labor About One Million Americans Have Pensions on Verge of Insolvency
Nearly one million working and retired Americans are currently covered by pension plans that are in imminent danger of insolvency, according to an organization trying to help people keep their retirement earnings.
The union pension funds have been designated as being in “critical and declining status” — which means trustees are eligible to apply for cuts on their payouts.
Reducing the payout load lengthens the life expectancy of the stressed fund — but does little to alleviate the suffering of seniors who see their checks cut to about a third of what they were promised upon retirement.
According to the Pension Rights Center, which works with seniors facing a downgrade of their retirement checks, a small iron workers union shop in Ohio recently had to accept a pension cut.
Cop sues for disability pension after NYC nixes 9/11-linked claim The payouts for retirees dropped by as much as 60%, the center said.
Ten private-sector union pension funds have applied to the U.S. Treasury Department for the green light to slash retiree payouts, according to the center.
Among them are labor organizations affiliated with the auto industry, several from the trucking industry and others from the iron workers and bricklayer unions.
There are 68 — including several from New York — that have been listed as having “critical and declining status,” meaning they too will soon have to apply for permission to cut retiree payouts.
A few have enough funding to carry them for 20 years, according to the list compiled by Pension Rights Center using data collected from The Multiemployer Pension Reform Act of 2014.
But many of the funds in critical status have a life expectancy of 10 years or less — some as few as three years.
The Pension Rights Center urges working Americans to take steps to educate themselves about the looming pension crisis.
The prognosis is gloomy for upwards of 10 million Americans over the next few decades if several large funds collapse — particularly the Central States Pension fund that covers 407,000 Teamster truckers in the Midwest and South.
Several other Teamster pension funds are also poised to dissolve — and one of them, Local 707, officially went broke this month.
That has left 4,000 retirees on the edge of financial disaster — many having to make do on less than $1,000 a month when they were pulling down more than $3,000.
For retirees who want to know how much of a cut they might be forced to take, the Pension Rights Center has a calculator to do the math.
Local 707's once booming pension fund runs out of money
B Ginger Adams Otis
New York Daily News
Sunday, February 26, 2017, 4:00 AM
The teamsters logo, two horses over a carriage wheel, once dominated the facade of Local 707’s glass Long Island headquarters.
Now the union rents space on the building’s third floor. Only a small poster in the window tells visitors they’re at Local 707’s official home. “We used to own the building, the pension fund did,” said Kevin McCaffrey, 62, a teamster who heads the union pension fund. “We sold that, because of this crisis.”
McCaffrey has watched Local 707’s pension fund sink deeper into debt over the past 20 years — until the 2008 stock market crash sent it into a death spiral.
Like many union shops in the private sector — especially trucking, the teamsters bread-and-butter — Local 707 is a victim of bad timing and industry deregulation, experts say. The New York State Teamsters pension fund and the Central States Pension Fund are also teetering on the brink of insolvency.
N.Y. retirees struggle to survive after pension fund bottoms out Local 707 thrived in the 1980s — and its teamster workforce paid into a pension that was maintained by multiple employers with trucking enterprises.
The idea of a centralized pension plan initially worked well. No single company had to bear the brunt of pension payouts, and workers could move to different companies within the plan and not lose their accrued pension.
But deregulation in the 1990s chipped away at the multiple-employer plan foundation. With each industry contraction, there were fewer workers and fewer companies paying into it.
Still, in 1999, Local 707 was 100% funded. The tech bubble — followed by 9/11 — ruined that. The trust lost 30% of its assets. And companies started going out of business. Three of Local 707’s largest employers merged in 2004 — purchased by Yellow Freight, which borrowed cash to buy two competitors. When the 2008 crash came, Yellow Roadway Carrier couldn’t make its payments. The bank told it to force concessions from the unions or face liquidation, McCaffrey said. It employed 35,000 teamsters — 1,600 from Local 707. Employees took a 15% pay cut and gave up vacation time and other benefits.
Yellow Roadway was allowed to skip its pension contributions for 18 months. When the company started paying again, it was at 25% of the previous rate. The fund began to topple, with roughly 700 workers paying into a fund supporting more than 4,000 retirees. Local 707’s fund pays out $48 million a year — and takes in $7.5 million in contributions, McCaffrey said.
“I’ve been lobbying Congress and asking anybody I can find for help for the last five years,” he said.
“The really horrible thing is, even though we saw this coming, we couldn’t do a thing to change it — because by law, we can’t touch pensions."
In 2014, Congress passed a law meant to give relief to multi-employer pensions — but when Local 707 applied for restructuring, it was denied.
It didn’t pass the solvency tests required for a bailout, McCaffrey said.The fund ran out of cash this month, throwing its retirees on the mercy of insurance payouts, about a third of what their pensions were.
McCaffrey has had to explain the new reality to his members. The worst calls are from the widows.
“They say, ‘We’re sure it’ll all work out, Mr. McCaffrey, because my husband told me, before he died, not to worry about anything because the union would always take care of me,’ ” he said. “I wish to God we could.”
N.Y. Retirees Struggle to Survive After Pension Fund Bottoms Out
By Ginger Adams Otis
New York Daily News
Sunday, February 26, 2017, 4:00 AM
In the backseat of his beat-up car, Tim Chmil stashes what he refers to as his new retirement fund — bags and bags of recyclable bottles and cans.
