Northwest labor press., May 21, 2010, Page 8, Image 8

May 21,2010:NWLP
5/18/10
10:16 AM
Page 8
...Some pension plans in trouble
(From Page 1)
bargain with the employer group to set a
fixed dollar-per-hour amount for wages
and benefits, which the workers then
decide how to divvy up.
With 381 actives and 111 retirees in
four union locals in Oregon, Idaho, and
Montana, the Cement Masons Em-
ployer Pension Trust had generous ben-
efits and a healthy funding level as of
2007. But investment losses pounded
the funding level down to 65 percent in
2009, and trustees determined employ-
ers would need to pay an extra $2.76 an
hour, bringing the total pension contri-
bution to $8.14 an hour. It meant, for
members, giving up two years of wage
increases.
The trustees also reduced the rate at
which future benefits accrue, and cut
the subsidy for early retirement. Ce-
ment masonry is physically demanding,
said Cement Masons Local 555 Busi-
ness Manager Brett Hinsley, and a num-
ber of members were expecting to use
the early retirement benefit to leave the
trade before the work took too great a
toll on their bodies.
“They were very upset,” said Hins-
ley, who’s also a pension fund trustee.
“It was a pretty emotional time for a lot
of people.”
Adding to the frustration of trustees
like Hinsley is that when the market
was riding high, federal tax rules pre-
vented pension trusts from building up
reserves as a cushion against down-
turns. Until a few years ago, employers
would lose the tax deductibility of pen-
sion contributions if pension trust fund-
PAGE 8
Adding to the frustration
of trustees ... when the
market was riding high,
federal tax rules
prevented pension trusts
from building up reserves
as a cushion against
downturns. Until a few
years ago, employers
would lose the tax
deductibility of pension
contributions if pension
trust funding levels were
over 120 percent.
ing levels were over 120 percent. The
Pension Protection Act of 2006 in-
creased that to 140 percent, but the rule
change came too late.
Particularly during the bull market of
the 1990s, pension investments often
soared in value. Employers in single-
employer pension plans would respond
to the “overfunding” by halting new
contributions, but employers in multi-
employer pension plans were locked
into continuing contributions by multi-
year union contracts. So to keep their
tax deductibility, trustees had to spend
down assets by making benefits more
generous. They mailed bonus checks to
retirees, increased future benefit prom-
ises, purchased extra retiree health ben-
efits, and gave lavish subsidies for early
retirement. At one point, 55-year-old
members of Cement Masons Local 555
with 10 years of service could retire
with a full pension benefit.
“We would have kept the money in
the fund, because we know the market
goes in cycles, but we had no choice,”
Hinsley said. “That extra 20 percent
would have really helped us ride out
these rougher times.”
That was Mark Holliday’s thought
too. Holliday — business manager of
Operating Engineers Local 701 — has
been a pension trustee for 24 years.
Holliday said the strategy of the Asso-
ciated General Contractors-Local 701
Pension Trust Fund has been to main-
tain the maximum tax-deductible fund-
ing level, and to favor lower-risk invest-
ments. Before the 2008 downturn, the
trust’s funding level was 114 percent.
Because of that, the trust could lose $48
million in 2008 (16 percent) and still be
at 93 percent funding a year later. It
meant — for 5,667 active, former, and
retired heavy equipment operators —
no benefit cuts or additional employer
contributions.
Much worse is the scenario faced by
Western States Office and Professional
Employees Pension Fund, which was
93.5 percent funded at the beginning of
the downturn. The fund began 2008
with assets worth $507 million and
ended with $325 million. It gets worse:
When a large employer in the fund,
Consolidated Freightways, went out of
business early in the last decade, the
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NORTHWEST LABOR PRESS
Bricklayers and Allied Crafts #1
recognizes longtime members
Bricklayers and Allied Craftworkers
Local 1 recognized longtime members
and new journeymen at a pin awards
dinner May 8. The keynote speaker for
the event was gubernatorial candidate
John Kitzhaber.
Oregonians faced a similar eco-
nomic downturn when Kitzhaber pre-
viously served as governor in the
1990s. Kitzhaber reminded the audi-
ence that then, as today, many Republi-
can politicians blamed unions for the
downturn. “In 1994, that view, and
those tactics, resulted in Newt Gingrich
and his ‘Contract with America’ taking
both chambers of the U.S. Congress
and both chambers of the Oregon Leg-
islature,” he said.
Kitzhaber also noted that his late fa-
ther’s generation — sometimes re-
ferred to as “the greatest generation” —
not only saved the world by winning
World War II, it also created America’s
middle class. “And the army in that
great movement was the American la-
bor movement,” Kitzhaber said.
Pictured at top with Business Man-
ager Keith Wright (left), President Matt
Eleazer, and Apprenticeship Coordina-
tor Shawn Lenczowski are pin recipi-
ents from left to right: Mike Ziebart,
Steve Roleson (seated), and Ernie
Pyles, 25 years; Darrel Holmes and
Ernie Mills, 50 years; and Terry
Schroeder, 40 years.
Others eligible for pins were: 50-
year members Jimmy Kruckenberg,
John Lamb, and Samuel Paulsen; 40-
year members Jack Kurtz, Jimmie
Lamb, Gerald Luther, Leon Pace, and
Robert Peterson; and 25-year members
Darrell (Butch) Smith and Wesley
Sorensen.
New journeymen at Local 1 are
Scott Hassebroek, Jacob Hazel,
Michael Hovey, Cletis Kroeker, Shane
McKenzie, Jeffrey Olds, Phillip Russo,
Cliff Shrader, Jason St. Clair, Jason
Tanner, Darrel Urban, Larry Ward, and
Steve Wolf.
MAY 21, 2010