Bankruptcy Dominoes: Murrary → UMW → PBGC

Last year Murray Energy was warning of a possible bankruptcy citing the Obama Administration’s war on coal.
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Last week it got closer:

The Trump administration has rejected a coal industry push to issue a rarely used emergency order protecting coal-fired power plants.

The U.S. Department of Energy has decided the order is unnecessary, and the White House agrees, according to The Associated Press.

The Energy Department says it considered issuing the emergency order sought by companies seeking relief for plants it says are overburdened by environmental regulations and market stresses.

President Donald Trump had committed to the measure in private conversations with executives from Murray Energy Corp. and FirstEnergy Solutions Corp. after public events in July and an early August rally in Huntington, according to letters obtained by The Associated Press.

The letters from Murray Energy and its chief executive, Robert Murray, said failing to act would cause thousands of coal miners to be laid off and put the pensions of thousands more in jeopardy. One of Murray’s letters said Trump agreed and told Energy Secretary Rick Perry, “I want this done,” in Murray’s presence.

The pension referred to above is the United Mine Workers of America 1974 Pension Plan which as of June 30, 2016 had 57.5% of its remaining $3.14 billion of trust assets  in alternative investments while running annual payment deficits of over $610 million.

Whereas the Pension Benefit Guaranty Corporation (PBGC) takes over troubled single employer plans (and then goes after 30% of the net worth of the sponsor) with mutiemployer plans they keep the zombie plan propped up so as to be able to keep sucking money out of past employers. That tactic falls apart when bankruptcy enters the picture.

Here are the dominoes:

Murray Energy sponsors a 401(k) plan for non-union employees:

Those companies listed in alphabetical order:

The United Mine Workers 1974 Pension Plan 5500 Schedule R lists 10 employers that “contributed more than 5% of total contributions to the plan during the plan year”. Four of those are also in the Murray Energy 401(k) Plan.

The PBGC recently projected that it expects its insurance program for multiemployer pension plans will run out of money by the end of 2025 and Cheiron, Inc. even more recently projected that as many as 114 multiemployer pension plans covering nearly 1.3 million workers are severely underfunded and headed toward failure within the next 20 years further noting:

Just three of the pension plans account for $22.8 billion—or more than 62.5 percent—of the $36.4 billion in unfunded liabilities of failing multiemployer plans, Cheiron found. The Teamsters’ Central States, Southeast and Southwest Areas Pension Plan has the most unfunded liabilities at $17.2 billion, followed by the Bakery and Confectionary Union’s plan ($3.2 billion) and the United Mine Workers’ ($2.4 billion).

Murrary → UMW → PBGC → US Pension System

17 responses to this post.

  1. Posted by George on September 4, 2017 at 8:59 am

    “$36.4 billion”

    Is that a lot of money? Fed gov tosses waaaaay more than that into Afghanistan alone.

    The financial cost of 16 years in Afghanistan
    http://money.cnn.com/2017/08/21/news/economy/war-costs-afghanistan/index.html

    I think that is the cost of one V-22 Osprey.

    Reply

    • Posted by Tough Love on September 4, 2017 at 10:43 am

      Only off by about 500 times………….

      wikipedia:

      The V-22 had an incremental flyaway cost of $67 million per aircraft in 2008, The U.S. Navy had hoped to shave about $10 million off that cost after a five-year production contract in 2013. The cost for each CV-22 was $73 million in the FY 2014 budget.

      Reply

      • Posted by George on September 5, 2017 at 1:29 pm

        Sorry I was thinking about the whole program. Since they keep falling out of the sky for mysterious reasons, they will all need to be replaced at some point so the sunk cost argument might not work.

        Reply

    • Posted by Anonymous on September 4, 2017 at 3:21 pm

      What is New Jersey’s unfunded liability?

