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.”

UPS Turns Parking Lots Into Sorting Centers to Add Speed


Outside a brick-and-mortar sorting facility in suburban Atlanta, UPS has built its own Christmas village.

It’s functional, if not festive: the company welded together aluminum segments and placed them atop a poured concrete floor to create a makeshift package-sorting facility in an employee parking lot. Inside, conveyor belts whisk packages toward the gaping delivery bays and awaiting delivery trucks.

These “mobile distribution center villages” deployed around the U.S. are designed to help avert a repeat of last year’s Christmas delays that saw thousands of gifts delivered a day or more late. United Parcel Service Inc. (UPS) is in crunch time. It expects six days this month to surpass its single-busiest shipping day of last year. Things should peak today with an estimated 34 million items dropped off at homes and businesses.

“It all goes back to 585 million packages in the month of December,” spokesman Dan Cardillo said. “It’s a lot more packages than we usually handle.”

The center in Roswell, Georgia, resembles a metal outdoor self-storage unit and even though it’s equipped with space heaters, a morning visit last week felt as chilly inside as the 28 degrees Fahrenheit (minus 2.2 degrees Celsius) outside.

The temporary structure means a 40 percent boost in capacity to process holiday gifts in surrounding ZIP codes for the world’s biggest delivery company.

Real Test

UPS has spent the past 12 months preparing for this. Memories of last year, when it missed some Christmas deadlines because of bad weather and a rush of last-minute online orders, are fresh. The company took an image beating and was forced to make $50 million in refunds because of missed deadlines. In response, UPS moved up its plans for $500 million in capital projects to accommodate this year’s peak season, and it dedicated another $175 million of operating expenses to it.

The moves are paying off as UPS navigates today’s crush of packages, said Andy McGowan, a spokesman for the company.

“While today will be UPS’s busiest day of the year, we expect packages to be delivered as planned,” he said. “All UPS air and ground operations are operating smoothly, demonstrating the value of the additional investments in capacity and technology.”

On-Time Rate

During the week of Dec. 7 to Dec. 13, UPS deliveries were on-time 95 percent of the time, according to package tracking company ShipMatrix Inc. That’s an improvement over the same week a year earlier, when UPS’s on-time rate was 92 percent.

“This year, because they’ve done planning, they are sustaining the service levels,” said Satish Jindel, a logistics consultant from Sewickley, Pennsylvania, and president of ShipMatrix.

UPS shares rose 0.9 percent to $112 at the close in New York. They gained 6.6 percent this year compared with a 12 percent increase in the Standard & Poor’s 500 Index.

The mobile villages are a piece of UPS’s strategy to make things right this year, along with hiring 95,000 seasonal workers to sort boxes and deliver packages. That exceeds the peak-season hiring done by Inc. (AMZN) and Macy’s Inc. UPS operated one mobile village last year, and rolled out another 14 across the country this year.

Early Start

In Roswell, 22 miles north of Atlanta, the 100 employees at the mobile village supplement the work done at a 225,000-square-foot (20,900-square-meter) permanent sorting facility next door. As many as 90 trucks a day pull into the delivery bays, awaiting fresh loads of tricycles, Christmas sweaters and electronics bound for Roswell and nearby Marietta. That adds to the 200 vehicles the regular processing center accommodates.

On a recent morning, village workers dressed in jackets, gloves and hoodies picked items off conveyor belts. A label affixed to each box tells employees which truck to load the box in and what shelf to put it on. Next-day items due at offices and homes by 10:30 a.m., go up front, less pressing deliveries go in back.

Work at UPS starts early, with some employees arriving at about 3:30 a.m., expected to load three trucks in a five-hour shift.

Cardillo, the spokesman, declined to give UPS’s startup cost for each mobile village.

‘Moved Anywhere’

“These temporary delivery centers provide us enormous flexibility,” Cardillo said by e-mail. “This not only includes during peak season, but any time of year. These MDCs can be moved anywhere around the country to set up temporary operations.”

In January, UPS will take down its aluminum panels and conveyor belts, leave the concrete foundation intact and it will return to a parking lot. Until then, employees are parking at a concert amphitheater nearby and shuttling to their jobs in school buses.

“We will be getting right back to work servicing customers we serve every day,” Cardillo said. “The peak holiday deliveries will be done, but the returns pick up right away.”

