Kenneth Stribling retired from the trucking industry after more than 30 years of service. In the years since, however, the 65-year-old Teamster has been working overtime to fight for the retirement he was promised. Like 10 million others, he spent the majority of his career paying into a multiemployer pension fund, often negotiating wage cuts, no pay increase or other benefits, to safeguard his future. But in 2015, he received a letter stating that safeguard could be cut by 55%. He’s not alone.
“It would have been devastating,” said Stribling, whose pension is part of the Central States Pension Fund (CSPF). It would have affected his ability to help his children or care for his youngest grandson. His family would have had to downsize. “When we first heard about the possible cuts, I went to work downsizing anyway, paying off debt, I paid my house off … just to be able to withstand that impact,” he said.
With almost 400,000 members and more than 1,500 contributing employers across a variety of industries, CSPF was, until recently, the largest multiemployer pension fund in the nation. There are 25,000 CSPF participants in Wisconsin; almost 13,000 of them are retirees. Historically known for its ties to organized crime and investments in hotel and casino real estate, the fund was once considered flush and fail-proof, but within 10 years, it is projected to be insolvent and will be unable to pay any benefits to current or future retirees.
Some of the nation’s largest multiemployer plans are underfunded and have low worker-to-retiree ratios, which put more responsibility on contributing employers. Central States has one active member paying in for every five retirees receiving benefits, and in 2016, it was 42% funded, according to its annual funding notice—a 6% drop from 2014.
Along with several attempted solutions—including increasing employer contribution rates, ending full benefits for early retirement and a bill that proposed a taxpayer-funded bailout—came the 2014 Multiemployer Pension Reform Act (MPRA), which replaced retiree protections from the Employee Retirement Income Security Act and, for the first time, allowed cutting retiree pension benefits to prevent a fund from failing. Funds in critical status must request these cuts through an application to the Treasury Department, which then approves or denies it.
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“It sort of turned the law on its head … and said let the retirees handle it,” said Karen Friedman, executive vice president and policy director of the Pension Rights Center. “We tried to stop the law, but it was snuck into the [2014] omnibus spending bill.”
Pensions to be Slashed?
In 2015, Central States submitted an application in which approximately 270,000 people would have some portion of their pension benefits reduced. “Their application was particularly draconian for a number of reasons,” Friedman said. “It would have allowed cutting [pension] benefits by up to 50-70%, which would have been unprecedented.”
“A lot of people don’t realize we paid for this just like you pay for a 401(k). We negotiated our wages,” said Paul Host, who retired from ABF Freight after 24 years. The 61-year-old said that for years, money was even diverted from his health care benefits to pay into his pension, causing a significant increase in his medical deductibles.
Insolvent funds are supposed to be backed by the Pension Benefit Guarantee Corporation (PBGC), a federal insurance agency responsible for the current and future pensions of about 1.5 million people, according to a 2016 PBGC report. However, the liability program is also alarmingly underfunded, estimating it will run out of money by 2025. Pensioners already take a cut when their benefits are assumed by the PBGC, but will get next to nothing when the program runs out of money. “No Central States Pension Fund participant would get any meaningful pension, because Central States and the PBGC will both be out of money,” according to the CSPF website.
“It is impossible to script a more tragic horror story,” former CSPF executive employee Bruce Trojak wrote in a 2017 letter to the U.S. Government Accountability Office, which is now investigating the government’s oversight of the CSPF. The imminent insolvencies that threaten the financial security of millions of Americans have been viewed as an impending economic crisis; Secretary of the Treasury Steven Mnuchin called it a pension “tsunami.” But now these retirees—and some of their still-employed counterparts—are leading the fight to keep what is theirs.
The Treasury Department denied Central States’ MRPA application for failing to meet certain criteria, including unrealistic rates of return, but also because of the overwhelming feedback from organizations and thousands of plan participants, representatives and beneficiaries.
A national movement has formed in the years since MRPA, much of which started in Wisconsin with people like Stribling, Host, Bernie Anderson and Bob Amsden, among others. These men are now participants and leaders in the Milwaukee chapter of the newly formed National United Committee to Protect Pensions (NUCPP). With more than 60 chapters in 22 states, it has been incessantly organizing, letter-writing, lobbying and visiting Capitol Hill to raise awareness about the issue and find a solution that avoids devastating effects on pensioners and taxpayers. “This has become a full-time job,” Anderson said, noting that he and Stribling often dedicate 60-100 hours a week to the cause.
