Category Archives: Retirement

Can They Grab Your Pension?

Clawbacks become more common as plans discover they overpaid recipients

by Carole Fleck, AARP Bulletin, March 2015
Millions Could See Cuts

Tucked into the massive budget bill passed by Congress in December was a provision permitting certain financially troubled multiemployer pension plans to cut existing benefits potentially to hundreds of thousands of retirees who are under age 80.

Shifting burden

That 11th-hour provision toppled 40 years of protections for retirees already receiving benefits and may alter the course of the U.S. retirement system, retirement advocates say. “Congress has placed the burden of rescuing underfunded multiemployer plans on the people who can least afford it — retirees and surviving spouses who rely on their pensions for food, medication and other necessities,” says Karen Friedman, executive vice president at the Pension Rights Center in Washington, which fought against the legislation along with AARP and other groups.

Multiemployer plans — there are about 1,400 in the U.S. — are group pensions that several companies within a single or related industry pay into, mostly to cover union workers. But shrinking union membership, market declines and other issues have put some 150 to 200 plans — covering about 1.5 million people — in peril.

Out of money

Those plans could run out of money within 20 years, according to the Pension Benefit Guaranty Corp., which insures private pensions up to certain limits when employer plans go bankrupt. Retirees won’t see immediate cuts to their pensions because it’s a complex process to modify benefits.

Vote on cuts

For example, plans with at least 10,000 workers and retirees must permit all participants to vote on cuts before they’re implemented. Even if a majority oppose it, the Treasury secretary could override the vote and uphold trustees’ decisions to reduce payouts, in order to prevent insolvency. Under the provision, retirees ages 75 to 79 likely will see smaller cuts than those 74 and under. Pensioners in single-employer plans won’t be affected.

Your New Congress at Work for YOU!

What Retirees Need to Know about the New Federal Pension Rules
Mark Miller / Reuters
Dec. 18, 2014
     Only a small percentage of retirees are directly affected by the new rule.
But future legislation may lead to more pension cutbacks.
The last-minute deal to allow retiree pension benefit cuts as part of the federal spending bill for 2015 passed by Congress last week has set off shock waves in the U.S. retirement
Buried in the $1.1 trillion “Cromnibus” legislation signed this week by President Barack Obama was a provision that aims to head off a looming implosion of multiemployer pension plans—traditional defined benefit plans jointly funded by groups of employers. The pension reforms affect only retirees in struggling multiemployer pension plans, but any retiree living on a defined benefit pension could rightly wonder: Am I next
“Even people who aren’t impacted directly by this would have to ask themselves: If they’re doing that, what’s to stop them from doing it to me?” says Jeff Snyder, vice president of Cammack Retirement Group, a consulting and investment advisory firm that works with retirement plans.
The answer: plenty. Private sector pensions are governed by the Employee Retirement Income Security Act (ERISA), which prevents cuts for retirees in most cases. The new legislation doesn’t affect private sector workers in single-employer plans. Workers and retirees in public sector pension plans also are not affected by the law.
Here are answers to some of the key questions workers and retirees should be asking in the legislation’s wake.
Q: Cutting benefits for people who already are retired seems unfair. Why was this done?
A: Proponents argue it was better to preserve some pension benefit for workers in the most troubled plans rather than letting plans collapse. The multiemployer plans are backstopped by the Pension Benefit Guaranty Corp (PBGC), the federally sponsored agency that insures private sector pensions. The multiemployer fund was on track to run out of money within 10 years—a date that could be hastened if healthy companies withdraw from their plans. If the multiemployer backup system had been allowed to collapse, pensioners would have been left with no benefit.
Opponents, including AARP and the Pension Rights Center, argued that cutting benefits for current retirees was draconian and established a bad precedent.
Q: Who will be affected by the new law? If I have a traditional pension, should I worry?
A: Only pensioners in multiemployer plans are at risk, and even there, the risk is limited to retirees in “red zone” plans—those that are severely underfunded. Of the 10 million participants in multiemployer plans, perhaps 1 million will see some cuts. The new law also prohibits any cuts for beneficiaries over age 80, or who receive a disability pension.
Q: What will be the size of the cuts?
A: That is up to plan trustees. However, the maximum cuts permitted under the law are dramatic. Many retirees in these troubled plans were well-paid union workers who receive substantial pension benefits. For a retiree with 25 years of service and a $25,000 annual benefit, the maximum annual cut permitted under the law is $13,200, according to a cutback calculator at the Pension Rights Center’s website.
The cuts must be approved by a majority of all the active and retired workers in a plan (not just a majority of those who vote).
Q: How do I determine if I’m at risk?
A: Plan sponsors are required to send out an annual funding notice indicating the funding status of your program. Plans in the red zone must send workers a “critical status alert.” If you’re in doubt, Snyder suggests, “just call your retirement plan administrator,” Snyder says. “Simply ask, if you have cause for concern. Is your plan underfunded?”
The U.S. Department of Labor’s website maintains a list of plans on the critical list.
Q: How quickly would the cuts be made?
A: If a plan’s trustees decide to make cuts, a notice would be sent to workers. Snyder says implementation would take at least six months, and might require “a year or more.”
Q: Am I safe if I am in a single employer pension plan?
A: When the PBGC takes over a private sector single employer plan, about 85% of beneficiaries receive the full amount of their promised benefit. The maximum benefit paid by PBGC this year is $59,320.
Q: Does this law make it more likely that we’ll see efforts to cut other retiree benefits?
A: That will depend on the political climate in Washington, and in statehouses across the country. In a previous column I argued that the midterm elections results boost the odds of attacks on public sector pensions, Social Security and Medicare.
Sadly, the Cromnibus deal should serve as a warning that full pension benefits aren’t a sure thing anymore. So having a Plan B makes sense. “If you have a defined benefit pension, great,” Snyder says. “But you should still be putting money away to make sure you have something to rely on in the future.”

