U.S. Sen. Sherrod Brown, a Democrat from Cleveland, issued the following statement today after the U.S. Treasury Department answered his call to reject the Central States Pension Fund’s application to make massive cuts to retirees earned pensions. Jack Lew said the law doesn’t allow for the government to impose a different plan on Central States to save it from insolvency, such as a smaller across-the-board cut or imposing smaller reductions for a set period of time before committing to deeper cuts. “We worked with thousands of retirees to educate Treasury and Congress on the devastating impact of the proposed cuts”, said Teamsters General President Jim Hoffa. It was the first fund to seek federal permission under the 2014 law to resolve its financial shortfall by cutting current retirees’ benefits.
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In Kline-Miller, Congress established an unprecedented process for some multi-employer pension plans to propose temporary or permanent cuts to pension checks of existing retirees.
About 40,000 people in Iowa and IL are members of the Central States Pension Fund.
The decision deals a victory to retired truck drivers, dockworkers and others who furiously battled against the cuts, which, in many cases, would have sliced promised pensions by more than half.
The Central States plan relied on flawed investment and actuarial assumptions, and failed to show that it would save the fund, Feinberg said.
“The Teamsters”, the statement continued, “will continue its legislative efforts to repeal MPRA and find a viable solution to the pension crisis”. Pension authorities have stated, however, that under the reform act, the likelihood of the plan going insolvent is still 50-50.
Friday’s announcement was great news for retirees such as Sherman Liimatainen of Cloquet, a former Teamster local union official.
While U.S. Rep. Loebsack said he was pleased with the decision, he noted “something must be done to shore up the multiemployer pension plans that are now underfunded and at risk of failing”. The pension trustees asked for $11 billion in reductions and warned that if the plan wasn’t approved, the fund eventually would go into insolvency.
The treasury department’s administrator said on Friday that retirees’ voices were heard but says he rejected the draconian cuts because they wouldn’t stop the fund from collapsing anyway.
“Next we’re going to sit down, talk, and see what we can come up with for a solution of them losing our money and investigate where our money went to”, Brockway said.
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Finally, Feinberg said, Central States was obligated to explain its intentions in a way that was understandable to the average participant. Those, unlike the more common single-employer plans, cover more than one company’s workers under contracts with unions. About 1 million workers and retirees are covered by pension plans that are at risk of running out of money over the next two decades, according to estimates from the Pension Benefit Guaranty Corp. However, the trustees could submit a new application to reduce benefits and start the process again. And for large and financially troubled plans, such as Central States, it is possible for the cuts to take place even if retirees voted against them. Another bill introduced this week would require pension executives to face pay cuts proportional to any reductions being proposed for retirees.
