Teamsters’ Pension Fund Warns 400,000 Members of Benefit Cuts

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The Teamsters’ Central States Pension Fund sent out a letter to its members this week, warning them that their benefits are going to be cut as the fund looks to remain solvent.

Such cuts were made legal in late 2014, when Congress passed a bill that allows trustees of some multiemployer pension plans to submit proposals for benefit reductions.

More on the letter and the cuts, from CNBC:

A prominent Teamsters pension fund, one of the largest, has filed for reorganization under a new federal law and has sent letters to more than 400,000 members warning that their benefits must be cut.

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The executive director of the Central States fund, Thomas Nyhan, said that reducing payouts to make the money last longer was the only realistic way of avoiding a devastating collapse in the next few years.

“What we’re asking is to let us tap the brakes a little now, and let us avoid insolvency,” he said. “The longer we wait to act, the larger the benefit reductions will have to be.”

He said the Central States fund had been hit by powerful outside forces — the deregulation of the trucking industry, declining union membership, two big stock crashes and the aging of the population — and it was currently paying out $3.46 in pension benefits to retirees for every dollar it received in employer contributions.

“That math will never work,” Mr. Nyhan said. He said the fund was projected to run out of money in 10 to 15 years, an almost unthinkable outcome for a pension fund that became a political and financial powerhouse in the 1960s, when trucking boomed with the construction of the interstate highway system. Central States became famous back then for financing the construction of hotels and casinos in Las Vegas.

Congress has to approve any benefit cuts to members of multiemployer plans, and they have until May to do so for this particular round of reductions.

If the cuts are approved, members will then need to vote on the changes – although even if they vote down the cuts, the Treasury can still implement them if it decides to do so.

 

Photo by TaxRebate.org.uk via Flickr CC License

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