IBT on possible pension cuts

                IBT:  We encourage everyone to remain calm

Tens of thousands of Teamsters and retirees voiced their strong opposition over the last weeks and months to pension legislation that was included in the Omnibus spending bill. Unfortunately, the legislation was sneaked into the bill literally in the dark of night and through procedural chicanery that didn’t even allow for a separate vote or give us the opportunity to strip the provisions from the bill and passed the Senate late Saturday evening. We encourage you to make one more call to the White House at 202-456-1414 to encourage President Obama to rethink his present course of action and veto it when it reaches his desk.

This fight is not over. The union will be looking for any avenue to protect hard-earned Teamster pensions and will work to ensure transparency by any Teamster fund that might look to this legislation to provide relief.

Over the next days and weeks, we will be providing more information on the timing of this legislation and what you can do to continue this fight. It is important to note that no pension cuts are going into effect immediately.

We understand that this is a very difficult time for all Teamsters, especially retired Teamsters who are dependent on their pension. We encourage everyone to remain calm while we continue our efforts to protect every member and their pension.

Please check out www.Teamster.org for the most up-to-date information that we know on the issue.

Republican Pension Cuts and You

FAQs: What the Pension Bill Means for You

The ink is still drying on the pension cut deal that was attached in the dead of night to Congress’s spending bill. Some FAQs can be answered now; TDU will provide updated information as it becomes available

Does this bill mandate pension cuts?

No. This bill permits “deeply troubled” pension plans, those which could become insolvent over the next 10-20 years, to cut already-earned pensions of retirees and active workers. These cuts will be up to the trustees of the pension fund; the trustees are 50% union officials, and 50% management reps. No cuts will go into effect immediately.

Could this affect other Teamsters, or just those in the Central States Pension Fund?

Most Teamster funds will be completely unaffected. The Western Conference Fund is in the “green zone.” Other large Teamster funds, such as New England, Local 705, Local 710, Local 804, Local 177, Joint Council 83, and most others will be unaffected, even if they are in the “red zone.” For example, Local 804 just won significant pension benefit increases in their recent contract.