      Reply

  2. Posted by S Moderation Honestly on September 4, 2017 at 3:01 pm

    “It’s three agencies of government, when I get there, that are gone—Commerce, Education and the, um, what’s the third one there? Let’s see,”

    Hint: It’s the one in the middle. The Department of Energy

    SMH

    Reply

  3. Posted by Tough Love on September 5, 2017 at 2:13 pm

    OUTSOURCING works …. in LA of all places…

    http://www.citywatchla.com/index.php/la-watchdog-for-rss/13928-la-convention-center-the-success-story-city-hall-doesn-t-want-you-to-know

    Quoting from that article:

    “This public private partnership that is providing outstanding service to its many stakeholders and generating millions for our cash starved City is an excellent example of why the City needs to investigate other outsourcing arrangements. This would include the repair and maintenance of our streets, sidewalks, parks, and urban forest; vehicle maintenance; street cleaning; the Zoo; information technology; and numerous other services, both large and small.

    While the City’s unions will go ballistic over the thought of any outsourcing, this may free up valuable resources to devote to other priorities, including, but not limited to, the homeless and affordable housing.”

    OUTSOURCING end the “employment relationship” and with it the ludicrously excessive, unnecessary, unjust, and unfair DB Pension and Benefit NOOSE around the necks of Taxpayers.

    Reply

    • Posted by PS Drone on September 5, 2017 at 6:45 pm

      Unfortunately, when it comes to “outsourcing” functions performed by the public sector it usually increases costs. In my town, the council bragged about outsourcing trash services proclaiming that the outside vendor would be cheaper and provide better service with newer equipment, etc. etc. Only one problem; the existing town employees who had performed the now-outsourced trash duties weren’t laid off as any rational person would expect. Instead, they were “reassigned” to other pressing duties. Who knows what they do, but the council claims that the town is saving money when to the casual observer that is impossible. Can’t add outside contract costs without reducing similar internal costs. Otherwise, you increase the annual burden of running the town. Like most governmental bodies, the council runs scared of the unionized public sector workers. No B-lls.

      Reply

      • Posted by Tough Love on September 5, 2017 at 9:03 pm

        The failure of Public Sector employers to terminate workers whose functions are Outsourced is not a failure of Outsourcing, but one more example of the failure of our Elected Officials with as you noted, no stomach to confront their Public Sector union masters (meaning those contributing to …. or working against ….. their reelection campaigns).

        That said, what you stated is real and problematic. Being in Private Sector business for many years and having participated in merger discussions, BOTH parties to such mergers KNOW that almost all “savings” comes from headcount reductions, especially in the soft categories, PR, Communications, Marketing, Customer Services, etc. While it may take longer and impact fewer workers, even sales and finance/accounting/IT ultimately experiences headcount reductions (and surprisingly to some, even in the more senior ranks where there are only so many positions for SVPs and Senior Managing Directors). And while such outsourced workers are generally granted a modest severance package (even where not a contractual obligation) and sometimes free placement assistance or re-training opportunities, there is RARELY an effort to “find work” for those who are no longer needed.

        In the Public Sector, mergers offer the SAME opportunities for saving via headcount reduction if acted upon (do you need 2 Police Chiefs, twice as many Captains, etc.?), and Outsourcing offers HUGE opportunities for savings via an end to the “employment relationship” and hence the zero further growth in the often ludicrously excessive pensions and benefits. You pay the Outsourcing firm) TODAY what you can negotiate and afford TODAY, and there is no “deferred compensation” to come back and bite you years down the road.

        I’ve sat in on local Public Sector merger discussions …….. and it’s VERY disturbing from a financial savings perspective. When step #1 is the laying of ground rules for subsequent discussion, and the FIRST “rule” established is that nobody (in either of the 2 towns considering merger) would lose their job other than by retirement or voluntary termination, what’s the point ? And 180 degrees from the way it works in the Private Sector …… where Management calls ALL the shots ……. why do our Elected Officials feel they MUST get approval or an OK from their workers & their Unions to proceed with a Merger? It’s ridiculous ….. the foxes are running the hen-house.

        Public Sector job Outsourcing discussions (of which I have also sat in on) are little different. Due to worker/Union “pressure”, the town’s Officials (fearful of Union retaliation) often demand that the outsourcing company hire all of the current worker (with no reduction in wages) and with retirement/health benefits far in excess of what’s commonplace in the Private Sector. Not surprisingly merger talks with such conditions rarely conclude with a merger (exactly the outcome most workers want). But sometimes it does work. If I recall correctly, the Montvale NJ DPW was outsourced with little in the way of job guarantees, and the terminated Public Sector workers lost at all stages of round and round of Court challenges.

