Update: The bipartisan committee working to resolve the pension crisis announced Thursday afternoon it would continue to work beyond its Friday, Nov. 30, deadline. The committee has not reached a solution and a press release from Ohio Senators Sherrod Brown and Rob Portman, who both serve on the committee, said they need more time.
“Working together, Rob and I have made significant progress on the committee and we know that with more time a bipartisan agreement is achievable,” Brown, co-chair of the Joint Select Committee on Solvency of Multiemployer Pension Plans, said in the written statement.
Sen. Portman added, “I will continue to work with my bipartisan colleagues until we solve this pension crisis once and for all.”
Friday is the deadline for a special joint congressional committee to agree on a plan to try to save retirement plans that cover tens of thousands of truck drivers, coal miners, plumbers and other tradespeople.
The unusual bipartisan committee divided evenly by House and Senate, Democrats and Republicans, was created earlier this year to try to avoid the collapse of more than a hundred of what are called “multiemployer pension plans.”
The Central States Pension Fund that covers truckers in the Teamsters union is just one plan teetering on the edge, says Jean-Pierre Aubry of Boston College’s Center for Retirement Research.
“If you really want to make sure that benefits get paid, especially to the critical and declining plans, you’re talking about $60 billion to $70 billion that needs to be paid somehow,” Aubry explained.
The alternative is steep cuts to the monthly checks for people like Terry and Phyllis Schwinn.
In 1970, when Terry Schwinn drove the first of about 3.5 million miles in his truck, there was no such thing as a 401(k) or even an IRA. What he had was the promise of a pension and the love of his job.
“Just not having a boss out there and just driving,” he said. “I loved to drive” even if it meant 13 to 16 hour days and a lot of missed time with family.
The Teamsters’ Central States Pension Fund is nearing insolvency which means retired truck driver Terry Schwinn and his wife Phyllis could see his pension check cut in half. [M.L. Schultze]
The job ended abruptly 42 years later when he slipped on ice in the truck yard, severing a tendon, forcing his retirement, and starting seven years of surgeries, therapy and daily uncertainty about blood clots.
Then came a new uncertainty: a letter from the Teamsters’ Central States Pension Fund outlining a possible cut to pension checks. Some payments including Schwinn’s could be cut in half. His wife, Phyllis, says the letter put their life on hold.
“It’s on your mind 24/7 for the last two years,” she said.
The Central States’ imminent collapse along with other weak plans could slash benefits for a million people, bankrupt companies that pay into the funds, and stretch the federal safety net created to protect retirees.
Phyllis Schwinn warned there will be consequences for taxpayers one way or another.
“If they take your income away from these senior citizens, then they’re going to fall back on the government,” she said. “What’s the government going to do for these people to provide for them, to keep housing, medical expenses? How are they going to live?”
What Went Wrong
Like many pension plans, Central States has two core problems: fewer employees paying in as more retire, and investments brutalized by the great recession.
The multiemployer plans differ from single-company pensions in a couple ways. Unions negotiated with groups of employees including trucking companies to create and fund them. Over the years, the government held multiemployer plans to lower funding standards.
Boston College’s Aubry said the logic was pretty simple: there was less risk that a whole employment sector could fall apart compared to a single company going under and leaving retirees stranded.
“There’s many, many employers in a system, so if one pulls out or fails, another employer will step right in,” so the theory went, according to Aubry.
The logic proved wrong. The deregulation and bankruptcies in the trucking industry in the ’80s demonstrated whole sectors could stumble.
Another complication: companies can withdraw from the multiemployer plans, leaving their “orphaned” employees for others to cover.
Now those plans need some $60 billion dollars to stay in the black.
And that’s where the special congressional committee comes in.
Capitol Hill Searches For a Solution
On a Sunday morning in March, a couple hundred people crowded into the circular hall of Teamsters Local 92 in Canton. Most were among the nearly half million members of the Central States Pension Fund.
They gathered to hear Sen. Sherrod Brown, D-OH, who had just been appointed committee co-chair along with Sen. Orrin Hatch, R-UT, of the Joint Select Committee on Solvency of Multiemployer Pension Plans. Sen. Rob Portman, R-OH, is also on the committee.
Brown was singing to the choir, saying the retirees had paid for the pensions up front.
With collective bargaining, he told the union audience, “You give up money, give up wages you’d like to have today to put them aside for the future with some guarantee that they’ll be there. And in part because of Wall Street shenanigans, these pensions are threatened to be cut 40-50-60 percent or worse.”
An audience of Teamsters welcome Sen. Sherrod Brown in March to discuss his role as co-chair of the bipartisan Joint Select Committee on Solvency of Multiemployer Pension Plans. [M.L. Schultze]
Brown warned them it would take a lot to come up with a committee proposal that would get a straight up-or-down vote from Congress.
“Five Republicans, five Democrats have to support it,” Brown explained. “It will then go to the floor of the Senate, the floor of the House. It won’t go to committee, it won’t get bogged down.”
Unless the committee misses the deadline, which is Friday.
Is the Butch Lewis Act the Solution?
Brown and the unions have been pushing the Butch Lewis Act, under which the Treasury Department would sell bonds and make low-interest loans to multiemployer funds. To qualify, the funds must demonstrate that they can become solvent and repay the loans in 30 years.
Brown says it keeps a promise made to workers who gave up a share of their wages to ensure a secure retirement.
Negotiations continue and Brown’s staff met with the White House this week to try to get President Trump’s interest.
Brown noted that Trump has made a lot of trips to Ohio promising the recovery of the working class.
“He talks about workers in my state as he’s made campaign trip after campaign trip here,” said Brown. “I would hope he’d stand up here” to save the pensions.
Brown warned the risk of doing nothing extends beyond workers. Companies could declare bankruptcy if their pension costs soar. And the ultimate protection for pensions in the U.S. — the Pension Benefit Guaranty Corporation (PBGC) — is itself running short on cash.
Andrew Biggs of the American Enterprise Institute argues it’s time to give up on the multiemployer funds. He says the plans should be turned over to the PBGC with some new tax money, shifting current workers to 401(k)s and current retirees on a sliding scale with the neediest coming closest to getting their full pensions.
He maintains the projections that show the multiemployer pensions could repay the loans are unrealistically rosy.
“Nobody wants to see people lose their benefits just like I don’t want to see somebody’s 401(k) drop in value,” said Biggs. “But it is another step to say the taxpayer has to be on the hook for hundreds of billions of dollars to pay these differences.”
Running Out of Time
Retired Teamster Mike Walden addresses Truck Drivers Local 92 in March. [M.L. Schultze]
Mike Walden, a retired Teamster from Akron who’s been part of the pension fight for about six years, heads the National United Committee to Protect Pensions and has spent a lot of time lobbying for the Butch Lewis Act.
He acknowledges union causes are a hard sell with many Republicans and he’d support other solutions that include companies, active workers, retirees and the government.
Walden says the uncertainty over what will happen has already had a huge cost. The stress, he points out, has literally killed people, including Butch Lewis. And friends who are afraid massive cuts are coming have put off home repairs and car purchases.
“Those pensions are like unemployment,” he said. “You get it, it goes back in the economy. You don’t make enough to save it and who’s going to save money at this age? For what? Other than your funeral.”