current union membership.

‘Debt bomb’

The Treasury Department said most multiemployer pension funds do not need to cut benefits at this time but there are others like Central States that are reporting financial difficulties.

Last year, 208 multiemployer pension plans, including Central States, reported to the U.S. Department of Labor that they were in “critical status” and were required to adopt a plan at restoring the financial health of the plan. Also, 94 plans reported they were in “endangered status.”

Illinois has a $111 billion pension debt for state employees and in May the state Supreme Court struck down a 2013 plan to address the debt. And analysts said the federal Pension Benefit Guaranty Corp., which is tasked with insuring private pension funds, could run out of money in 2025 for its multiemployer program.

“The Pension Benefit Guaranty Corp. is supposed to step in to insure pension benefits, albeit at much lower levels; but it is projected to run out of money for its multiemployer program in 2025, a year before Central States’ projected insolvency,” Nyhan said. “So, without this rescue plan, all of our participants’ benefits will be reduced to essentially zero at that time. Congressional leaders have repeatedly said that if the PBGC goes broke, it will not get a bailout.”

Also, Nyhan said implementing cuts at a more gradual rate is not feasible.

“It is unlikely Treasury would require Central States to do this since any delay would cause the plan not to meet the mandate of preventing insolvency,” Nyhan said in an email.

The traditional pension is really biting the dust.

Juli Niemann, analyst with Smith Moore in Clayton, Mo.

Juli Niemann, an analyst with Smith Moore in Clayton, Mo., sees a dim future for pensions like the ones from Central States.

“This is probably the biggest debt bomb we’ve got going here in the United States,” Niemann said of unfunded pensions and pension liabilities.

“Pensions are almost a piece of wonderful history. The way things used to be, wasn’t it lovely?” Niemann said. “The traditional pension is really biting the dust.”

“It’s an unfortunate thing but there is absolutely nothing that can be done.”

Niemann doubts the public is ready to raise taxes to fund pensions.

“That’s kind of a non-starter right there,” she said. “Do you — the citizen — want to pay pensions for somebody who retired many, many years ago? And some of these were Cadillac pensions.”

Niemann noted baby boomers have begun retiring and some people want to retire at 55. And at the same time, life expectancies are increasing.

“Try 70. That’s the new retirement age,” Niemann said. “I don’t have a pretty picture for you.”

Retiree angst

Central States retirees 80 and older do not face pension cuts and people who are 75 to 79 would see reductions at a lower rate. Participants who received disability benefits would not have their payments reduced.

The average reduction is 24 percent for the 15,300 Central States retirees who live in Illinois.

There are 1,800 Central States retirees in St. Clair and Madison counties.

Some participants are considered “orphans” who worked for companies that left the fund and failed to pay their employer pension withdrawal obligations. There are two people in Illinois in this category, and they face cuts of at least 70 percent.

More than three dozen Central States retirees responded to the News-Democrat after the BND asked participants to comment on the proposed cuts.

When I retired, I was guaranteed this pension for the rest of my life and now they say they’re running out of money.

Central States retiree Henry Kreke of New Baden

Henry Kreke, 72, of New Baden was told his pension check would drop 36 percent from $2,000 a month to $1,275 a month. “It’s almost unbelievable that they could do something like that.

“When I retired, I was guaranteed this pension for the rest of my life and now they say they’re running out of money,” Kreke said.

He made concrete vaults at the former Wilbert Vault plant near New Baden and made deliveries for Wilbert for over 32 years.

Kreke said the union negotiated contracts over the years in which workers agreed to have lower wages in exchange for contributions to the pension fund.

Jack Wuebbles, 69, of Carlyle is a retired truck driver who was told his pension would be reduced 51 percent from $3,000 a month to $1,463.

51 percent Pension check reduction possible for Jack Wuebbles, 69, of Carlyle

And John Street of Hillsboro said his pension may be reduced 53 percent. The 62-year-old drove trucks for 30 years and described the planned pension cuts as “horrible.”

St. Louis area retirees, including Bauer and Randolph, attended a rally in St. Louis last month to raise awareness about the proposed cuts.

Retired and current Teamsters have formed the Committees to Protect Pensions with more than 40 groups popping up across the country. You can see all the groups at mycspensionhandsoff.com.

Sue Mauren of Minnesota is a retired Teamster business agent and officer who was appointed the volunteer “retiree representative” to the Central States Pension Fund.

Mauren has received more than 6,100 letters, emails and phone calls about the Central States cuts.

“There are some people who have contacted me and said, ‘No, the cut wasn’t as bad as I thought it would be and I can live with that,’” Mauren said. “And there are others that are telling me that they are going to have to choose between buying medicine and paying their mortgage and they’re worried that they’re going to become homeless because of these cuts.”

