A decades-old problem is coming home to roost and the Teamsters want taxpayers to bailout their sinking ship.
Every year that passes, the trustees of the International Brotherhood of Teamsters’ pension funds get more and more desperate.
Now, the Teamsters has come up with a new scheme that the union is trying to sell to Washington lawmakers—one that may require Americans to, ultimately, foot the bill.
Two years in the making, the draft proposal from the Teamsters is the latest attempt to prevent as many as 130 union-negotiated multiemployer plans from going insolvent in the next 20 years. More than 3.5 million workers participate in these plans.
The proposal calls for Congress to create a nonprofit private-sector corporation tasked primarily with making loans to poorly funded plans or to employers that participate in such plans. Money for the loans would come from bond purchases by investors. Payments on the bonds would be guaranteed by the full faith and credit of the U.S. Treasury.
The Teamsters proposal calls for taxpayer support for multiemployer plans and “that’s something a Republican Congress and administration won’t even consider,” Joshua Gotbaum, guest scholar at the Brookings Institution in Washington, told Bloomberg BNA May 26. He previously was the director of the Pension Benefit Guaranty Corporation.
The proposal is “complicated and the draft lacks full details, but it looks like a government bailout that isn’t being acknowledged as a bailout,” Jeremy Gold, a retired pension actuary and economist in New York, told Bloomberg BNA May 26. [More here.]
A decades-old problem…
In 1980, when President Carter (a Democrat) signed the Motor Carrier Ac–which deregulated the nation’s trucking industry–into law, trucking companies that were unionized by the Teamsters began to falter and close.
As those companies went out of business, the payments that went into the Teamsters’ pensions stopped.
As a result, the remaining companies were on the hook to continue putting moneys into the pension pot as more and more Teamsters retired.
By 1997, United Parcel Service (UPS), with its 185,000 employees, was the single largest contributor to the Teamsters’s Central States Pension Fund, which covers 400,000 active and retired Teamsters in 38 states and was once known as the “mob’s piggy bank.”
Knowing that the pension was on a trajectory of failure, UPS tried to get out of the plan in 1997. However, the Teamsters could not allow that.
So, the union, calling UPS’ pension proposal “corporate greed,” a nationwide strike against UPS that lasted for three weeks.
At the end of the strike, the union maintained control of the pension with UPS still contributing to a failing plan.
The back-room deal…
Nearly 10 years after the UPS strike, UPS had acquired Overnite Transportation, which was a non-union carrier. UPS renamed Overnite Transportation UPS Freight.
The Teamsters, not wanting to see its primary employer operate union-free, desperately wanted to unionize UPS Freight’s 15,000 employees.
At its 2006 union convention, Teamster President James P. Hoffa—the son of notorious Teamster boss Jimmy Hoffa—announced with great fanfare that a deal was struck with UPS management that gave the union the ability to unionize UPS Freight.
A year later, in 2007, the Teamsters and UPS announced that UPS would be withdrawing from the Teamsters’ Central States Pension Plan. For its part, UPS would pay a one-time $6 billion withdrawal liability—which the Teamster trustees then invested.
By 2008, when the economic meltdown occurred, much of the Teamster pension plan investments had evaporated prompting the Teamsters’ Hoffa to ask members of Congress to consider a pension bailout.
Since then, the topic of taxpayers bailing out failed union pension funds have come up repeatedly.
No easy fix…
To be certain, there are no easy fixes to the pension problems that plague many unions today.
As 2016, there were 168 different union pension funds in “critical status,” according to the Department of Labor.
While no one wants to see retirees suffer as the result of others’ poor choices, resolving the pension dilemma should not be borne on the backs of taxpayers either.
When President Obama signed the bipartisan Multi-Employer Pension Reform Act in 2014, it was thought that, finally, a partial solution could be found.
As part of the new law, critically-funded pensions could, for the first time ever, cut already retired pensioners’ pensions in an effort to save the entire fund.
However, when the Central States Pension Fund’s trustees attempted to do that, it was blocked by President Obama’s Treasury Department, which only kicked the can further down the road and closer to the fiscal cliff.
A political hot potato…
With unions calling for a pension bailout, they have a slew of lawmakers (mainly democrats) heeding their call.
With Republicans controlling Congress and Donald Trump in the White House, however, the chances of seeing a bailout bill passed is highly unlikely.
This makes the 2018 mid-term elections a huge deal for unions.
If they cannot win back enough seats to get legislation passed, or if they cannot win back the White House in 2020, their already-numbered days will be that much shorter.