A large and ailing Teamsters union pension fund that holds the financial futures of thousands of active and retired trucking-industry workers said yesterday it won't devise an alternative plan to rescue the fund and called for Congressional legislation to preserve workers' pension benefits.
The announcement by trustees of the Rosemont, Ill.-based Central States, Southeast, and Southwest pension fund comes less than two weeks after the Treasury Department rejected the fund's rescue plan on grounds the fund failed to show how the plan, which called for sizable pension benefit cuts that varied depending on a beneficiary's status, would take it off the track to insolvency. At the time of Treasury's decision, Central States trustees said they would explore their next move.
Thomas Nyhan, Central States' executive director, said in yesterday's statement that the fund would be unable to develop and implement a revised plan that meets the regulatory hurdles erected by Treasury. Only Congressional funding, either directly into the fund or through the Pension Benefit Guaranty Corp., the federal government's multiemployer pension-insurance program, would save workers' pensions, Nyhan said. Without Congressional action, pensioners may see that part of their retirement nest eggs dwindle away to nothing, Nyhan said. The fund has said that, absent any intervention, it will run out of money in less than 10 years, and that it needs about $11 billion to meet all its obligations.
Nyhan didn't address the merits of Treasury's ruling other than to say the alleged defects of the fund's proposal could have been dealt with at an earlier stage in the process than they were. The fund made its proposal last fall.
"The rescue plan was a proposal of last resort, and clearly not the option that the Trustees preferred," Nyhan said. "It was, however, based on a realistic assessment that benefit reductions under a rescue plan were the only available, practical way to avoid the hardship and countless personal tragedies that will result if the Pension Fund runs out of money."
Noting that many members of Congress called on Treasury to reject the proposal, Nyhan said that it is "now time for those and others who suggested that there is a better way to fix this critical problem to deliver on real solutions that will protect the retirement benefits of Central States participants."
As of year-end 2014, the 400,000-member fund's liabilities were about twice as large as its assets. According to a published report, the fund pays out $2 billion more in retirement benefits each year than it takes in from employers, and there are more than five retired members for every active member contributing to the fund.
The fund has been hurt by subpar investment returns, high costs, and perhaps most significant, a dramatic decline in organized truck labor. At its peak before trucking deregulation in 1980, the Teamsters had about 400,000 members in its freight division. Today, it has about 50,000 members. With unionized trucking eviscerated by bankruptcies and consolidations over the past 35 years, there are fewer employers paying into the fund to support a growing number of retirees.
This, in turn, has put enormous stress on multiemployer pension schemes like Central States, where companies fund the pensions not just of their own workers and retirees but also of workers at other firms that participated, including those that have gone out of business. The program worked well as long as there were numerous unionized truckers to equitably distribute the pension obligations. As the ranks thinned, however, surviving companies became liable for a larger share of the cost. That was the main reason Atlanta-based UPS Inc., a huge Teamster employer, paid $6.1 billion to Central States in 2007 to exit the fund.
Among workers whose benefit levels were preserved by Treasury's decision were 13,000 employees of Overland Park, Kan.-based less-than-truckload (LTL) carrier YRC Worldwide Inc., as well as thousands more retirees who worked at YRC and the old Roadway Express, an LTL carrier that YRC, then known as Yellow Freight, acquired in 2003.