Certain deeply troubled small Teamster funds may be affected. New York Local 707’s pension fund is nearly insolvent, as freight jobs dried up, and their biggest employer YRC got concessions to drastically cut their contributions to all pension funds. So we expect the Local 707 Fund to consider pension cuts.

How will it affect Teamsters in the Central States Fund?

The Director of the Fund, Thomas Nyhan, was a principal lobbying force for this bill, and has stated that CSPF will impose cuts on retirees and active Teamsters. The Trustees of the fund, who are 50% management and 50% Teamster officials politically aligned with Hoffa, support the bill and support cutting pensions. They will make the decisions on when, who, and how much to cut, within the bounds of the new legislation.

Have Central States officials indicated how much they will cut?

In the past, Al Nelson, the Benefit Services Director of Central States, stated that a cut of about 30% would be what is needed.

But now the legislation has changed that. It requires that workers (so-called “orphans”) who retired from companies that went bankrupt (such as CF, Allied Systems, Preston, or Hostess, for example)  be cut first and hardest.

This horrendous language is contained on page 81 of the pension legislation.

At this point, no one knows what the cuts will be, because we do not know how this legislation will be interpreted or applied. The next move will be by the Central States trustees.

The legislation also has protective language for some retirees: those over 80, those receiving only a disability pension, and to a partial degree, those who are 75-80.

How will this affect UPS retirees in the Central States Fund?

UPS bought enough influence in Congress to save an estimated $2 billion through a special interest loophole that shifts the company’s cost burdens on to Teamster retirees who will face additional pension cuts as a result.

On pages 81-82 of the pension legislation there is a loophole dedicated to exactly one corporation, UPS. This loophole means that CSPF will probably not be able to cut the pensions of UPS workers who retired after January 1, 2008, because they are “Priority 3” in order of cuts (the best priority).  

UPS retirees do not benefit one cent from this loophole because their pensions are already protected by the contract. Article 34, Section 1 of the current UPS master agreement, requires UPS to make up the full pension to UPSers if CSPF imposes cuts.

UPS’s special interest loophole means the company won’t have to make up for any pension cuts. As a result, all non-UPS retirees will face $2 billion more in pension cuts. Retirees are footing the bill so that UPS doesn’t have to pay the obligations it agreed to in the contract.

It is not known if the “UPS Exemption” also covers UPS Teamsters who retired from Central States before January 1, 2008. These Teamster retirees deserve to know their status and if they may face pension cuts.

Will Teamsters and retirees get a vote prior to any cuts?

A ‘fact sheet’ issued by the bills sponsors claims that workers and retirees will get a vote before cuts could be made. But this is not true because of additional loopholes in the deal.

First, those in Central States can be deprived of a vote, because it is a large fund and its failure could seriously impact the Pension Benefit Guaranty Corporation (PBGC).

To add insult to injury: a majority of all participants – not just voters – would be required for a No result. In other words, not voting would count as a vote in favor of a pension cut!

If Central States makes these cuts, will the fund be secure?

Maybe. Certainly slashing the benefits would improve the bottom line. But in the long run a pension plan needs contributing employers, and here is where the Hoffa administration has failed badly. They severely undermined the Fund by letting UPS pull out 45,000 participants, and they have not organized new companies into the fund. Central States set up a special “hybrid” kind of plan to allow new companies to join the fund with zero withdrawal liability. It was designed for organizing. But it has not been used for new companies. That has to change.

Will Teamster officials and Central States officials have to take cuts?

That remains to be seen. Because their work for the fund or local unions will not count as “orphan” time, they may or may not face cuts.  But Thomas Nyhan, the fund director, is paid $662,060, so he probably isn’t worried. Neither is Hoffa: he is in the lucrative Family Protection Plan, which pays far more than a working Teamster could dream of collecting.

