March 25, 2010

Bill to reform nation's multi-employer pension program introduced in Senate

Proposed legislation would provide relief for unionized truckers by easing pension obligations.

By Mark B. Solomon

The legislative push to reform the nation's multi-employer pension programs, which funds the retirements of 940,000 workers and retirees in the trucking industry, is gaining momentum.

On Monday, Sen. Bob Casey (D-Pa.) introduced legislation that he said would "ensure the solvency" of multi-employer plans and protect the pensions of more than 10 million Americans covered under multi-employer plans. An arrangement between a union and at least two employers usually in a common industry, a multi-employer plan requires participating companies to fund the pensions of workers and retirees from their companies and from other firms included in the plan.

The Casey bill, the Create Jobs & Save Benefits Act of 2010, mirrors legislation introduced last year in the House by Reps. Earl Pomeroy (D-N.D.) and Patrick Tiberi (R-Ohio).

Of particular interest to the trucking industry is a provision of the Casey bill that would transfer all pension liabilities of "orphan" retirees—those who had worked at now-defunct trucking firms whose pensions are being funded by the surviving truckers—to the Pension Benefit Guaranty Corp. (PBGC), a federal corporation that protects more than 29,000 pension plans. Under the Casey bill, the benefits to the "orphan" workers would be fully guaranteed so as to assure that the orphans continued to receive the same benefits they had collected under the multi-employer plan.

The bill would spell relief for unionized trucking companies responsible not only for the pensions of their own workers but of employees at failed businesses who may never have worked for the surviving companies. It would be a huge boon to YRC Worldwide Inc. and ABF Freight System, which employ about 45,000 unionized workers represented by the Teamsters. Casey introduced the bill at a YRC facility in Carlisle, Pa., with ABF and Teamster representatives also in attendance.

Overburdened plans
The multi-employer scheme was created as an amendment to the landmark 1974 Employee Retirement Income Security Act, commonly known as ERISA. Its main objective at the time was to allow workers to change employers without losing their vesting privileges.

In the trucking industry, the multi-employer concept worked fine as long as there were enough unionized firms to spread the cost. However, as company failures and consolidations winnowed the universe of unionized firms, the burden fell on those remaining to absorb an even larger portion of total retirement obligations.

Michael H. Belzer, a professor at Detroit's Wayne State University and one of the nation's foremost experts on trucking labor law, has called the multi-employer concept "dumb" and an "inconceivably great failure" of public policy.

In a statement, Casey said multi-employer plans, which as of the end of 2008 funded the pensions of 10.3 million Americans, face insolvency because so many participating companies have gone under and have left huge unfunded obligations that must now be paid by a smaller band of survivors.

"Multi-employer plans face unique challenges that are overburdening pension plans and the bottom lines of companies," the senator said.

The Teamsters hailed the legislation, saying it would strengthen the finances of multiple industries, including trucking, and change the pension funding rules so "employers won't have to make payments that could force them into bankruptcy."

Calling the current costs of multi-employer pension compliance a "huge, hidden tax" on large and small businesses, Mike Smid, chief operations officer of YRC Worldwide, said the Casey bill "will protect our employees' retirements and lead to a more competitive retirement contribution system for the industry. This is an issue that has the strong backing of labor and management. This is an opportunity to protect jobs and pensions."

The Casey proposal would also allow multi-employer plans to combine resources in an effort to reduce administrative costs. In addition, the Department of Treasury and Department of Labor would be required to report on whether the program had strengthened the financial condition of the original plans and improved the ability of the contributing employers to remain in business.

More articles by Mark B. Solomon

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