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Speech by Karen Friedman to the Texas-Houston Committee to Protect Pensions

Sunday, February 21, 2016

Hello, my friends from Texas! I’ve flown here today from Washington, D.C. I’m happy to be talking to you about the movement to STOP the cuts to your pension. And I want to say right up front, we are making good progress on this goal.

But I first want to ask you a few questions:

  • Have all of you gotten your letters telling you your pensions are going to be cut?
  • How many are getting cuts of 50 percent? More than 50 percent?
  • How many of you are spouses or widows or widowers? How many of you understand how the cuts were made?
  • How many of you, because of the expected cuts, fear losing your home?
  • How many of you will no longer be able to take care of a family member?
  • How many of you are worried you’ll have to go on public assistance?
  • Now tell me how many of you are MAD!

Well, I’m mad, too.

And I’ll tell you something. Tim took me out for Texas barbecue last night. After eating all those ribs, I now think I have more muscle and more strength to fight. And since you guys are from Texas eating those ribs all the time, I bet you’re all in a fighting mood, too! Are you?

I’m the executive vice president and policy director of the Pension Rights Center, the country’s oldest 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 – the cuts threatened by the Central States Pension Fund – are among the biggest challenges we’ve seen.

But we have seen challenges before. Here’s my advice: we should in terms of 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 focus on the fight ahead. We must continue to battle the Central States Pension Fund and lobby Congress to repeal the parts of the law that made these cuts possible. Congress has got to pass new legislation that will put Central States and other plans on sound enough financial footing that they will be able to pay the benefits they promised.

We need to keep working to influence the government officials who are going to implement this law… and to keep our focus on getting the media to pay more attention.

You have already made progress.

More than 2,000 of you have filed comments asking the Treasury Department to REJECT the Central States application to cut your benefits.

And thousands of retirees, workers, widows and spouses across the country have been filling auditoriums talking to government officials to ask them to STOP these cuts.

There are now more than fifty retiree committees throughout the country that have organized retirees around the country to say no to cuts.

And the Pension Rights Center, IBT, local Teamster unions, the AARP, TDU, the Machinists Union, and others have been working right along side you to stop this injustice.

And because our combined efforts, your voices are being heard in Congress and, in fact, we heard the Senate may soon hold a hearing on this issue – due in large part to you!

There have been more than 100 stories in the media including, in the Washington Post, the New York Times, NPR, the Detroit Free Press and others.

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:

First, how we got to where we are and how the Multiemployer Pension Reform Act was passed and a little about what the law allows. Next, I’ll describe what led to Central States applying for benefit cuts under this new law and the role of the Treasury Department in the process. And then I will discuss the legislation that has been introduced into Congress and the need for a Grand Bargain solution. We’ve heard from many people who are wondering about the feasibility of a lawsuit, so I will discuss that and finally, I’ll address 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.

First, what is this law and how did such a bad piece of legislation pass?

Most of you know the story. Starting in 2013, 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 – a coalition of member unions, employer trade groups, and individual employers trustees representing both unions and employers – advocated that a key way of 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, including the Pension Rights Center, the AARP, the Machinists, the IBT and others, NCCMP lobbyists were able to convince key members of Congress to include a 161-page piece of legislation in the must-pass “Cromnibus” spending bill that allows the trustees of certain underfunded pension plans to slash the pension benefits of workers and retirees.

The law was passed ostensibly to “save” deeply troubled underfunded multiemployer plans, but what the law really allows is pension plan 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, clearly protecting retiree pensions by preventing them from being cut unless a plan runs out of money.

However, the Multiemployer Pension Reform Act reverses ERISA’s protections and allows trustees of many underfunded multiemployer plans to slash retiree benefits before the plan runs out of money.

Let me reiterate: this bill was written in a back room and kept secret until the last minute. The retirees targeted by the cutbacks were never given a chance to have their voices heard.

