S-HNB and the demise of the Yard-Man Presumption

Public plan sessions are tomorrow with New Jersey likely to be featured but today I learned of two recent events that might mean in ten years nobody will get retiree health benefits outside of Medicare, Medicaid, or Obamacare and there will probably never be a federal bailout of pensions beyond what the PBGC can afford.

It was also announced that this will be the last EA meeting that will be recorded so in future years I may be the only one memorializing this sort of stuff:

S-HNP: Self-Help Not Bailout

As discussed by former US Representative and current lawyer/lobbyist Earl Pomeroy in the opening general session when in 2009 the Casey-Pomeroy bill was introduced it was decried as a bailout for union pensions and died.  Learning from that experience lobbyist Pomeroy worked to get the Multiemployer Pension Reform Act of 2014 passed last December in record time and included a provision allowing for reductions in accrued benefits as necessary.  That precedent could conceivably be extended to public plans with the definition of ‘necessary’ stretched to accommodate what taxpayers can pay.  It seemed clear to Mr. Pomeroy that any bailout of pensions beyond what is in place now with the PBGC is a non-starter.

No More Yard-Man Presumption

In a session on litigation affecting DB plans a January 26, 2015 decision of the Supreme Court that I don’t recall hearing about anywhere else was summarized:

The Supreme Court, in M& G Polymers USA, LLC v. Tackett, dealt with another “presumption,” – this one created by the Sixth Circuit in a prior case involving Yard-Man, Inc. The presumption is that the parties to a collective bargaining agreement intend for the retiree medical benefits to continue for life, notwithstanding the expiration of a collective bargaining agreement.

Tackett arose after the employer began to require retirees to contribute towards the cost of their retiree medical care. The Tackett plaintiffs argued that the collective bargaining agreements provided for “lifetime” retiree medical benefits and that the implementation of cost-sharing violated ERISA and the LMRA. The district court dismissed the complaint, but the Sixth Circuit reversed. The Sixth Circuit applied the Yard-Man presumption to conclude that, in the absence of extrinsic evidence to the contrary, the provisions of the CBA evidenced an intent to vest retirees with lifetime benefits.

The Supreme Court reversed the Sixth Circuit and remanded Tackett for further consideration. The Supreme Court  explained that collective bargaining agreements must be interpreted “according to ordinary principles of contract law,” and held that the Yard-Man presumption violated these principles.

It was noted by one of the panelists that lawyers looking to protect retiree medical benefits in these types of cases would forum shop trying to find some link to get it before the Sixth Circuit.  But with this Supreme Court decision making it the law of the land the cutting of retiree medical benefits is in play everywhere.

 

12 responses to this post.

  1. Posted by Tough Love on April 14, 2015 at 12:26 am

    Seems like 2 good outcomes ……… in moving towards ending the pension/benefit-driven decades-long financial “mugging” of Private Sector Taxpayers by the insatiably greedy Public Sector Unions/workers.

    Reply

  2. Posted by Anonymous on April 14, 2015 at 8:27 pm

    I dreamed a little dream, that one day..John and TL older, get exactly what they want and that the disregard they show for the promises made to others, visit them and that the destitute poverty the elderly faced a century ago comes home. savings, I look forward to passing you on the street corner.

    Reply

    • Posted by Tough Love on April 14, 2015 at 8:40 pm

      Promises made by whom …. certainly NOT by Taxpayers whose best interests SHOULD have been (but WEREN’T) considered ….. but by Elected Officials or their minions who participate in the same pension & benefit Plans and personally benefit by granting these grossly excessive and costly deals.

      Instead of “dreaming”, I suggest you develop a “Plan “B” to fund your retirement years. NJj’s Taxpayers certainly won’t be paying for it.

      Reply

  3. Posted by Anonymous on April 15, 2015 at 8:46 am

    Promises made by you TL through your elected representatives. You have never demonstrated grossly excessive comparing public to privates. Once again a 60 year old state worker with 30 years and a 100 K salary gets a 55K pension. You indicate that is three or four times greater than a private worker (who gets a match t their 401 K plan). Prove it.

    Reply

    • Posted by Anonymous on April 15, 2015 at 9:37 am

      I do agree with you. My cousin husband work for the state. He told me he could make much more in the private sector!

      Reply

      • Posted by Tough Love on April 16, 2015 at 12:58 am

        Look at those unique identifying square symbols next to each comment.

        Certainly looks like your responding to yourself.

        Reply

    • Posted by Tough Love on April 15, 2015 at 11:46 pm

      Anonymous, I have posted such demonstrations numerous times. Here is a link to such a post (right on Mr. Bury’s blog):

      https://burypensions.wordpress.com/2013/09/27/rolling-stone-covering-public-pensions/

      See my comment time-stamped … October 1, 2013 at 10:05 pm

      To be noted, is that I was comparing a California Police Officer’s pension with that typically granted an equally situated (in pay, service years, and age at retirement) Private Sector worker. The demonstrated 4.55 times Public Sector advantage would be smaller in NJ as NJ’s Plan are less rich than those granted in crazy California.

