In the world of pension law, Charles Weatherman of Excelsior Springs is a 72-year-old “orphan.” And he’s about to pay dearly for it.
It means his pension, earned over nearly 33 years mostly spent hauling new trucks out of the Ford Claycomo plant, is slated to be cut by 59 percent next July 1.
He said he drove 22 years for Allied Systems before retiring in 2000. And when the company went under years later, it — like many others before — failed to pay into the Central States Pension Fund what it owed.
“That’s the one that orphaned me,” Weatherman said at a rally Thursday outside The Kansas City Star.
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The crumbling Central States Pension Plan says it is going to cut members' pension checks, many by half or more. These Teamster retirees protested the planned cuts Wednesday in Kansas City. (Video by Mark Davis The Kansas City Star Nov. 19, 2015)firstname.lastname@example.org
Weatherman is among 43,400 union members and retirees designated as orphans and facing the steepest cuts under a restructuring of the crumbling pension fund.
The cuts have sparked earlier rallies organized by the Missouri-Kansas City Committee to Protect Pensions and claims that some families will go from comfortable retirements to poverty.
Nationally, Central States sent letters last month to 407,000 union members, mostly Teamsters, who had worked for the many companies that paid into, and often failed to pay into, the fund. Central States said it’s going broke and won’t be able to pay benefits past 2026 unless these drastic cuts are taken now.
Some pensions paid by Central States are being spared under the rescue plan as it calls the restructuring. No cuts are coming for those 80 and older. Pensions of those at least 75 but not yet 80 are “partially protected,” an overview from the fund said.
The fund’s overview blames “two devastating national economic recessions,” deregulation of the trucking industry and declining union membership, which means fewer new workers entering the pension plan and making payments.
Central States said it pays out $3.46 in benefits for every dollar it takes in. The difference comes from the fund, which is invested to produce more money but is not big enough to sustain current benefits and expected future benefits.
Many of the companies that paid into the fund to cover workers’ benefits failed and stopped paying. Like some other companies, YRC Worldwide Inc. in Overland Park stopped payments under an agreement to avoid its own bankruptcy and then resumed them at a reduced rate.
Central States said earlier efforts to shore up the fund have not been enough. These included requiring higher contribution rates from employers, cuts in early retirement benefits and other benefits changes, and slower gains in accumulating pension benefits.
So it now has proposed the cuts facing retirees like Warren Stevenson, who was an over-the-road driver for many of his 34 years with the International Brotherhood of Teamsters.
Stevenson said that he understands cuts are needed, but he said these are too much.
“We worked hard to get these pensions,” Stevenson said. “It’s not fair. It’s not fair to the workers. It’s not fair to the families.”
Stevenson’s letter shows his pension, which he’s been living on since retiring eight years ago, will be cut by 51 percent. It’s steep because the Kearney resident will be among the young members of the pension fund even when he turns 65 next month.
The dramatic cuts are being made possible under a 2014 law aimed at dealing with severely underfunded pensions. Central States’ members will get to vote on whether to accept the plan, but the law gives the U.S. Treasury the power to override a collective “no” vote.
Central States is unlike most pensions because many companies and their employees were in the same fund. Most company pension plans cover only employees of that company.
The retirees’ letters said they would receive benefits from the Pension Benefits Guarantee Corp. should Central States fail. These would be smaller checks than the planned cuts would leave them with, but they would start much later assuming the fund continued to pay until 2026.
The federally created Pension Benefits Guaranty Corp. backs private pensions that pay into its program. But Central States is so large that its failure could overwhelm the multi-employer plan program of the guarantee corporation.