By WFI Staff
Credit Suisse reported in 2012 that multi-employer pensions managed by union bosses in 2012 were just 52 percent funded. According to the Pension Benefit Guaranty Board (PBGB), in 2012, there were well over 150 union-managed funds classified as “critical” or “endangered.” What all this means is that the funds lack the cash to pay promised benefits and may have to cut them threatening the retirement security of millions of American workers.
Thomas Nyhan is the executive director of one such fund, the Teamster’s Central States Pension Fund.
Nyhan admitted in a recent The Wall Street Journal interview that “[t]here is a reasonable possibility that this plan could run out of money in about a dozen years.”
Central States is the second largest multi-employer pension plan in the nation with $18 billion in assets. One of its contributing companies Republic Services, Inc., a waste management business, bravely bit the bullet recently and bought itself and its workers out of the fund. Republic finalized a deal with three Michigan-based Teamster unions to pull 800 of its sanitation workers out of the Central States fund limiting the company’s future risk and protecting its workers.
Writes Michael Corkey in The Wall Street Journal: “With just 60 cents of assets for every $1 in obligations, the Teamsters pension fund is considered in ‘critical’ status by the Pension Benefit Guaranty Corp., the federal agency that backstops failed pensions. The price for exiting from the fund is steep. Republic estimates it must pay a ‘withdrawal liability’ of as much as $146 million to cover the company’s share of Central States’ unfunded liability. This amount could go up if the company stays in the plan and the funding level deteriorates.”
In the meantime, some allege that the Central States, founded by legendary union leader Jimmy Hoffa, is a money trough for union bosses who regularly dip into it for their own political and personal objectives. According to a 2009 Wall Street Journal article (“Union Pensions in the Red,” July 29, 2009) the lack of liquidity in union pension funds began well before the crash of 2008. For example, Unite HERE’s National Retirement Fund was 115% funded in 1998, but dropped to 83.4% in 2007. The article concludes, “Poor management probably deserves some of the blame for the union decline but the exact causes are a mystery.”
Hopefully other employers will be able to afford to buy themselves and their workers out of the terrible bind poor financial management on the part of the nation’s union bosses has put them in.