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Pension cuts law makes mockery of American democratic principles – Retirees to use democratic processes to fight back

The idea of one person, one vote, is a core principle of American democracy, and, consistent with this tenet, millions of citizens across the nation are expected to exercise their right to vote in elections taking place in the next few weeks. At about the same time, workers and retirees in a New York-based pension plan will be asked to participate in a voting process that makes a sham of these democratic ideals. They will have the opportunity to vote on a proposal to cut their hard-earned pensions under a law that stacks the deck in favor of cuts.

“I’m overwhelmed with anxiety and on the verge of a breakdown,” 64-year-old widow and Teamsters Local 805 Pension Plan retiree Carol Podesta-Smallen recently told a special congressional committee tasked with addressing a looming pension plan insolvency crisis.  She said in a letter to the committee that her monthly benefits are on the verge of being cut by 61 percent, from $2,600 to $1,022.  “My biggest fear” is losing my home and “ending up in a shelter,” she told the committee. 

About 130 multiemployer pension plans, like Podesta-Smallen’s Local 805 plan, are facing insolvency within the next 10 to 20 years. Congress enacted a law in 2014, the Multiemployer Pension Reform Act (MPRA), which purported to address the problem. Unfortunately for Podesta-Smallen and thousands of other plan retirees across the country who are also facing drastic cuts, MPRA was constructed to have retirees pay the bulk of plan financial shortfalls even though retirees are not responsible for the plans’ financial problems. This law also created an unfair and undemocratic voting process that for all practical purposes ensures that plan members will approve such cuts.

Under the ill-conceived MPRA, the U.S. Treasury Department has the authority to give provisional approval to plan proposals to cut benefits. Plan trustees must show that implementing the proposed cuts will keep their plan solvent for at least 20 years to get Treasury’s thumbs-up. However, once Treasury gives its approval, plan members, both current workers and retirees, theoretically have the right to vote to decide whether or not to approve the cuts. MPRA unfortunately permits trustees to create proposals that burden a minority of the plan’s members with the most severe cuts, thus reducing the incentive for most plan members, who receive only relatively small cuts, to vote against the plan’s proposal. If that weren’t enough, MPRA installed an undemocratic voting procedure to guarantee that benefit cut proposals will be approved by plan members.

Presumption of Approval

The undemocratic nature of MPRA’s voting procedure becomes evident when one realizes that the law presumes that all members approve the cuts unless they cast a “no” vote disapproving the cuts. Thus, if people do not return ballots – casting neither a “no” nor a yes” vote – these non-returned ballots are counted as a “yes,” which retirees view as deeply unfair.

For example, when members of the Portland-Ore.-headquartered Western States Office and Professional Employees Pension Fund returned their ballots by the September 7 deadline, 2,326 members had voted to reject the benefit cut proposal while only 920 had voted to approve it. However, the 3,986 members who didn’t return ballots were all counted as having voted for the proposal. The official final tally was thus 4,906 votes for cuts and 2,326 votes against. The plan began making cuts as of October 1.

Similar undemocratic voting results occurred in four of the other six plan proposals that Treasury approved and which were put to a vote of plan members. In only two cases did a narrow majority of plan members who actually voted affirmatively approve a benefit cut proposal (see the bar graphs below for the results of plan voting).

 

MPRA’s undemocratic voting procedure and unfair benefit cut provisions must be repealed and replaced. This can be accomplished by the congressional Joint Select Committee on Solvency of Multiemployer Pension Plans, which has until the end of November to devise a bipartisan proposal to rescue plans, buttress the federal multiemployer insurance program run by the Pension Benefit Guaranty Corporation, and preserve retirees’ benefits.

Thousands of plan retirees, like Podesta-Smallen, fear the consequences of drastic benefit cuts.  They appear, however, ready to use the democratic process as it was meant to be used. They are watching the select committee, congressional leaders, and their individual representatives to see which legislators vote to preserve both retiree benefits and dignity. These retirees, many from key battleground states, have told the Pension Rights Center that they intend to vote on that sole issue come election day.

Read PRC's comments to the Joint Select Committee, here.

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