A recent letter sent to Teamsters who are collecting, or expect to collect, a pension from the union’s troubled Central States Pension Fund reveals that for every $1 collected, the fund pays $3.46 to pensioners, leaving the plan “headed for financial failure” if immediate action isn’t taken.
At the end of 2013, according to the last publicly available reports, the Central States Pension Plan had $17.7 billion in assets. However, it needs $53.2 billion to pay its present and future liabilities–leaving a $35.5 billion shortfall.
The fund’s Executive Director and General Counsel Thomas Nyhan explained in his letter to Teamster members:
…like many of our nation’s multiemployer pension funds, Central States Pension Fund has become severely underfunded and is headed for financial failure if we do not take immediate, decisive action. Baby Boomers are retiring in record numbers and the union workforce has been steadily declining for years. As a result, the Fund currently has more than three times as many retirees as active members — so fewer contributions are coming in than benefits being paid out. To put this into perspective, for every $3.46 that the Fund pays out in pension benefits, only $1 is collected from contributing employers, which results in a $2 billion annual shortfall. Clearly, that math will never work. [Emphasis added.]
Although Nyhan did not provide details, he states that “significant and painful retirement benefit reductions must be considered for both active workers and current pensioners.”
This, however, was not possible, according to Nyhan, until last year when the MultiEmployer Pension Reform Act was signed into law.
Signed into law by President Obama at the end of 2014, the MultiEmployer Pension Reform Act has many Teamsters fretting over their future as cuts to existing pension payments seem to be a certainty.