Teamsters Multiemployer Pensions On The Brink: DOL Asked To Investigate
NEW YORK, NY - OCTOBER 18: Members of the
Occupy Wall Street community join Teamsters in front of the auction
house Sotheby's to protest the lockout of union art handlers in a
contract dispute on October 18, 2011 in New York City.
Across the nation largely less-skilled older workers participating in multiemployer pension funds are at risk of losing the limited retirement security they had and slipping into poverty. Reductions or limitations on benefits–such as disability benefits–may spell doom for some workers, particularly those with physically demanding jobs. Too frail to work, too poor to retire will be their fate.
As the name suggests, a multiemployer plan is funded by more than one employer, typically in the same industry, such as retail, construction, mining and transportation. Each employer makes contributions to the plan on behalf of their employees, usually under the terms of a collective bargaining agreement.
The Pension Benefit Guaranty Corporation, the government agency that protects pensions, insures more than 10 million Americans in multiemployer pension plans. Millions of participants in multiemployer plans have already received cryptic notices that their plans are underfunded and will likely be taken over by the PBGC within three to five years.
Just how much benefits will be slashed in the event of a PBGC takeover is not disclosed. Workers have to contact the PBGC to learn what impact the cuts will have on their retirement benefits—assuming PBGC “protection” even exists in the future. That’s a big assumption given what a recent report by the Government Accountability Office has to say about these plan insolvencies that threaten the PBGC’s multiemployer insurance fund.
The GAO report ominously entitled, “Multiemployer Plans and PBGC Face Urgent Challenges,” dated March 5, 2013 warns:
“The Pension Benefit Guaranty Corporation’s (PBGC) financial assistance to multiemployer plans continues to increase, and plan insolvencies threaten PBGC’s multiemployer insurance fund. As a result of current and anticipated financial assistance, the present value of PBGC’s liability for plans that are insolvent or expected to become insolvent within 10 years increased from $1.8 to $7.0 billion between fiscal years 2008 and 2012. Yet PBGC’s multiemployer insurance fund only had $1.8 billion in total assets in 2012. PBGC officials said that financial assistance to these plans would likely exhaust the fund in or about 2023. If the fund is exhausted, many retirees will see their pension benefits reduced to a small fraction of their original value because only a reduced stream of insurance premium payments will be available to pay benefits.”
Teamsters multiemployer pensions are particularly a risk. That means older blue-collar truck and bus drivers, warehouse and construction workers and others who are unemployable because they lack skills that employers seek today or who may, due to poor health or disability, be precluded from continuing to work, are out of luck. The elderly workers who have already retired may get hurt worst. With limited pensions and only Social Security to rely upon, these geriatrics will almost assuredly slip into poverty.
Some Teamsters want answers but aren’t getting them. What caused their pensions to plummet in the past decade? Was the demise of their pension entirely unforeseeable, due to unknowable market forces or was foul-play involved? (Wall Street Thieves perhaps - ed)
Louis J. Alimena, former President of the Local 707 Teamsters, a trucking and warehouse workers union, and former trustee of the Local 707 Pension Health Welfare Funds IBT says, “Many of these Teamsters multiemployer pensions could have locked in an 8% return for fifteen years on assets when the pensions were already overfunded in 2000. Instead they chose to take unnecessary risks hiring equity Investment Managers.
That worked just fine for Wall Street but killed our pensions. I’ve asked the Department of Labor to investigate but the DOL is doing nothing.” (Since publication, I have been informed that DOL is conducting a review of the Local 707 Teamsters pension, apparently in response to Mr. Alimena’s concerns.)
On June 14, 2012, Alimena sent a letter to Jonathan Kay, Director of the New York Regional Office of the Department of Labor, asking for an investigation into the causes of the apparent impending demise of the Local 707 pension. Of greatest concern to him is the longstanding relationship between the pension and its investment consultant. According to Alimena, the consultant is a securities broker who may have been receiving commissions from the money managers he recommended to the fund. Alimena has repeatedly asked for a copy of the contract between the pension and the investment consultant to no avail, he says.
He ends his letter to Kay with the following plea: “We depend upon the Department of Labor to have oversight responsibilities and to at least inspect the failure of these trustees and advisors to secure these funds. To the best of my knowledge, there has been no DOL audit of these funds since 1997. In light of the lack of response from all parties to the fund, and my concern for the integrity of the fund’s management, I am requesting a fiduciary breach investigation by your department. All retirees including myself look forward to your help in this matter.”
Alimena’s concerns may be justified. I have conducted fiduciary breach investigations on behalf of pensions that retain conflicted “gatekeepers” to make recommendations regarding asset allocation and money management hires. My investigations have proven that conflicts of interest involving these advisers cause substantial, quantifiable harm. There are no harmless kickbacks.
Pervasive Investment industry scamming may not be the sole reason our nation’s pensions are failing but, in my opinion, it is a significant contributing factor—and one which regulators and law enforcement inexplicably choose to ignore.
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