Union pension crisis threatens retirement funds
Funds need federal permission to enact cuts but without, they could become insolvent
Updated 7:00 pm, Wednesday, December 31, 1969
Albany
John Raffiani's retirement didn't last long. Facing a steep cut in his Teamsters trucking pension, the 70-year-old Greene County man went back to work more than a year ago after a short time away from full-time labor.
While he was a semi-truck driver for 35 years, Raffiani now spends five or six days a week at the wheel of a Trailways bus, shuttling between Albany, New York City, Long Island and Montreal.
As it turned out, Raffiani hasn't yet seen a cut in his Central States Teamsters pension, although the bad buzz that circulated two years ago prompted him to rejoin the workforce.
But according to a notice he received just days ago in the mail, his pension plan will likely become insolvent in eight years, which means there will be a cut after all.
"Every time I go to the mailbox, I cringe,'' Raffiani said.
On the other hand, Willie Pando's retirement is turning out to be longer than he envisioned.
The Queens resident left the trucking industry in 2004, and quit working altogether in 2008 after his second heart attack.
But his Teamsters pension, from Local 707, has already become insolvent and his monthly payment has plummeted from about $2,900 to $910.
"That's a big cut,'' said Pando, 62, who said the union also halted its health coverage.
While he and his wife used to take vacations in Bermuda or at a timeshare they had in the Catskills, that's come to a halt. Like other Local 707 members he knows, he's pondering a move out of New York state to escape the high property taxes and other costs that are difficult to meet on a modest fixed income.
"The trucking companies got their way with the union,'' said Pando.
Raffiani and Pando are just two faces of an emerging pension crisis.
Another crisis is facing the Upstate Teamsters, also known as Local 294, with more than 34,000 active and retired members.
With predictions that its $1 billion-plus pension fund will be insolvent in less than a decade, the union is seeking permission from the U.S. Treasury Department to make a cut of almost 30 percent in order to shore up funding.
All three pensions — Local 707, Central States and Upstate Teamsters — are "multi-employer" plans. That means they are union-run pensions for people like truckers who typically work for a number of different companies during their career.
These multiemployer plans are emerging as the tip of what could be a pension-peril iceberg facing private sector employees whose unions, battered by federal policies such as deregulation as well as the vagaries of the stock market, are in danger of eventually going broke.
In New York state alone, 17 multiemployer union pensions are listed with the U.S. Department of Labor as being in "critical and declining" status.
As well as truckers and freight handlers who are Teamsters, union representing printers, radio and television workers, bricklayers and electrical workers are on the watch list.
That translates into almost 53,000 New Yorkers who are either retired or covered by those 17 pension plans at risk of steep cuts in future years.
Nationally, more than 1 million people are in "critical and declining" plans.
A few years ago, the Central States fund was in the news as they planned to make a benefit cut.
As it turned out, the federal Treasury Department didn't approve their request and they say they are now headed toward insolvency.
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Central States is based in the Midwest, but has members such as Raffiani in upstate New York who worked as car haulers, delivering new vehicles from train depots to dealerships.
The Treasury Department also denied Local 707's request to make cuts.
That union pension became insolvent earlier in the year, at which point the federal Pension Benefit Guaranty Corp. stepped in. But while that federal agency backstops pensions, it does so at a much lower level.
Now upstate Teamsters, or Local 294, is looking at a cut to pensions for its members who live in the Capital Region and across much of upstate.
That would make it the second multiemployer pension, behind an Ohio ironworkers union, to actually institute a cut since Congress passed a law allowing such reductions in 2014.
Union officials say they need to do that to avoid what has already happened to Local 707.
"There are a lot of ifs," said Tom Baum, the volunteer retiree representative for Local 294 who has been keeping members apprised of the latest proposals for cuts.
As it stands, the pension may cut payments by 29 percent this fall. Members would have to vote on it, but abstentions are automatically counted as "yes" votes. The federal government can also step in and order the cuts, although that has yet to happen.
The change in administrations may have an impact as well. Under President Barack Obama, some union members believed the Treasury Department was reluctant to allow cuts since it might have reflected badly on the administration.
Indeed, unions have been reluctant to discuss their projected shortfalls. Other than Local 294, at least a half dozen on the ''critical and declining'' list for New York either didn't return calls or flatly declined to discuss finances with a reporter.
The projected insolvencies in some cases are years away, and few members may even be aware that they are lurking – unless they assiduously read the mail that comes from their pension plans.
"The notification that retirees receive isn't all that clear," said Joellen Leavelle, communications and outreach director for the Pension Rights Center, which advocates for pensioners and employees who are in pension plans.
So far, the biggest shortfalls are in union pensions representing specific industries, such as truckers, or bricklayers and electrical workers who work in different locations.
The proposed cuts have provoked anger among employees — including some who believe their union leaders failed them. A group of Local 294 members, for example, believes the plan put too much money in high-cost and risky vehicles such as hedge funds and private equity investments.
"It's the classic Wall Street-Main Street thing,'' said Scott Dickinson, a Local 294 member.
"Who knows what's going to happen six or seven years down the road," added Bernie Collatz, another retired upstate Teamster from Cairo.
Lawmakers have proposed solutions in the form of higher tax revenue to shore up the plans.
Democrat U.S. Sen. Bernie Sanders of Vermont has called for the closure of tax loopholes for investments like real estate and art and large IRA contributions, said Leavelle.
While it may not get far in the Republican-held Congress and Senate, Leavelle said the proposals are spurring awareness of the problem.
"It crosses party lines. It affects Democrats. It affects Republicans,'' she said.
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