An ironworkers union local pension plan in Cleveland will get a $48.9-million federal cash infusion to prevent a projected 2024 insolvency that would have affected benefits for about 3,000 retirees and active workers.
Benefits had been cut an average of about 30% across the board in union Local 17 in 2017 under the Multiemployer Pension Reform Act of 2014 that was created to aid pension funds in danger of running out of money.
The new financial relief was created under the federal American Rescue Plan Act, a $1.9-trillion package enacted last year to aid U.S. recovery from economic and health effects of the COVID-19 pandemic. It provides an estimated $94 billion in assistance to eligible plans.
The law calls for the federal Pension Benefit Guarantee Corp. (PBGC). which pays benefits to multiemployer plans that fail, to pay a lump sum sufficient for a plan to continue benefits through 2051.
As of May 23, 20 other pension plans have been approved for assistance, according to the PBGC website. They include other construction-related plans, such as the Bricklayers and Allied Craftworkers Local 5 New York Retirement Fund Pension Plan; the Cement Masons Union Local 681 Pension Plan in Houston; and the Carpenters Industrial Council of Eastern Pennsylvania Pension Fund.
Eric Dean, president of the International Association of Bridge, Structural, Ornamental, and Reinforcing Iron Workers, said the relief is the first of its kind for an ironworkers’ pension plan.
He attributes the financial woes of Local 17 in part to a downturn in the industrial economy. “When you get a major steel factory closure, it’s like removing a piston from an engine,” Dean said. “All of a sudden you run with one less piston, and it puts downward pressure on the pension plan.”
Ironworker members now work more in infrastructure and other construction than they did previously. Dean said. “Infrastructure and commercial construction have taken the place of what used to be a very large industrial sector, which had been a good core of their work,” he added.
Other factors that have affected multiemployer pension plans in general include declines in the covered workforce, employers exiting the system and asset losses during The Great Recession, according to the American Academy of Actuaries.
In addition to restoring retirees’ full benefits, the financial assistance will make them whole for benefit cuts since 2017.
Dean said it also will make the plan solvent, protect the benefits of active workers and bolster PBGC and businesses. He said businesses in multiemployer pensions funds would have had to write major checks if the PBGC had collapsed. “There are people who view it as a union bailout. But, quite frankly, it’s a business bailout too," Dean said.
Rich Jordan, Local 17 business manager and financial secretary, declined to discuss specifics of the financial assistance other than to say “I am very happy for retirees to get this money back."