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The Pension Rights Center’s backgrounder on the pension-cut bill

TDU

 

Income gap widens as American factories shut down

Income gap widens as American factories shut down

Once mighty, now a Monopoly property: How manufacturing’s decline widens the wealth gap
Associated Press
By Michael Rubinkam, Associated Press
7 hours ago
Income gap widens as American factories shut down
READING, Pa. (AP) — In August 2008, factory workers David and Barbara Ludwig treated themselves to new cars — David a Dodge pickup, Barbara a sporty Mazda 3. With David making $22 an hour and Barbara $19, they could easily afford the payments.
A month later, Baldwin Hardware, a unit of Stanley Black & Decker Corp., announced layoffs at the Reading plant where they both worked. David was unemployed for 20 months before finding a janitor job that paid $10 an hour, less than half his previous wage. Barbara hung on, but she, too, lost her shipping-dock job of 26 years as Black & Decker shifted production to Mexico. Now she cleans houses for $10 an hour while looking for something permanent.
They still have the cars. The other trappings of their middle-class lifestyle? In the rear-view mirror.
The downfall of manufacturing in the U.S. has done more than displace workers and leave communities searching for ways to rebuild devastated economies. In Reading and other American factory towns, manufacturing’s decline is a key factor in the widening income gap between the rich and everyone else, as people like the Ludwigs have been forced into far lower-paying work.
It’s not that there’s a lack of jobs, but gains often come at either the highest end of the wage spectrum — or the lowest.
“A loss of manufacturing has contributed to the decline of the middle class,” said Howard Wial, an economist with the Brookings Institution and the University of Illinois at Chicago. “People who are displaced from high-paying manufacturing jobs spend a long time unemployed, and when they take other jobs, those jobs generally pay substantially less.”
Globalization, automation and recession destroyed nearly 6 million manufacturing jobs between 2000 and 2009. In Pennsylvania, between 2001 and 2011, 258,000 middle-income factory jobs were lost. At the same time, Pennsylvania added jobs at the lower end of the wage spectrum — in health care and social services — and at the highest end, in sectors like management and finance.
Berks County, of which Reading (pronounced REH’-ding) is the county seat, is a mirror of that larger problem.
Decades ago, Reading was a mighty manufacturing town where the Reading Railroad — once the world’s largest company, now a spot on the Monopoly board — built a 19th-century transportation empire, and factories produced everything from hats to hardware. At one time, the city boasted so many manufacturing jobs that you could quit one, cross the street and easily land another, longtime residents say.
“You made a very, very good middle-class living. You could get a new car every couple years, send kids to college,” recalled Ed McCann, Berks County’s longtime director of workforce development.
Honda automotive engine plant in Anna, Ohio
An associate is seen working in the connecting rod area during a tour of the Honda automotive engine …
Then the factories shut down. The wealthy fled to the suburbs, their grand Gilded Age mansions carved up into apartments, and poor immigrants moved in. Now Reading, population 88,000, is one of the nation’s neediest cities, with more than 40 percent of its residents living in poverty, up from 19 percent in 1990.
As poverty grew, so too did the gap between the rich and everyone else. The difference between the income earned by the wealthiest 5 percent in Berks County and by a median-income household rose 13.2 percent in 20 years, according to the U.S. Census Bureau. Nationally, the wealth gap became even more pronounced, increasing 15.8 percent.
Six years after David Ludwig lost his factory job, the couple have exhausted their retirement savings. They don’t go out to eat or spend on their grandchildren.
Barbara, 56, said she has applied for more than 200 jobs since January and gotten one offer, as a shipping clerk, for $7.50 an hour. She has lost 40 pounds, blaming it on the stress.
“I don’t mind wearing the big baggy clothes, but just to put money aside to buy one or two bras because I lost too much weight, I couldn’t even do that. It sounds silly, but it’s true,” she said.
The toll can also be seen at the Greater Berks Food Bank. It distributed 7.2 million pounds last year, up from 2.5 million pounds in 2001, and the food bank plans to move into a larger building to accommodate the surging demand.
The latest wave of plant closures, beginning around the turn of the millennium, hit companies like Dana Corp., Agere Systems, Luden’s, Glidden and Baldwin Hardware. Some 9,300 jobs evaporated between 2001 and 2011 — nearly a quarter of Berks County’s manufacturing base, according to Penn State economists Theodore Alter and Theodore Fuller. They were replaced by jobs in lower-wage sectors like education and especially health care, a phenomenon that has played out around the state and nation.
“The manufacturing sector was decimated, and the people who had those skills had no place to go,” said Karen Rightmire, a longtime United Way official who now runs the Wyomissing Foundation, a private philanthropy outside Reading. “The days of the factory job that just required a strong back are gone.”
Nationally, manufacturing declines accounted for 40 percent of the increase in joblessness from 2000-2011, according to labor economist Erik Hurst. And the middle class was hit hardest.
For high-income college graduates, “It doesn’t look like there was a recession,” said Hurst, of the University of Chicago. “For lower-skilled (manufacturing) workers, the recession comes along, you get a big decline in employment, and it hasn’t rebounded at all.”
The jobs picture isn’t entirely dark. Manufacturing is still the No. 1 employer in Berks County, led by battery maker East Penn Manufacturing Co. and a specialty steel company. Economic development officials say they’ve seen a recent uptick in factory hiring, and graduates of local technical career programs are virtually guaranteed a job. Berks County has placed a huge bet on worker training, launching a “Career in 2 Years” marketing campaign that encourages people to become certified in high-skilled manufacturing fields like precision machining and robotics.
But not everyone has the aptitude or desire.
Vicki Henshaw serves on a rapid-response team that helps laid-off factory workers. She said they are typically older, with high school diplomas and outdated skills.
“You know the struggle they are going to have to even come close to the wage they were receiving,” said Henshaw, executive director of labor-affiliated United Community Services in Reading. “You look at them and you feel the despair. Their lives are now in utter turmoil.”
While the manufacturing picture has brightened a bit nationally — with the U.S. adding hundreds of thousands of jobs in recent years — it’s an open question whether the sector is truly making a comeback or the gains are merely cyclical following the recession.
Brian Waldbiesser, for one, isn’t betting on a manufacturing renaissance.
The 41-year-old father of two saw little choice but to go back to school after losing his $19.50-an-hour job at battery maker Exide Technologies, where he had put in 19 years. After a year of unemployment, he is struggling to pay the bills, and he no longer considers himself middle class.
Waldbiesser, who has tapped a federal program for workers hurt by foreign competition, is studying psychology — and psyching himself up for better times.
“I don’t want this to be a sob story about me,” he said. “What I would like for people to take from my story is that even though I am struggling, and it is radically different from where I was, if you seize the opportunities that are in front of you, there are opportunities out there to better yourself.”