To contact the reporter on this story: Michael Sasso in Atlanta at

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 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



Retirees Listen UP

1.5 million pensioners may soon see benefit cuts

WASHINGTON – Retirees covered by financially troubled multiemployer pensions could soon see their benefits cut under a $1.1 trillion congressional spending deal to keep the government running.

Architects of the proposal said it was the best way to keep the pension plans viable and benefits flowing to retirees.

“We have a plan here that first and foremost works for the members of the unions, the workers in these companies and it works for the companies,” said Rep. George Miller, D-Calif., who worked the deal out with Rep. John Kline, R-Minn.

But it quickly drew fire from some labor unions and AARP, who denounced what they call backroom deal-making that will create hardships for older Americans.

A vote on the overall spending plan was expected before week’s end.

Here are some questions and answers about multiemployer pension plans and the impact of the congressional move.


What are multiemployer pension plans?

These plans are usually found in industries that have many small employers that would not ordinarily put together a pension plan on their own, according to a report from Boston College’s Center for Retirement Research.

More than 10 million people are covered by the plans, which involve agreements between labor unions and a group of companies. Many plans cover those who work in construction, but they are also can be found in the transportation, retail and trade sectors.

All told, there are about 1,400 multiemployer pension plans.


How did things get so bad?

About 150 to 200 of these plans covering 1.5 million people are in financial trouble and could become insolvent within a few years, according to estimates from the Pension Benefit Guaranty Corp. (PBGC). The agency was established by Congress to take over failed and failing pensions when they run out of money.

The plans were once thought to be secure, but a decline in unionization and financial crises like the Great Recession have left them with fewer workers to pay into them.

The PBGC says it’s about $42.4 billion short of the money it would need to pay out pensions for plans that have failed or will fail. That’s up from $8.3 billion in 2013.

The congressional proposal essentially shifts much of the risk from the government back onto the retirees and their funds.

Alicia H. Munnell, a Boston College professor and director of the school’s Center for Retirement Research, says that decision was made out of desperation.

“They’re at a point in time where it’s impossible to cut benefits for new employees any further,” she said. “It’s sort of impossible to ask employers for any more money, so the question is what do you do?

“It’s a place where there’s no good options.”


What kind of cuts are looming?

This can vary widely, depending in large part on the financial condition of the plan and the wages paid in the industry.

“We have plans where a 10 percent cut will be enough to allow them to survive and thrive,” said Randy DeFrehn, executive director of the National Coordinating Committee for Multiemployer Plans, an advocacy group that consulted with Congress on the legislation.

In other cases, reductions as high as 30 percent may be necessary.

Some cuts may eventually be restored. That depends on factors like the industry, the plan’s location and how much trouble it was in when the cuts were made.

“It’s a function of a lot of different things,” DeFrehn said.

People will know whether their plans face a cut because they will have to vote on the cuts.


What about other pension plans?

Single-employer pension plans are much more common, covering about 31 million workers and retirees in around 22,300 plans.

The PBGC said in June that it was “highly unlikely” that its single employer program would run out of funds in the next decade.

The improving economy, better market returns and an $869 million jump in income from legislative changes led to the improvement.

“It’s a well-functioning pension insurance program, it’s adequately funded, it’s in fine shape,” Munnell said.

The PBGC does not guarantee government pensions, and those were targeted for cuts in the Detroit bankruptcy case. But Munnell said her research shows states are “absolutely committed” to paying benefits.

“In the end, the cuts to pensions in Detroit were relatively modest,” she added.


What’s the reaction?

Among unions, it’s mixed.

The AFL-CIO’s Building and Construction Trades Department has been generally supportive. But the Teamsters and Machinist unions blasted the provision.

“Today, we have seen the ugly side of political backroom dealings as thousands of retirees may have their pensions threatened by proposed legislation that reportedly contains massive benefit cuts,” said Teamsters President James Hoffa.

Machinists International President Tom Buffenbarger said, “While there is a genuine retirement crisis in this country today, the solution must not be borne by retirees who worked hard and faithfully contributed to their pension plans and have no practical means to replace lost income.”

The AARP, which says it represents millions of retirement-age Americans, also attacked the agreement as a “secret, last-minute, closed-door deal between a group of companies, unions and Washington politicians to cut the retirement benefits that have been promised to them.”

Karen Friedman of the Pension Rights Center, a group that opposes the changes, called the move “outrageous. We think that Congress is sneaking through a provision that would torpedo the most sacred protections of the federal private pension law and will devastate retirees.”