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Points to consider making in comments submitted to the U.S. Department of the Treasury on the Central States Pension Fund application to reduce benefits

The Multiemployer Pension Reform Act of 2014 allows the trustees of certain severely underfunded plans to apply to the Treasury Department for permission to cut retiree pension benefits. The Central States Pension Fund is the first plan to apply to make drastic and life-changing cuts to retirees’ earned pensions. The U.S. Department of the Treasury is currently reviewing the Central States’ application and has requested comments from interested parties, including the workers and retirees who will suffer from these terrible cuts if they are approved.

Specifically, the Treasury Department wants your opinion on whether the Central States Pension Fund has met the specific benchmarks that were set by the Multiemployer Pension Reform Act of 2014. Keep in mind that the Treasury Department is bound by the law and can only reject the Central States’ application if it finds that the plan has not met these specific benchmarks. Only Congress has the power to change the law.

Comments are due to the Treasury Department by Monday, Febuary 1 at 11:59 PM Eastern Time. Submit comments electronically here.

Below are important points that retirees can make in comments submitted to the Treasury Department. While you can use these points as a guide, it is most effective to put your comments into your own words.

If you do not think that the Central States Pension Fund has met the conditions set by the law, say so in your comments. Then ask the Treasury Department to DENY the Central States Pension Fund’s application to cut benefits.

There are three conditions that the plan must satisfy. The decision to approve or disapprove the application will most likely turn on whether the plan satisfies all three of these conditions. The Treasury Department must reject the application if it fails to satisfactorily answer these questions:

  1. Have the Central States trustees taken all “reasonable measures” to prevent the Fund from running out of money?
  2. Have the trustees allocated the cuts fairly among active, retired, and deferred vested participants equitable?
  3. Will the proposed cuts ensure that the Fund will remain solvent for at least 30 years?

 

Below are examples of answers to these questions based on suggestions from experts and other retirees. You are likely to have other ideas. You may also want to describe how the proposed cuts will affect your life and your family's life if they are approved by the Treasury Department.

Have the Central States trustees taken all “reasonable measures” to prevent the Fund from running out of money?

The Fund has not taken all reasonable measures to prevent insolvency because –

  • The trustees did not reduce other expenses before proposing to reduce retiree benefits. The trustees did not: (1) reduce the salaries of plan officials and trustees or (2) reduce fees paid to investment management firms, lawyers, actuaries, and other consultants. Fund employees received raises at the same time the trustees applied to cut retirees’ pensions.
  • The “rescue plan” does not require "shared sacrifice" from contributing employers by requiring them to significantly increase their contributions to the Fund – even though many of the companies are very profitable. The plan penalizes retirees who gave up wages for the promise of a pension. Taking away their earned pensions is a form of wage theft.

Have the trustees allocated the cuts fairly among active, retired, and deferred vested participants?

The Fund has not distributed the cuts fairly because:

  • If cuts have to be made, everyone should be cut by the same percentage. It is not fair to base cuts on how much employers contributed for individual retirees. That is not what the retirees were promised.
  • It is unfair that people within the same tier receive different cuts, and that people who retired early are penalized more than others.
  • It is not fair that UPS retirees who left the plan before 2008 have bigger cuts than those who retired later, particularly as UPS is required by contract to make sure those retired after 2007 receive full benefits.
  • If a retiree's former employer agreed with Central States to pay part of what they owed when they left the plan and paid that amount, or a bankruptcy court awarded partial payment to the Fund, it is not fair for the partial payment not to be taken into account in figuring the retiree's "orphan" benefit.
  • Tier 2 retirees who qualified for 30-and-out pensions are being treated unfairly. Not only are their pensions now being based on how much their employers contributed, but they are also being penalized for retiring early – which makes no sense. The whole point of the 30-and-out pension was to incentivize workers into retiring early by offering a full pension. How can this be taken away?  
  • “Deferred vested employees” with less than 20 years of service are unfairly receiving larger benefit cuts than those with 20 or more years of service. In many cases, their employers went out of business and they were forced to leave the fund.

Will the proposed cuts ensure that the Fund will remain solvent for at least 30 years?

The Central States Pension Fund projects that if the cuts are approved, the Fund will have a 50.4% chance of not running out of money within 30 years.

  • Small changes in a few assumptions – interest rates, life expectancy, numbers of contributing employers, etc. – could quickly bring the projections below the 50 percent mark. The Fund’s projections should be thoroughly scrutinized by independent experts.
  • Susan Mauren, as the Retiree Representative, should have had a comprehensive analysis of the Fund’s projections conducted on behalf of retirees. Instead, she said there was not enough time or money to do this – and took the Central States’ projections at face value. 

Other points to make

The Fund has not provided plain-English explanations of how benefit cuts have been calculated.

  • You have received a long letter in small type that tells you how long you worked under the Central States plan, your current pension and how much your benefit will be cut. This letter does not explain how the Fund calculated your benefit. Tell the Treasury Department that the Fund's application should be denied unless all participants are given individualized work sheets explaining exactly how the trustees figured your benefit cuts. 

The Fund has not provided help to individuals who think their benefits have been miscalculated.

  • If you think your benefits have been miscalculated, you should ask the Treasury Department to require the Central States Pension Fund to make available to any individual who requests one, a lawyer or actuary to help them understand, and possibly challenge, the calculations made on their behalf.

Fund officials have misrepresented key facts in communications to participants.

  • In written materials and on the website, Fund officials have stated that the average cuts are 22.6 percent. That figure is misleading since it includes those who are over age 80 or disabled, who are exempt from the cuts. For those whose benefits are being cut, the reductions are much larger. For many they are more than 50 percent, up to 69 percent in some cases.
  • The materials also say that the Fund is paying out $2 billion more in benefits than it is taking in from employer contributions each year. Although this is true, they do not say that the Fund receives more than half this amount - nearly $1.2 billion in 2014 - in investment earnings. The shortfall was $878 million in 2014.

Comments are due to the Treasury Department by this Monday, December 7th. Submit comments electronically here.

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