      Reply

  4. Posted by Anonymous on April 16, 2015 at 10:21 pm

    Unfortunately TL. I checked your link. It talks about a California 100 K police officer that makes another 50K in overtime. Nothing demonstrated.
    You are a fraud and you have been debunked. You are irrelevant. Let us all move on.

    Reply

    • Posted by Tough Love on April 16, 2015 at 11:10 pm

      Fraud? Did I not stay that the demonstration linked was for a CA Police Officer ?

      When I prepared it, THAT was the discussion at hand.

      Reply

  5. Posted by Anonymous on April 17, 2015 at 6:55 am

    You indicated an equivalency that wasn’t there. You’re a shill and irrelevant. TL unmasked.

    Reply

    • Posted by Tough Love on April 17, 2015 at 10:23 am

      Oh the 4.55 times pension/benefit “advantage” for the CA Police Officer is “there”, and a revised workup reflecting NJ’s police pension formula (with COLA assumed reinstated) and comparing to the true retirement benefits that private Sector workers really get today (modest 401K “matching”, NOT traditional DB Plans) would surely result in a similarly high Public Sector “advantage”.

      Might even be worth taking the time to re-work it … just to give you more heartburn.

      Reply

    • Posted by S Moderation Douglas on April 17, 2015 at 3:00 pm

      Ah, the Fireman fallacy redux. If they are not similar workers, comparisons of pensions, wages, and/or total compensation are meaningless. Worse than meaningless, in fact.

      Let me do my own math.

      When you give the peace officer example, some people are left with the impression that these salaries and pensions are typical.

      Of over 250,000 California state employees, fewer than 7,000 are CHP officers. Their average pay in 2012 was $87,000, median pay $94,000.

      Yes, they do have a more generous pension than most state employees, but OT is NOT calculated for their pensions. Only base pay.
      ………………………
      For MY example, I will use the workers that everyone “loves to hate”: CalTRANS and DMV.

      Lest you drive down lifes highway (literally) and see those CalTRANS workers slowing you down and you remember ToughLove on that blog (or the infamous glib Rush Limbaugh) You MIGHT think these people retire at 50 with $100,000 a year. It’s typical, right? And those slow azz clerks at DMV who are slowing you down (make an appointment next time, it always works for me.) $100,000 pensions?

      NO

      Now we’re talking about over 30,000 state workers.
      Average pay for these folks is $33,000 to $45,000 per year. ( http://www.sacbee.com/2013/12/31/6038332/the-state-workers-top-10-a-different.html )
      Let’s be generous and pay them $4,000 a month for simplicity.

      A CalTRANS worker makes $4,000 per month.
      The state contributes an additional $400 to the pension fund, for a “total compensation” of $4,400 per month.
      An additional $400 is withheld from the employees check for retirement contribution.

      An equivalent private sector worker earns $4,200 per month plus $200 in matching funds (roughly 5%). For a “total compensation” of $4,400. Just like the CalTRANS worker.
      The private sector worker has $200 withheld from his cash pay to fund his 401(k).

      Disregarding inflation, over 30 years, the Caltrans worker has earned $1,296,000 in “take home pay”.

      The private sector worker, $1,440,000. That is 10% MORE lifetime cash pay.
      And he and his employer have contributed $144,000 total to his 401(k).

      The CalTRANS worker and his employer have contributed a combined $288,000.

      I wonder which one will get “TWICE as much” in retirement?
      ……………………………………………………………
      This is an example of “roughly equal” TOTAL compensation.

      ToughLove continuously repeats that public and private sector earn the same “cash pay”, but most studies say that public sector workers earn less for EQUIVALENT positions.

      In a Heritage Foundation paper, Biggs and Richwine state:
      “Compared to private
      workers, state and local workers tend to earn less
      in wages, but more in benefits. The net impact on
      overall pay is controversial.

      The Center for State and Local Government
      Excellence, the Center for Economic and Policy
      Research, the Economic Policy Institute, and
      the Center on Wage and Employment Dynamics
      (CWED) have all released similar studies arguing
      that the compensation that state and local workers
      receive is less than or equal to that of comparable
      private workers.”

      Specifically, they say:
      “After controlling for observable skills and a detailed list of personal charastics, state workers in California earn about 10.2% less in wages than private-sector workers.”

      To be fair, the Heritage Foundation claims that when the value of healthcare and pensions are “properly accounted for”, state workers earn more. I can agree to disagree on the magnitude of this difference. To see the paper, go to :

      http://www.aei.org/article/economics/fiscal-policy/labor/are-california-public-employees-overpaid/
      …………………..
      These examples I give because they are the people I worked with. With 30 years service, they will retire with $3,000 a month, tops. Not $100,000 a year.

      And they will probably retire at age 65, give or take a year, NOT 50 or 55.

      Reply

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