Retirees Have to Pay Deductible Again

Even though current retirees have satisfied this years deductible for their health plans, with the implementation of the “new” healthcare plan, negotiated between UPS and the Teamsters, current retirees will be subject to the deductible portion of the plan on June 1st when the “new” plan is put into place.  Aetna has been given the opportunity to re-collect the deductible and gouge retirees for up to an additional $400.

During negotiations we were led to believe that our retiree health plans were going to remain the same. Guess we should have known that we were being misled just like the active rank and file. Pretty tough to make these changes on a retirees income. Sure would have been nice to at least get some advance notice, and maybe some say in the negotiation process. Not so for todays Teamster Retiree!

New Summary Plan Descriptions Mailed to Retirees

After being reassured that the Retirees Health plan remained unchanged, all of the retirees are being sent a new summary plan description which drastically alters coverages and costs to retirees.
Just an example of those changes is the prescription coverages. Where many of our prescriptions were covered at 100%, now we will pay 20% of the cost. Additionally, where many of us were on a 90%-10% plan, we are now being reduced to an 80%-20% plan. Another huge increase in costs.
The biggest, most devastating cost though is the inclusion of a $200 per person, $400 family deductible. Many of the current plans did not include a deductible.
These are the most glaring changes in the Summary Plan Description. The worst part is that most of the retirees I know, that retired before the contract negotiations, were led to believe that our healthcare package would remain unchanged.
The consistent story in these negotiations seems to be the Internationals secrecy in negotiating on our behalf.
Here’s another example!