Home » Treasury Rejects Multiemployer Pension Fund Benefit-Cut Plan
The Treasury Dept. has rejected an ailing multiemployer pension plan’s application to trim members’ benefits, a move that drew criticism from construction contractors and praise from organized labor and its congressional allies. It also sparked calls from both sides to seek legislative remedies.
The May 6 decision by Kenneth R. Feinberg, the Treasury-appointed special master overseeing such multiemployer pension applications, deals with an application from the Central States, Southeast and Southwest Areas Pension Plan. The ruling is Treasury’s first under a 2014 pension law that allowed multiemployer plans to petition Treasury to reduce benefits.
Multiemployer plans are common in construction’s unionized sector. The Central States Fund, established in 1955 for teamsters’ union truckers, now includes some members from the construction industry.
The fund said in a Feb. 18 letter to U.S. Sens. Gary Peters and Debbie Stabenow—both Michigan Democrats—that its annual benefits payments exceed contributions by more than $2 billion.
The fund also said that it is projected to become insolvent in about 10 years and added that it needs $11 billion to avoid insolvency and meet long-term obligations.
Feinberg said in a letter to the fund that its application failed to meet the requirements set forth in the 2014 Multiemployer Pension Reform Act. For example, he said that the reductions would not ensure the plan’s solvency and that the proposed reductions in benefits would not be distributed equitably among members.
Stephen Sandherr, Associated General Contractors of America CEO, said in a statement, “By denying a rescue plan that responsibly but regrettably employs benefit reductions, the administration creates false hope that a better deal for affected retirees is possible.” He added, “The sad truth is that this is the best deal available.”
Marco Giamberardino, National Electrical Contractors Association executive director for government affairs, said in an email, “The difficult decision the Central States trustees made would have ensured long-term solvency of the...pension fund, but Treasury’s decision creates even greater uncertainty over the viability of their plan going forward.”
Feinberg’s decision was welcomed in other quarters. Teamsters’ union General President James Hoffa said in a statement, “This decision means that there won’t be any cuts to retirees’ benefits this July or the foreseeable future. We will find a solution to this problem that will allow members and retirees to continue to retire in dignity.”
NECA wants Congress to permit the creation of “composite plans” which combine some features of 401K-type, defined-contribution plans with those of traditional defined-benefit plans.
Five other multiemployer plans have applied to Treasury to reduce benefits, including plans from two ironworkers’ union locals.
As of 2010, the construction industry accounted for 55% of all multiemployer plans and 37.5% of the people those plans covered, the federal Pension Benefit Guaranty Corp. said in a 2013 report.
Bills have been introduced in the House and Senate that would repeal the 2014 law’s provision allowing plans to seek approval for benefit cuts. The bills also would set up a new fund to pay the benefits of troubled plans’ members whose employers went bankrupt or withdrew from the plans without paying their shares of the benefits.
Another bill, introduced by Sen. Rob Portman (R-Ohio), would make changes in the 2014 law’s provisions dealing with voting on whether a plan’s pension cuts could take place.
None of the bills, however, has yet gained a substantial number of co-sponsors. Moreover, moving legislation of a variety of types this year will be difficult because the congressional calendar will be shortened by political parties’ July conventions and the November elections.
Feinberg has had other high-profile tasks, including overseeing claims stemming from the 2010 Gulf of Mexico oil spill and serving as special master for the federal fund to compensate victims of the September 11, 2001, terrorist attack.