Protecting Employers Since 1985
Chickens Come Home to Roost
As a number of Clients of the Firm would state, over the last ten (10) years, the author has been advising them to get out of/not participate in the Unions’ Multi-Employer Pension Funds. It has long been the opinion of the author that this is a quasi-Ponzi Scheme and was destined for failure from the start. When half of the Trustees of such a Plan are Union Business Agents who have little, if any, financial background, how can actual and cogent financial guidance about investigating/managing millions of dollars be provided? The author had the privilege in the early 80’s to serve as a Trustee of a Multi-Employer Pension Plan in California and got out of the Trustee Position because of the stupidity of the day-to-day Administration of the Pension Plan and its investment strategy. As an aside, the next time the author negotiated a contract with the Union that had that Pension Plan in it (Retail Clerks Union – Northern California), he got the Client out of the Plan prior to the creation of MEPPA in 1989.
As of March 2017, the New York Teamsters Road Carrier Local 707 Pension Fund is dead and has run out of money. The PBGC (Pension Benefit Guarantee Corporation), the Federal Agency established by MEPPA in 1989 to “backstop Pension Payments”, has reportedly taken over the Pension Payments for Retirees. However, the impact to those Retirees (4,000 Retirees in the Plan) is as follows:
They were previously receiving $1,313.00 per month, and under the PBGC will be receiving $570.00 per month or a reduction of $743.00 per month.
This is a harbinger of the future and foretells a tale that is going to be happening to Multi-Employer Pension Plan Retirees throughout the country.
It should be noted that Local 707 was one of several Pension Funds that sought relief under the Multi-Employer Pension Reform Act of 2014 but its application, as well as the application of numerous other Funds including Central States Southeast and Southwest Pension Fund – one of the largest in the country, was rejected by the Department of Treasury. This “rejection” was at the behest and spearheading of Senator Elizabeth Warren of Massachusetts. She was joined in the spearheading the disapproval of the Department of Treasury by well over twenty (20) other Senators. Maybe Senator Warren and other Senators will “step forward” and help the PBGC to bring back the $743.00 of Retirees Pension Payments from $570.00 per month to $1,313.00 per month. The author believes a snowball has a better chance in hell than any Senator, most importantly Senator Warren, of ever admitting they made a mistake!
It is strongly recommended to every Employer that is participating in a Multi-Employer Pension Plan to not only check its potential Withdrawal Liability Calculation on a yearly basis but, as well, start thinking about whether or not continued participation in the Multi-Employer Pension Plan is in your and your Employees best interest.
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