“Because of them, many members of the U.S. Congress realize what a mistake the passage of MRPA was, and they have inspired new plans,” Friedman said. “This is not a partisan issue; this is about keeping promises to retirees. These guys drove trucks across the country in snow and rain to put food on the table for their families and so they could have a pension when they retired. This law really torpedoed those promises.”
Many wonder what will happen next, fearing this new precedent is the tip of the iceberg and could carry over to other types of benefits, such as single-employer pensions, 401(k)s or even Social Security. Many more wonder how we got here in the first place.
Shared Responsibility
The deep and sprawling roots of the multiemployer pension issue go very far back and very high up with a handful of contributing factors, some of which are widely acknowledged and others that are widely speculated.
The first and most commonly cited culprit is the deregulation of the trucking industry in the 1980s, which led to thousands of bankruptcies and more than 10,000 employers exiting Central States. Then, there is the untimely convergence of two major recessions occurring just as retirement reached the Baby Boomer population that makes up a majority of the fund’s participants.
Ironically, the success of these funds may have also contributed to their downfall. To avoid becoming overfunded, CSPF paid out a series of benefit increases that eventually became unsustainable, and because the plans originally had tens of thousands of companies paying in, they paid comparatively low premiums to the PBGC and were also lower on the list of payouts made after a bankruptcy, according to Anderson. That’s why MRPA was put in place, he said. “What they’re actually asking us [retirees] to do is to pay that liability that should have been the company's responsibility in bankruptcy,” he says.
The combination of economic misfortunes seems to portray a nonpoint source of fault. However, there is skepticism surrounding the significant losses suffered by Central States once the government took control of the fund, despite regular oversight from a judge and special council. A 1982 consent decree, meant to rid the fund of corruption, required selling off real estate investments and turned the management of many of the fund’s assets over to Wall Street firms like Goldman Sachs.
“We lost millions with the mafia; we lost billions with the government,” Host said. The CSPF attributes some of these losses to continued employer bankruptcies, while others point to risky investments. Trojak explained that, when the financial markets collapsed in 2008, CSPF was 68% invested in equities, many of which were in mortgage-backed securities and investment banks that held toxic assets. “Being nearly 70% invested in stocks is a lot like ‘betting on black’ at a roulette table,” Trojak said.
Host, Anderson and many others believe they deserve access to the Troubled Asset Relief Fund, created to stabilize the financial system during the 2008 financial crisis, or to some of the billions of dollars Wall Street paid in fines after the crisis. “The [government] wasn’t really doing a good job of safeguarding our futures, our retirements,” Host said. “They did things like allowing Central States to invest with known criminals like Goldman Sachs—though Goldman Sachs was experiencing losses year after year.”
Solutions for Solvency
On a Saturday morning in late September, dozens of Milwaukee NUCPP members packed into the Brookfield American Legion Post for an update on the state of their pension fight. As attendees lined up to sign the newest rep-targeted letter, Amsden, Anderson and Stribling spoke to fervent cohorts about the most recent developments.
“Wisconsin is so unique because we have everybody: We’ve got Republicans, Democrats, congressmen, senators all working for us, and they’re all talking with their aides and staffs about us, about how … we become one to let the rest of the country know that Wisconsin is leading this fight to save the pensions,” Amsden said to the crowd.
Several proposals are currently at hand with several more on the horizon, including Sen. Bernie Sanders’ Keep Our Pension Promises Act, the Bridge to Solvency and the Funding Assurance Plan. The 1-2-3 Solution, coming out of Wisconsin, suggests all 10 million multiemployer plan participants contribute a premium between 1% and 5%—depending on the status of their fund. Many local NUCPP members are also patiently awaiting the Sherrod Brown bill, which is expected to be introduced this fall.
Anderson said the goal now is to get their representatives to review all the plans and get behind those with the fewest cuts. “At the end of the year, the fund will be another billion dollars smaller,” Anderson said. “We certainly would like this over by year’s end.”
They have the ears of senators in Wisconsin and across the country, Friedman said. “I am convinced that, because of their activism, we will prevail, and we will find a better solution,” she said. “These guys have become the best citizen activists we know, and to them, it’s a larger principle. It’s not just about their pensions, it’s about, as a country, do we value taking care of our workers? This issue is an American dream issue. This is fundamental to democracy.”
