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Speech by Karen Friedman to the Minneapolis Teamsters Committee (November 14, 2015)

Saturday, November 14, 2015

Good morning, my friends from the Pension Rights Committee. I’ve flown in from Washington, D.C., and I know I’m in a fighting mood – and I bet you are too. Minnesotans, let’s get mad!

Many of you met me when I was here last April, so you know that I’m the executive vice president and policy director of the Pension Rights Center, the country’s oldest national consumer organization working to protect and promote the retirement rights of workers, retirees, and their families.

We’ve been around for almost 40 years, and the challenges that we’re facing today – these threatened cuts by the Central States Teamster Pension Fund – are one of the biggest challenges we’ve seen. 

But we have seen challenges before, and we should all think of ourselves as David vs. Goliath.

While Central States has a lot of might, we have RIGHT on our side, and we have hundreds of thousands of workers and retirees who are about to be hurt. We have to keep our strength and our focus to continue to battle the pension fund and to lobby Congress to repeal the law that made these cuts possible. We need to keep working to influence the government officials who are going to implement this law, and to keep our focus on getting more and more stories in the media.

You have already made progress. 

Hundreds of you came to Washington to speak at the Treasury Department and you made a huge impact, which I’ll talk about later. Because of your lobbying, your voices are being heard in Congress. There have been more than 100 stories in the media including, in the Washington Post, the New York Times, NPR, the Los Angeles Times, and, thanks to Donna Carlson, the Star Tribune

More and more people are learning about this travesty and asking how it happened. We can’t let up. We have to keep fighting -- and fighting hard.

Today I’m going to talk about five topics: 

  1. How we got to where we are and how the Multiemployer Pension Reform Act was passed and a little about what the law allows;
  2. The Central States application to apply for benefit cuts under this new law and your impact on the Treasury Department and the need to keep fighting; 
  3. Legislation in Congress; 
  4. The possibility of a lawsuit;
  5. The need for ongoing grassroots efforts – not just by Teamsters, but by lots of organizations throughout the country to undo this dastardly law and to join together for a new movement to keep pension promises. 
     

1.  What is this law and how did such a bad piece of legislation pass?

Most of you know the story. For the past two years, an organization called the National Coordinating Committee for Multiemployer Plans (better known as NCCMP) lobbied Congress intensively to ostensibly “solve” the problems of seriously underfunded multiemployer plans, particularly the Central States Pension Fund. 

NCCMP, an association of plan trustees, both union and employer, advocated that a key way to saving these underfunded multiemployer plans was to allow trustees to be able to unilaterally decide to cut retirees’ benefits. NCCMP has a lot of money and many powerful lobbyists working for it. 

In the waning days of 2014, despite massive push-back from a host of organizations, NCCMP lobbyists were able to convince key members of Congress to include a 161-page piece of legislation in the must-pass “Cromnibus” (the spending bill) to allow trustees of certain underfunded pension plans to slash the benefits of workers and retirees – by as much as 60 percent or more.

The law was passed ostensibly to “save” deeply troubled underfunded multiemployer plans, but really what the law does is allow trustees to balance the books on the backs of retirees – the most vulnerable. 

This new law guts the most fundamental provisions of ERISA, the federal private pension law. 

For 40 years, ERISA has had the strongest protections for retirees. It says clearly that the pensions of retirees cannot be cut back unless their plan runs out of money. 

However, the Multiemployer Pension Reform Act reverses ERISA’s protections and allows trustees of certain underfunded multiemployer plans to slash retiree benefits while the plans are still solvent. 

There were no public hearings on the legislation, and the retirees targeted by these cutbacks were never given a forum to have their voices heard. This legislation passed only because it was attached to the omnibus spending bill, and if that didn’t pass, the government would have shut down. 

While everyone here wants multiemployer plans to continue, there is no immediate crisis that should have compelled Congress to pass a bill that was never vetted. We know that Central States is projected to become insolvent in 10-12 years, but still there is still plenty time to consider other options. Retiree cut-backs should have been the last thing on the table, not the first option to consider.