        I just takes Elected Officials with a strong stomach and an overriding desire to do the RIGHT THING for ALL of the Town’s residents, not just it’s Public Sector workers.

        Reply

        • Posted by PS Drone on September 6, 2017 at 4:07 pm

          One of many reasons why the public sector has been engaged in “legal” grand larceny for decades. I would presume that most of it started with cynical JFK allowing Federal employees to unionize in 1962, which in turn spawned all of these greedy (but effective for their members) “public service” (as FDR called it) unions. But alas I fear that the jig will be up soon and all of the cumulative ripping off of the taxpayer will come to a tortuous but well deserved end.

          Reply

  4. The first step in merging any public entity is to get rid of the layer upon layer of useless administrators, managers, double dippers, school superintentendents, layers of school principals, police and fire chiefs of smaller towns, etc. so these folks will claw to keep their positions because lets face it they pay well with little accountability.

    Reply

    • Posted by Anonymous on September 6, 2017 at 2:02 pm

      Quoting …………

      ” A pension funding crisis in Kentucky could lead to fewer officers on the street according to several FOP presidents. ”

      Coming from the FOP (Fraternal Order of Police), i.e., a Union ….. no surprise there.

      Scare tactics.

      Reply

      • It’s all scare tactics, the sky will fall and society will collapse if we don’t have an over abundance of public workers. ha ha

        Reply

        • Posted by S Moderation Honestly on September 6, 2017 at 9:46 pm

          “The biggest downsizing of state and local government in modern history has proved to be a big drag on the U.S. economy since 2009 and a primary reason the four-year-long recovery is more sluggish than other recoveries since World War II, economists say.

          While the private sector has generated 7.4 million jobs since the recession and is approaching its pre-recession levels of overall employment, government at the federal, state and local levels continues to shed jobs, diminishing the performance of the job market. Overall, federal, state and local governments have eliminated more than 750,000 jobs since the recession ended in June 2009, with no end in sight to the trend, according to figures from the Bureau of Labor Statistics.”

          http://www.washingtontimes.com/news/2013/sep/17/government-job-cuts-create-a-historically-slow-rec/

          SMH

          Reply

          • Posted by Tough Love on September 7, 2017 at 12:35 am

            Quoting SMH ……….

            “While the private sector has generated 7.4 million jobs since the recession and is approaching its pre-recession levels of overall employment, government at the federal, state and local levels continues to shed jobs, diminishing the performance of the job market. ”

            THAT is one of the most ludicrous attempts at logic I have even seen.

            The “Gov’t” is a “taker” and “produces” NOTHING. Shedding far more than the jobs already shed is the best thing that could even happen to AMERICA.

  5. Posted by S Moderation Honestly on September 6, 2017 at 8:29 pm

    “Coal executives wanted the Trump administration to stop coal-fired power plants from closing for the next two years. “As stated, disastrous consequences for President Trump, our electric power grid reliability, and tens of thousands of coal miners will result if this is not immediately done,” 
    “Murray said Trump privately committed to issuing the order, telling Energy Secretary Rick Perry, “I want this done.”
    ………………………..
    That was then, this is now. Trump backed down on a deal with the owners

    But the union miners are another thing. They already (I think it’s a done deal) got their retiree healthcare bailed out by Congress, and are still working on a pension bailout. It looks like there is a lot of support for a government bailout. It would probably pass tomorrow but for one thing. It would set a precedent… Today the miners, tommorow, New Jersey.

    The only thing worse than a bad precedent is a worse president.

    SMH

    Reply

    • Posted by Tough Love on September 7, 2017 at 12:42 am

      LOL…..I don’t want NJ’s Public Sector pensions bailed out either.

      We should instead find a way to renege on 50% (75% for Safety workers) of the ludicrously excessive promised pensions (and 100% of the retiree healthcare benefits that very few in the Private Sector get any longer) that were never justifiably in the first Place, but simply BOUGHT from our Elected Officials with Pubic Sector Union BRIBES disguised as campaign contributions and election support.

      Reply

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