This legislation passed only because the House leaders attached it to the omnibus spending bill, and if that didn’t pass, the government would have shut down. Where it took 7 years for Congress to pass the federal private pension law ERISA in 1974, it took just a few days to rollback one of its key provisions. And that is horrible

While everyone here wants multiemployer plans to continue, there was no immediate crisis that should have compelled Congress to pass a bill without hearing from the people most affected by it. The Central States Pension Fund isn’t even projected to become insolvent for more than 10 years, which means there was plenty of time to consider better solutions than just cutting benefits. Retiree cutbacks should have been the last option on the table, not the first.

Here’s what MPRA allows:

The legislation allows deep benefit cuts in certain financially troubled plans. Trustees are given almost unbridled leeway on how much the cuts can be, up to a legal limit of 110 percent of the PBGC guarantee, which for someone who worked for 30 years is only $12,870.

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. The law says that orphans have to have their pensions cut up to that 110 percent limit.

Those who are over age 80 are exempt from cuts. Those aged 75 to 80 get smaller cuts, and retirees who are currently receiving disability pensions are protected.

UPS was given special protections for some of its participants, saying they would be last in line to be cut.

Retirees will have the right to a vote, but the election is non-binding. I’ll talk about that later.

The trustees appointed someone supposedly to represent retirees and former employees. But many of you have told me that you think that Susan Mauren hasn’t done much for you and you are right. Here’s just some of what you’ve told me she hasn’t done: she hasn’t met in person with any of you. She hasn’t, in fact, she refused to conduct a forensic audit of the Fund, saying it was unnecessary. And she hasn’t defended you. Instead she defended the trustees’ decisions rather than fighting for you – the people she is supposed to be helping.

The Central States Teamster Pension Fund was the first plan to apply to the Treasury Department for permission to cut your benefits, but it isn’t alone. We very recently learned that two other pension plans have sent letters to retirees, informing them of plans to cut retiree pensions. Teamsters Local 469 in New Jersey and Iron Workers Local 17 in Cleveland, Ohio, have announced plans to cut retiree pension benefits.

In other word, friends, if Central States goes, I’m afraid that we’re going to see a domino effect. We might see a million or more people affected.

I’ve heard from those of you who have received a letter – be it worker, retiree, spouse or widow – that the letters telling you how much your benefits will be cut are written in pages of incomprehensible explanatory material, written in microscopic print.

We’ve been working with a team of lawyers and actuaries who helped us go through a lot of the material that Central States has sent you. We’ve also gone over the application Central States submitted to the Treasury Department, which many of you know is 10,000 pages in all.

Here are some of the key points:

The level of cuts – which can be over 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 were when you first began to receive 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 left 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 cuts too, but those cuts will probably be made up by UPS. And pretty much everyone else will get cuts of 40 percent, 50 percent or even more.

We’ve heard from several whose pensions would be cut to ZERO. These are terrible stories that involve how Central States is looking at reductions for people who are divorced. I can talk more about that in the question and answer section.

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 270,000 retirees, widows and widowers.

The Treasury Department is now reviewing the Central States Pension Fund’s 10,000 page application to make sure that it follows the rules that were laid out in the law.

The Treasury Department asked for comments on the Central states application.

The Pension Rights Center, the IBT, the AARP, Teamster Local 89 in Louisville, Kentucky – and more than 2000 of you – sent in comments to the Treasury Department explaining why it should deny the Central States application.

Keep in mind that the Treasury Department was given authority under MPRA to implement this law but they do not have the power to change the law. Only Congress can do that. 

Specifically the Treasury Department asked for your opinion on whether the Central States Pension Plan met the specific benchmarks that were set by MPRA. The Treasury Department is bound by the law and can only reject the Central States application if it finds the plan did not meet these benchmarks.

There are three conditions that the plan must satisfy.

First, have the Central States trustees taken all “reasonable measures” to prevent the Fund from running out of money? Second, have the trustees allocated the cuts among active, retired, and deferred vested participants in an equitable and fair manner? Finally, will the proposed cuts ensure that the Fund will not run out of money in the future?