“It’s a very difficult situation.”

Voting process upsets pensioners

The U.S. Treasury Department has until May 7 to approve or deny Central States’ application to cut pension benefits.

Nationally known attorney Kenneth Feinberg was appointed special master by the Treasury Department as part of the implementation of the law allowing Central States to cut pension checks.

Feinberg, who was special master for the Sept. 11 victim’s fund, has met with Central States retirees in town hall meetings nationwide, including one in Peoria on Thursday.

If the plan is approved by the Treasury Department, Central States participants would then be asked to vote on whether to implement the reductions.

But here’s the catch that upsets retirees: Since the Central States Pension Fund is so large and is considered “systemically important,” the Treasury Department can still require the pension cuts be made even if the majority of participants vote against the plan.

“How do you tell the American people that you can vote on something but it really isn’t going to make any difference?” said Bauer, the retiree from Troy. He said this possibility “angers” him the most out of all that has happened since he received a letter in October that his benefits would be cut. “If a group votes ‘no,’ …. it should be ‘no,’” he said.

Outlook for retirees

The Multiemployer Pension Reform Act “effectively deep-sixes 40 years of established pension law by allowing companies to cut retiree pensions,” said Joellen Leavelle, digital and outreach director of the nonpartisan Pension Rights Center in Washington, D.C.

“It is important to note that many of these retirees are physically unable to return to work to make up for the income that would be lost due to the pension cuts — precisely because they spent years in demanding jobs that took a hard physical toll on their bodies and left them unable to continue work,” Leavelle said.

Many of the Teamsters who contacted the BND said the union has strict restrictions about retirees getting jobs to supplement their income. However, Central States would loosen those restrictions if the cuts are approved.

Leavelle said her group wants to help the retirees by supporting legislation sponsored by Vermont Sen. Bernie Sanders, who is running for the Democratic presidential nomination, and Rep. Marcy Kaptur, D-Ohio.

The proposed Keep Our Pension Promises Act would halt the pension cuts allowed by the Multiemployer Pension Reform Act, and it would give funding to troubled pension plans and the Pension Benefit Guaranty Corp. by modifying two tax shelters used by wealthy investors and large estates, according to the Pension Rights Center.

The proposed Keep Our Pension Promises Act would halt the pension cuts allowed by the Multiemployer Pension Reform Act and it would give funding to troubled pension plans and the Pension Benefit Guaranty Corp. by modifying two tax shelters used by wealthy investors and large estates, according to the Pension Rights Center.

The legislation remains in committee.

Leavelle also said her group is exploring legal arguments for a potential lawsuit to stop the cuts.

Carl Horowitz, director of the Organized Labor Accountability Project for the nonprofit National Legal and Policy Center in Falls Church, Va., suggested on the center’s website that the Teamsters “convert the Central States fund to a defined-contribution plan such as the 401(k) or a hybrid defined-benefit/defined contribution plan.”

For Karen Friedman, the executive vice president and policy director for the Pension Rights Center, the best solution for the retirees would be passage of the Keep Our Pension Promises Act.

“Solving this issue without cuts is a bi-partisan issue, and, if ever there was a reason for Congress to step in and do what’s right, it is now,” she said in a statement about the Central States’ plan. “If middle-class retirees who did everything right can’t depend on their government to protect them, who can?”

Where to voice your opinion

  • Sue Mauren is the volunteer retiree representative for Central States participants. Email: centralstatesretireerep@losgs.com Mail: P.O. Box 15670, Minneapolis, MN 55402. Call center: 855-465-6747. Go to losgs.com for more information.
  • Kenneth Feinberg was appointed special master by the U.S. Treasury Department as part of the implementation of the law allowing pension checks to be reduced. He held a public hearing in Peoria on Thursday and may hold others this year.
  • The Treasury Department will accept comments on the Central States plan until Feb. 1. The original deadline was in December. Go to www.regulations.gov and type in “Central States” in the search box to leave a comment or mail comments to Department of the Treasury, MPRA Office, 1500 Pennsylvania Ave. NW., Room 1224, Washington, DC 20220 Attn: Deva Kyle.
  • Also, the Treasury Department hosts conference calls on Monday afternoons for Central States participants. Go to treasury.gov for more information.
  • Retired and current Teamsters have formed the Committees to Protect Pensions with more than 40 groups popping up across the country. You can see all the groups at mycspensionhandsoff.com.

Additional sources

  • Central States has established a website at cspensionrescue.com. Phone: 800-323-5000.
  • The nonpartisan Pension Rights Center has a fact sheet on Central States’ proposal at pensionrights.org.
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