Multiemployer Plans: Why Participant Benefit Cuts Over A PBGC Bailout

Congress passed a law tonight that will allow benefits for retirees in Multiemployer (union sponsored) plans to be cut to preserve the system although there is already a mechanism in place through the Pension Benefit Guaranty Corporation (PBGC) to handle these zombie plans which includes benefit caps.  The problem is that the PBGC already has massive liabilities and does not want to take on more but the union sponsors of these plans also do not want to involve the PBGC for their own reasons.

A story about the new law to be enacted ends with:

The problems facing the Central States Fund illustrate the overall picture. In 1980, the fund had four workers contributing money for every retiree collecting payments. Now it has five retirees for every worker paying in, according to congressional testimony last year by Executive Director Thomas Nyhan.

Hundreds of trucking companies that were part of the fund have gone bankrupt, dissolving before paying their share of the pension costs. The recession severely compounded the problem, as the value of the fund’s investments plunged. So did the number of workers paying into the fund, amid widespread layoffs.

With the federal pension insurance program unable to backstop the funds, Nyhan said the 410,000 participants in his pension plan confronted a “stark reality” without some congressional action.

“Even though they were told repeatedly their benefits were guaranteed,” he said, “their pension checks could be eliminated entirely.”

But why would Thomas Nyhan prefer to cut retiree benefits without involving the PBGC and the influx of federal bailout money?  Because he would be cutting (or eliminating) his own salary.

Look over the 5500 filing for 2013 for the Central States plan and you find 175 pages (from pages 14 to 188) of entities receiving at least $5,000 annually from plan assets ranging from $5,094,740 to Northern Trust for investment services to  $5,152 to Automated Presort USA 2013.  In between there are scores of fund employees being paid their salaries from pension assets (not at all unusual in these multiemployer plans) including $250,414 to Employee Thomas C. Nyhan (page 26).

 

 

10 responses to this post.

  1. Posted by Tough Love on December 13, 2014 at 10:34 pm

    Personally, I believe that any PBGC guarantee WILL be honored via a Federal bailout of the PBGC.

    A BIG problem for Multi-employer Plans is the MUCH lower PBGC guarantee (as an annual annuity). While (at age 65 and taken a single straight life annuity) it’s $60,136 for Single-employer Plans, it’s only $12,870 for Multi-employer Plans.

    Reply

    • total logical fallacy to call pbgc guarantee “honored” by this scenario. this is not honoring a debt, this is passing off a debt onto others, to keep the ponzi schemes going

      end all db plans and convert to dc plans immediately

      Reply

  2. Posted by Javagold on December 13, 2014 at 11:15 pm

    Tick Tock. Tick Tock. It’s coming. Math is funny that way.

    If I were a public taker. I would say it was a good 25 year run, where I fleeced the sheep.

    Reply

  3. I’ll bet a lot of these plans had retroactive pension increases and employer underfunding in the 1990s, just like the public plans. But they can’t just force future generations of taxpayers to pay, unlike in the public plans.

    The question, as always, is who did past taxpayers, past and retired public employees, past politicians, past executives and past union leaders steal from? In this case, it appears to be those retirees still around.

    Reply

  4. […] 7:30- turn over pensions to the unions – when union (multiemployer) plans are almost as big a basket case as public plans and were recently allowed to arbitrarily cut benefits. […]

    Reply

  5. […] C which is where anyone getting over $5,000 out of the trust in that year has to be reported.  The main reason that the PBGC is not directly taking over the plan and making payments is that the input from the […]

    Reply

  6. […] 12/11/14 (219-206), the Senate on 12/13/14 (56-40), and enacted on 12/16/14 for reasons that were obvous to me at the time but I may have missed […]

    Reply

  7. […] Central States Pension Fund (CSPF) will have their benefits cut substantially this July so that the people who run these plans won’t be inconvenienced.  Here is a timeline of the […]

    Reply

  8. […] the people running these plans keep getting paid, […]

    Reply

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