We, and retirees like you, took the position that the application should be rejected because the plan flunks all three conditions.

Our overriding message is this: The Central States trustees, from the start, had disabling conflicts of interest where they treated those who they no longer represent – retirees, orphans, and other former employees – the worst and they ask almost nothing of the employers.

We learned on OpenSecrets.org that Central States spent $500,000 of your plan money to lobby for the passage of MPRA. They wrote the law, and then lobbied for the law, that gives them almost unbridled authority to cut your benefits.

So here are the questions that the Treasury Department needs to answer:

Does the rescue plan demonstrate that Central States took all reasonable steps to avoid insolvency? We say “no”.

Central States didn’t propose increased contributions for employers, even those their own experts said could afford it. Yet they decided it was O.K. to reduce your pensions. That’s not right. In fact we’ve had some of you compare this this to wage theft.

Central States didn’t reduce plan and administrative and investment management expenses. In fact, as you know Tom Nyhan, the Fund’s executive director, gets a compensation package of $600,000. And he recently got a $30,000 raise. Is that right? Heck no.

The second thing the Treasury Department needs to determine is whether the “rescue” plan equitably distributes the benefit cuts. Again, we say “no”.

Central States clearly and deliberately created a plan that hurts retirees, who can least afford the cuts, the most. The plan decimates benefits of long-service loyal retirees who were incentivized to retire early. The “rescue” plan treats some participants as orphans – and cuts their benefits accordingly – even though it isn’t clear that they are orphans under the statute. And I’ve heard from you guys, that you’re all in it together, and this whole idea of orphans is just wrong.

While Central States says that the average benefit cut is just over 22 percent, the retirees we’ve talked to – and I’m talking thousands – are facing cuts of 40, 50, 70 percent or even higher. And this seems to be the case for many of you in this room.

The third factor the Treasury Department will consider is whether the proposed cuts ensure that the Fund will remain solvent for at least 30 years.

Again, we and IBT and others say “no”.

Even with the steep and unjust cuts proposed in its “recuse” plan, it is pretty clear that Central States may not survive for the long term, which is a key condition to Treasury accepting this proposal.

The Central States Pension Fund projects that if the cuts are approved, the Fund will have a 50.4 percent 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 Central States’ projections at face value.

If Central States is “rescue” plan includes such devastating cuts, don’t you think there should be more than 50.4 percent chance that the plan doesn’t run out of money?

We think the Treasury Department shouldn’t even consider the Central States application until each and every one of you gets a work sheet telling you exactly how your benefits are cut. The information they gave you is purposefully opaque and incomprehensible. To get a work sheet, send a letter to the Fund via certified mail asking for it to provide you a work sheet.

In your comments, some of you have told Treasury that, with the complexity of these cuts, the government or Central States should provide lawyers and actuaries who are independent of the Fund so they can help you verify that these calculations are correct.

For these reasons and more, the Treasury Department should reject the Central States Pension Fund’s application. As I mentioned earlier, the Treasury Department, can only reject the application if they determine that it hasn’t met the conditions as set forth in the law.

Ken Feinberg, the Special Master who has been appointed by the Treasury Department to oversee the implementation of law, not only asked for your comments, but also is talking to as many of you as he can.

He holds weekly conference calls with retirees and has held town hall meetings around the country – in Ohio, Illinois, Wisconsin, Minnesota, Michigan and others. Just two weeks ago, I flew to Detroit to join 800 retirees who asked him to reject the application.

Mr. Feinberg is hearing story after story of hardships. he’s heard from retirees describing how they may lose their houses, retirees who may have to go on public assistance, retirees who won’t be able to take care of their kids or grandkids. These cuts will have a lasting impact – and not just on families – but on economies. And he is listening. Of course, the fact that these cuts are cruel and harsh is not a factor, but we want everyone to know that these cuts affect real people. These cuts would be devastating.

