A new bill introduced by Democratic Sen. Bob Casey of Pennsylvania would set up a taxpayer bailout of underfunded, multiemployer union pension plans.
The Pennsylvania senator recently introduced the latest in Orwellian-named Democratic bills—the “Create Jobs and Save Benefits Act of 2010.”
Multiemployer plans were designed to let union members move from union job to union job and keep the same pension plan. But if a company participating in the plan as part of its collective bargaining agreement were to go bankrupt, the other participating companies in the plan are forced to fully fund these Cadillac union pensions.
The vested members with no participating company are called “orphans.” Casey’s bill seeks to partition out these “orphaned” union members, putting taxpayers on the hook for their full retirement benefit funding.
As previously reported on HUMAN EVENTS, Democrats plan to federalize pensions while bailing out their union supporters who’ve botched funding pensions for their rank-and-file members.
Democrats are not content with a one-time bailout of these failed multiemployer pension plans. Now, Casey’s bill would make a line item on the federal budget through the Pension Benefit Guaranty Corporation (PBGC) to fund these union pension bailouts annually.
Currently when one of these funds is in distress, the PBGC has the power to partition out these orphans and pay a guaranteed benefit of $12,870 at taxpayer expense, similar to what the Federal Deposit Insurance Corporation (FDIC) does when a bank goes belly up.
At a recent Senate Health, Education, Labor and Pensions Committee (HELP) hearing, Charles Jeszeck, an acting director at the Government Accountability Office (GAO), said that union multiemployer pension plans are in deep financial trouble.
A chart found on page 12 of Jaszeck’s written testimony clearly illustrates that by 1998, there was only one active worker in the multiemployer pension plans for every retiree.
“In 1998, the multiemployer plans overall got to one worker for every retiree,” Brett McMahon of the Associated Builders and Contractors (ABC), a national trade association, told HUMAN EVENTS. “They’re much worse now. The Teamsters in particular right now are about four retirees for every worker. The coal miners are about 12 retirees to every worker. When you hit one to one it is impossible—actually even earlier than that—it’s impossible to recover.”
Jeszeck testified at the hearing that unless union membership grows exponentially, the multiemployer pension funds are headed for collapse.
“The future growth of multiemployer plans is largely predicated on growth of collective bargaining,” Jeszeck said. “Without a new stream of contributions, plans will increasingly have to tap into assets to meet benefit obligations and, everything else being equal, will generally lower the plans’ funded status.”
One of the largest of these multiemployer funds, Central States Funds, is in such bad shape that UPS paid $6 billion in penalties to extricate itself from employee participation in the fund.
“All that got them was the right to leave the plan. It transferred no benefits to their employees,” McMahon said. “They now have their own plan, though, which is doing great because it’s properly funded and they’re not responsible for everyone else’s employees.”
According to the financial and analytical report compiled for a January 2009 trustee meeting, by the end of 2008, Central States had approximately 80,000 current participating workers and over 200,000 retirees.
The fund is headed for an implosion.
“A collapse of this sort of Ponzi scheme was foreseeable 25 years ago,” McMahon said.
The Casey bill seeks to bailout and then expand participation in these defined benefits plans that give unions control over the funds, as opposed to a defined contribution plan such as a 401(k) where employers contribute and individuals control their own retirement investments.
Further, union members are indentured to their unions, unable to accept other work at the risk of forfeiting these pension benefits outright.
In May, the PBGC partitioned the Chicago Truck Drivers, Helpers and Warehouse Workers Union (Independent) Pension Fund which now sets the pensions for the new partitioned plan workers at the federally guaranteed benefit level of up to $12,870 per year after 30 years of service.
According to the PBGC, “The Chicago plan’s administrator applied for partition because the plan was running out of money to pay benefits. The shortfall resulted from the bankruptcy and withdrawal from the plan of 52 contributing employers from 1982 to 2004, which reduced the plan’s funding levels.”
“If a union knows that if they drive a company into bankruptcy, which they clearly have a talent for doing, they can still say to those union members that taxpayers will cover your full retirement bill, removing further incentives for a union to work productively with an employer,” McMahon said.
There are 57 contributing employers left in the Chicago plan and no new employers agreeing to enter into any multiemployer benefit plan.
With union-controlled, multiemployer pension plans clearly becoming a failed model, the Associated Builders and Contractors—representing 25,000 construction and construction-related firms employing over 2 million people—offers guidelines on how to deal with the problem:
• Immediately freeze the troubled multiemployer pension plans to new entrants, followed by paying out the remaining assets among those already enrolled based on the length of time people have been invested in them.
• Amend the existing Employee Retirement Income Security Act provisions that allow termination of a multiemployer plan if all contributing members of a plan withdraw (a mass withdrawal).
• Require yearly written notices to be issued to all participants and beneficiaries when the ratio of the number of retirees, beneficiaries of deceased participants, and terminated vested participants in a multiemployer plan to the number of active participants in the plan for each such year is 3:1 or less.
Casey’s bill seeks to bailout the union plans on the taxpayer dime to give unions more leverage to drive up membership. That’s the Democrat plan: continue the Ponzi scheme by expanding it with taxpayer dollars.