The beleaguered Central States Pension Fund has fired back against attacks on its painful rescue plan, saying there’s no time for a “do-over” if Washington rejects it.
Central States, under a controversial 2014 law, has proposed cutting thousands of retirees’ monthly pension checks because the fund is going broke. Many of the cuts would be by half or more, starting in July, and affect many pensioners in their 70s.
Trustees of the pension fund that covers mainly Teamsters union members and retirees said it needs $11 billion in new funding to make good on current and future benefits. Short of a bailout of that size from Congress, or going through with the proposed rescue plan, the fund will collapse, they said.
“If members of Congress are serious about helping Central States participants, then they must pass legislation that provides some or all of this funding,” said a letter from trustees Arthur H. Bunte Jr. and Charles A. Whobrey.
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Their letter was dated Feb. 18 and was sent to U.S. Sens. Gary Peters and Debbie Stabenow. The trustees sent an identical letter to U.S. Reps. Debbie Dingell and John Conyers.
The trustees aimed the letters at them for opposing the rescue plan without offering another solution. Moreover, “there is no time for a ‘do-over’ if the rescue plan is rejected,” the letters said.
“This is because each month the plan is delayed will result in larger benefit reductions until the point is reached where the fund can no longer be salvaged,” they wrote.
Thomas Nyhan, executive director of the pension fund, provided the letters and an emailed statement. His statement said Congress needs to support the rescue plan or pass legislation to provide the additional funding the pension plan needs.
“The hard truth is no other course of action will protect participant benefits,” Nyhan wrote.
The pension fund’s response follows a string of public sessions at which Teamsters facing pension cuts blasted the rescue plan. Noted mediator Kenneth Feinberg held the town hall meetings in eight cities, including one in Kansas City earlier this month that attracted 750 people.
In Kansas City, several asked Feingberg to reject the plan at least to give them and others a chance to find a less devastating solution.
U.S. Rep. Emanuel Cleaver of Kansas City spoke at the event and pushed back at the Central States trustees’ letter on Wednesday.
“It is disappointing to hear that the Central States Pension Fund Trustees are claiming that nothing else can be done except to strip thousands of retirees of their earned benefits,” Cleaver said in a statement.
“My office is requesting the Department of Justice look into how the fund has been managed all of these years. It would be easy for the Central States Pension Fund to ask the U.S. Treasury to fix this by allowing the reductions or asking Congress for additional funding but first and foremost, we must understand how the fund arrived at this point,” Cleaver said.
The trustees’ letter said that the fund’s shortfall is mostly due to two economic downturns since 2000 and to trucking deregulation, which helped reduce the number of companies paying into the fund and left many bankrupt and unable to pay.
Feinberg has been tasked by the U.S. Treasury secretary to determine whether the Central States proposal meets the terms set down by the 2014 law. Feingberg said he intends to rule by May.
In their letter, the pension fund trustees said Central States participants would see even larger cuts if the plan failed and the Pension Benefit Guarantee Corp. took over.
The Central States Pension Fund is covered by a portion of the PBGC set up for it and other multi-employer pension funds. A different portion of the PBGC covers pension plans that cover single employers.
The trustees’ letter also said that the PBGC “lacks the resources to pay virtually any portion of the guaranteed benefits” for multi-employer plans because of its own funding problems. It urged Congress to not only fund the guarantee program but also to increase the guarantees it provides.