But, again, there is only so much that the Treasury can do, given the law.

And that’s why we have to get Congress to change the law so that the plans can survive without cutting benefits by 40 or 50 percent.

And you are making an impact there too.

Because of you, Senator Bernie Sanders and Congresswoman Marcy Kaptur introduced the Keep Our Pension Promises Act, which now has 30 cosponsors in the House and 8 in the Senate.

If passed, KOPPA will roll back the provisions of MPRA that allow for these horrible pension cuts. It would also provide funding to troubled multiemployer plans and to the Pension Benefit Guaranty Corporation, the agency that insures private pensions.

KOPPA is not a government bailout. It is a retiree and worker assistance plan, and it will be paid for by partially repealing two tax breaks that only help the richest Americans.

And because of the hard work of your fellow retirees in the Ohio Committee to Protect Pensions, Senator Rob Portman introduced the Pension Accountability Act, which is aimed at giving you all a real voice in the voting process.

As the law stands now, if the “rescue” plan is approved by the Treasury Department, all participants in the plan have a right to vote. That’s good. But the law is written so that anyone who doesn’t vote is automatically counted as a “yes” vote. The Pension Accountability Act would ensure that only the votes of those who actually cast a ballot are counted.

Your members of Congress need to sign onto these bills!

Have you met with them? What do they say? Ask them for your help!

We have to keep on the pressure and get as many co-sponsors of KOPPA and Pension Accountability Act. Don’t take no for an answer.

When Members say that they can’t do this, or that they can’t support a bill that is from a Democrat or a Republican. Tell them this.

ERISA was signed into law by Republican President Gerald Ford who worked with Democrats and Republicans to get it passed because they knew that retirees’ pensions had to be protected.

And then in 1983, president Ronald Reagan signed into law the Railroad Retirement Solvency Act. He worked with Democrats and Republicans, to provide federal assistance, millions of dollars, to save the Railroad Retirement Program – because of the commitments that had been made to workers and retirees.

If Ronald Reagan protected retirees, then certainly so can this Congress 30 years later. Congress needs to stop the partisan bickering and help you keep your pensions.

And if your members of Congress still won’t sign onto either of these bills, tell them to come up with a bipartisan solution. A solution similar to what was fashioned in Detroit when it was going through its own bankruptcy.

The first proposal saw retiree pensions getting cut by 34 percent. There was a national outcry. And this pales next to the size of the cuts most of you are getting.

But Detroit found a way to save the plan. They brought together stakeholders from all sides – Republicans and Democrats. In the end, civilian retirees only got pension cuts of 4 percent, and police and firefighters were spared any cuts.

Surely, if it can work in Detroit, we can find such a solution for Central States and for all underfunded multiemployer plans.

You guys are doing a great job influencing the media. You’ve been getting great coverage in your local newspapers and on local news programs. Keep it up! Write an op-ed for your local newspapers. Talk to columnists and investigative reporters.

Now, 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 lawyers in the country to see if there is a basis for lawsuits.

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. Everyone has to be in it together. If plan trustees can cut retiree benefits now, what does that mean for active workers once they retire? Will they have their benefits cut again?

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 cuts in Social Security? Will it mean more cuts in state and local pension plans? Will it move into single employer plans?

How can this be stopped? Many of the retiree committees I mentioned earlier are planning coordinated actions around the country to take place on March 11 and 12. Committees in Ohio, Michigan, Minnesota, Wisconsin will rally at their state Capitols to draw attention to what’s going on. They are planning to have a theme about how these pension cuts could mean “the death of the middle class.” Their hope is to have hearses and caskets to illustrate their point. Do you want to take part in this? They are also planning a rally in Washington, D.C. on April 14. Retirees from around the country will come to D.C. to make their voices heard.

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 stop these cuts. We need to pass legislation that will allow Central States and other plans to pay the benefits they promised. Please go to our website www.pensionrights.org and tell your stories on our story bank. Thank you.

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