Here are key things that MPRA allows (I can talk about this more in Q&A):

  • The legislation allows deep cuts in certain financially troubled plans.
  • Trustees are given almost unbridled leeway on how much the cuts can be, up to a legal limit.
  • Plan trustees are required to cut the benefits of orphans first – those workers and retirees who worked for companies that pulled out of the fund without paying all of their withdrawal liability.
  • Those who are over age 80 are exempt from cuts. Those aged 75 to 80 get lesser cuts, and disability pensions are protected.
  • UPS was given special protections for some of its participants, saying they would be last in line to be cut.
  • You will have the right to a vote, but it can be overturned. I’ll talk about that later.
  • You were given a retiree representative. But many of you have told me that you think that Susan Mauren hasn’t done much for you. You’ve told me she hasn’t met in person with any of you. She refused to do a forensic audit of the Fund, saying it was unnecessary.

2.  The Central States Teamster Pension Fund is the first plan to take advantage of this new law (which by the way, we’re fairly sure the Fund had a big hand in writing). 

Probably just about everyone here who is a worker or retiree participating in the Fund or a spouse or widow has received a letter telling you how much your benefits will be cut, accompanied by pages of incomprehensible explanatory material, written in microscopic print.

We are still sifting through the material that they sent to you, as well as their application to the Treasury – 10,000 pages in all. You can find the main parts on our website.

Here are some of the key points:

  • The level of cuts – ranging from 50 to 70 percent – is based on what tier you’re in; whether you’re an active employee, a retiree, or a participant who left the fund before retiring; what age you are when you received your benefits; whether you worked 20 years or less than 20; and how much your employer contributed for you. 
  • If you worked for a company that bailed out of the Fund without paying full withdrawal liability, you’re considered an “orphan” and get the worst cuts (down to 110 percent of PBGC guarantee levels). If you are a UPS employee who was still working after 2007, you’ll get lesser cuts. And pretty much everyone else will get cuts of 50% or more. 
  • I heard about one guy who was cut to ZERO. That’s a terrible story and involves how Central States is looking at reductions for spouses in a divorce situation.

The whole process is opaque and unfair. If Central States gets away with this, there will be many other multiemployer plans in line to do the same. Central States calls these cuts a “rescue plan.” But these cuts are nothing short of a pension demolition plan that will ruin the lives of more than 200,000 retirees, widows and widowers.

The Treasury Department is now reviewing the Central States Pension plan’s 10,000 page-long application to make sure that it follows the rules that were laid out in the law. Treasury also issued rules on how the law will be implemented.

This is our first line of attack. Hundreds of you came to Washington, thanks to PRC, Teamsters for a Democratic Union, and the International Brotherhood of Teamsters, to tell Treasury your stories in September. Teamsters and their wives and family members filled the hearing room. And dozens of you got up to speak to officials from Treasury, the Department of Labor, and the Pension Benefit Guaranty Corporation.

You told them about the devastating effect benefit cuts would have on you, and you asked them to use their regulatory authority to minimize the harm. Those who testified told of how the cuts would mean losing their home, not being able to take care of family members – going on public assistance.

Nobody in the agencies had ever seen anything like it. Some of the government officials told me afterward they were so moved by the stories they heard. The top people from every agency were there. I saw some with tears in their eyes. 

Folks spoke directly to Ken Feinberg, the special master who stayed the whole day to hear every story. He told the retirees that he and other government officials were listening to you.

He said that he would do everything he could to protect retirees within the confines of the law. He can’t change the law, but he can try to maximize protections to retirees. 

Just so you know, the Treasury now is asking for comments about the Central States application, and they are due on December 7. Already, more than 460 people have commented, telling their stories of how the cuts will affect them.

Treasury wants to hear from you. Did Central States take all reasonable measures to keep the fund from falling into insolvency? Have the benefits been equitably distributed? Has the voting ballot been developed? 