Every time he spots a bottle on the street, he bends down to pick it up.
“Even if it’s just 5 cents, it’s money, and I need it,” the 71-year-old said.
It’s not the way the ex-trucker — a member of Teamsters Local 707 — expected to fund his senior years.
Local 707's once booming pension fund runs out of money Chmil is one of roughly 4,000 retired Teamsters across New York State suffering a fate that could soon hit millions of working-class Americans — the loss of their union pensions.
Teamsters Local 707’s pension fund is the first to officially bottom out financially — which happened this month.
“I had a union job for 30 years,” Chmil said. “We had collectively bargained contracts that promised us a pension. I paid into it with every paycheck. Everyone told us, ‘Don’t worry, you have a union job, your pension is guaranteed.’ Well, so much for that.”
Ray Narvaez received a certificate when he retired that guaranteed his lifetime pension, but last year, he and 4,000 others were informed their checks would be slashed. Also on the brink of drying up are the pensions for two Teamster locals — 641 and 560 — in New Jersey, union officials said. Plus 35,000 Teamster members upstate who are part of the money-hemorrhaging New York State Teamsters Pension Fund.
N.Y.’s democracy needs an overhaul Bigger than all of New York’s Teamster locals combined is the Central States Pension Fund — another looming financial disaster that could leave 407,000 retirees without pensions across the Midwest and South.
And there’s still more beyond that, in various industries, officials say.
“It’s a nightmare, it has just devastated all of our lives. I’ve gone from having $48,000 a year to less than half that,” said Chmil, one of five Local 707 retirees who agreed to share their stories with the Daily News last week.
“I don’t want other people to have to go through this. We need everyone to wake up and do something; that’s why we’re talking,” said Ray Narvaez.
Narvaez, 77, got a union certificate upon retirement in 2003 that guaranteed him a lifetime pension of $3,479 a month.
The former short-haul trucker — who carried local freight around the city — started hearing talk in 2008 of sinking finances in his union’s pension fund.
But the monthly checks still came — including a bonus “13th check” mailed from the union without fail every Dec. 15.
Then Narvaez, like 4,000 other retired Teamster truckers, got a letter from Local 707 in February of last year.
It said monthly pensions had to be slashed by more than a third. It was an emergency move to try to keep the dying fund solvent. That dropped Narvaez from nearly $3,500 to about $2,000.
“They said they were running out of money, that there could be no more in the pension fund, so we had to take the cut,” said Narvaez, whose wife was recently diagnosed with cancer.
The stopgap measure didn’t work — and after years of dangling over the precipice, Local 707’s pension fund fell off the financial cliff this month. With no money left, it turned to Pension Benefit Guaranty Corp., a government insurance company that covers pension.
Pension Benefit Guaranty Corp. picked up Local 707’s retiree payouts — but the maximum benefit it gives a year is roughly $12,000, for workers who racked up at least 30 years. For those with less time on the job, the payouts are smaller.
Narvaez now gets $1,170 a month — before taxes.
Ex-trucker Edward Hernandez, 67, went from $2,422 a month to $1,465 last year. As of this month, his gross check is $902. After federal taxes, it’s $721 — but he still has to pay state and city taxes.
“We have guys on Long Island who are losing their houses, the taxes are so high out there,” Hernandez said.
Milton Acosta, 75, was a dockworker in Local 707. He retired at age 62, figuring his union pension of $2,300, coupled with his Social Security, would keep him and his wife afloat.
Now his pension is $760 a month after taxes, he said.
“I pay $13,000 a year in property taxes alone. My mortgage is $2,300 a month,” Acosta said.
He and his wife share the home with their 50-year-old son, a general contractor who is often without work; the son’s wife; their three kids, and the Acostas’ 53-year-old daughter.
“I had to declare bankruptcy when this happened because I had too much credit card debt. It was that or lose our home,” Acosta said.
Ted Petrone, 74, saves money living in a basement apartment below his son and daughter-in-law.
“It’s very isolating. You can’t spend money on anything — now entertainment is going for a long walk,” Petrone said.
Like Chmil, the retirees find themselves doing things to stretch their savings that they never imagined. Skipping meals, holding off on doctor appointments and skimping on medicines are now commonplace, the ex-truckers said.
Some of them are even considering a return to work.
“Me, I’m pretty broken down physically, I’d hate to go back on the road, if anyone would even have me,” Chmil said. “But if it’s that or starve ... what am I gonna do?”
As heartbreaking as their stories are, they are not new to Thomas Nyhan, executive director and general counsel of the Central States Pension Fund.
The same crisis now hitting Local 707 has been stewing among numerous Teamster locals around the country for the past decade, he said, and that includes in upstate New York.
The trucking industry — almost uniformly organized by Teamsters — has suffered enormous financial losses in its pension and welfare funds due to a crippling combination of deregulation and stock market crashes, Nyhan said.
“This is a quiet crisis, but it’s very real. There are currently 200 other plans on track for insolvency — that’s going to affect anywhere from 1.5 to 2 million people,” said Nyhan. “The prognosis is bleak minus some new legislative help.”
And it’s not just private-sector industries that are suffering, he added.
“Municipal and state plans are the next to go down — that’s a pension tsunami that’s coming,” he said. “In many states, those defined benefit plans are seriously underfunded — and at the end of the day, math trumps the statutes.”