Here’s what we think you should tell Treasury:

  • Central States hasn’t taken all reasonable measures to keep the Fund from falling into insolvency. Has it cut administrative costs? The cost of investment managers? Why did it give CSPF executive director Thomas Nyhan a $30,000 raise?
  • Are the cuts equitable? Heck no. Why are they based on how much employers contributed for you? When most of you retired, the plans were fully funded. And the orphan cuts are certainly unfair.
  • Tell them the cuts are arbitrary and unfair and that you can’t understand how they figured out the cuts. Tell Treasury that Central States must be required to give work sheets to every participant that shows how their cuts were made. 
  • You should write a certified letter to the Fund asking for a work sheet
  • Tell Treasury that, with the complexity of these cuts, the government should provide or Central States should provide lawyers and actuaries who are independent of the Fund, who can help you with these calculations.
  • Tell Treasury that you don’t feel that the current retiree representative, Susan Mauren, protected your interests and that she simply signed off on the plan. Central States retirees should have the right to another truly independent retiree representative and that Treasury should not sign off on this plan until the retirees truly are heard and protected. The new retiree representative should do a forensic audit of the plan. Mauren says that the Department of Labor audited the plan, but the DOL doesn’t do audits.

Also, Tom Nyhan said that there was no roadmap for the trustees to use in deciding on how to choose a retiree rep. He said since MPRA said that the rep must be chosen at least 60 days before filing a rescue plan that Congress “wasn’t looking to have the retiree rep conduct an extremely independent review.” 

3.  Legislation in Congress

You are not only affecting the Treasury officials, you are having an impact on Congress. 

Because of you, U.S. Senator Bernie Sanders and Congresswoman Marcy Kaptur introduced the Keep Our Pension Promises Act (H.R. 2844 and S. 1631, KOPPA), which now has 30 cosponsors in the House (including Keith Ellison and Congressman Nolan) and seven in the Senate, including Senator Franken. You should ask Senator Klobuchar’s office to co-sponsor these bills, as she is a big consumer advocate.

KOPPA will rollback MPRA’S pension-cut provisions, while providing funding to troubled multiemployer plans and the Pension Benefit Guaranty Corporation, the agency that assists troubled plans. It is not a government bailout. It is a retiree and worker assistance plan, and it will be paid for by partially repealing a few tax breaks that only help the richest Americans.

Also, recently, because of the hard work of the Ohio Committee for Pension Rights, Senator Rob Portman introduced the Pension Accountability Act (S. 2147) aimed at giving you all a real voice in the voting process.

As it is now, all participants in the Fund have to vote, and anyone who doesn’t vote – is counted as a yes vote. The Portman bill will ensure that only those who actually cast a ballot are counted, and the Treasury Department can’t overturn the vote.

More and more members are hearing from you. We have to keep on the pressure and get as many co-sponsors of KOPPA and Pension Accountablity Act. Don’t take no for an answer.

We want to pass legislation and we want to slow this process down.

You guys are doing a great job influencing the media, getting great coverage in your local newspapers and on local news programs. Make sure you keep hitting your television stations and your newspapers. Write an op-ed for your local newspapers. Talk to columnists and investigative reporters. We need to try to get on national news, and we are going to try to get PR firm to help.

4.  Lawsuits

Many of you have asked if you can sue. This is a very complicated area of the law and we are consulting with the best ERISA and constitutional lawyers in the country to see if there is a basis for lawsuits. We ask that you not hire your own lawyer without talking to us first, because it is important that if a lawsuit is filed that it be done by only the best attorneys who are ERISA and constitutional experts. 

5.  Forming a retirement reform movement

How do we preserve promises and create a system that works? This is not just about protecting retirees in multiemployer plans, although that is our first and most critical challenge. This is a bigger issue about America. What kind of country are we and what kind of country do we want to become? Do we as a country value promises made to people, especially our elderly and our most vulnerable, or have we become a country that obliterates promises and has no regard for workers and retirees? 

We believe that the multiemployer issue is fundamental to answering these questions. America is the richest country in the world. We can and must keep promises.

So, we need to organize everyone – not just Teamsters, but other union retirees who could be affected: food workers, bricklayers, pipefitters, actors – anyone who is in these funds and who one day could be affected. This is affecting active workers and retirees, and everyone has to be in it together. We need other retirees and workers from other unions to join us. And church groups, and synagogues, and more retiree organizations. 

If this can happen to you – think about what will happen to everyone else in this country? Will this spur more cuts in Social Security? Will it mean more cuts in state and local pension plans? Will it move into single employer plans?

I’ll end saying this: the way MPRA was passed was totally undemocratic, but the way you are responding now is democracy in action. Let’s keep it up so we can win either by stopping the cuts, slowing the cuts, or changing the cuts. Please go to our website www.pensionrights.org and tell your stories on our story bank. Thank you.

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