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February 6, 2015 | NORTHWEST LABOR PRESS
...Congress makes big change to law on union pensions
From Page 1
vote no, the U.S. Treasury De-
partment can override that vote
and approve the cuts if the plan’s
insolvency would increase the
PBGC’s projected liabilities by
$1 billion or more.
The 161-page law making the
changes is titled the Multiem-
ployer Pension Reform Act of
2014, but it didn’t go through
the normal legislative process of
hearings and committee votes.
Instead, it was passed, with al-
most no debate, as an amend-
ment in the House Rules Com-
mittee to a bill to continue
funding for the federal govern-
ment.
The Multiemployer Pension
Reform Act was crafted largely
along the lines of a proposal
called “Solutions Not Bailouts,”
which was developed by a task
force formed by the National
Coordinating Committee on
Multiemployer Plans. NCCMP,
with offices at the AFL-CIO
headquarters in Washington,
D.C., is a kind of trade associa-
tion for union benefit funds. But
not all unions agreed with the
legislation. The proposal was
supported by the AFL-CIO
Building & Construction Trades
Department, Service Employees
International Union, the Carpen-
ters Union, United Food and
Commercial Workers, United
Association of Plumbers and
Pipefitters, Operating Engi-
neers, and the Painters, and by
union employers like Associated
General Contractors and
Kroger. But it was opposed by
the Machinists, United Steel-
workers, United Auto Workers,
Teamsters, and Boilermakers,
and by AARP and the nonprofit
Pension Rights Center.
“It’s a breach of faith,” says
Karen Friedman, policy director
for the Pension Rights Center.
The Pension Rights Center, an
advocacy group funded by foun-
dations and individual dona-
tions, assembled an informal
coalition with AARP and unions
opposed to the Solutions Not
Bailouts proposal.
“We’re breaking a fundamen-
tal tenet in our federal pension
law that has been there for 40
years: You do not take benefits
away from people that are al-
ready retired,” she said.
“When Congress passed
ERISA 40 years ago, its princi-
pal aim was to put an end to dis-
appointed pension expectations,
to put an end to broken prom-
ises,” Friedman told the Labor
Press. The 1974 law she refers
to — the Employee Retirement
Income Security Act — created
the PBGC, and regulated benefit
plans to make sure they invested
prudently and treated partici-
pants fairly. It also barred the
plans from reneging on prom-
ised benefits.
“We’re breaking a
fundamental tenet in
our federal pension law
that has been there for
40 years: You do not take
benefits away from peo-
ple that are already re-
tired.”
— Karen Friedman,
Pension Rights Center
NCCMP executive director
Randy DeFrehn says the Solu-
tions Not Bailouts proposal was-
n’t ideal: It came about after
other proposed solutions got
nowhere in Congress, and after
a Republican House committee
chair declared, in effect, that
union pension funds would have
to solve their own problems, and
would not get any bailout from
taxpayers.
DeFrehn has said previously
that if no changes were made,
pensions in troubled plans
would be cut; it was only a ques-
tion of when. The thinking of
the NCCMP, therefore, was that
if smaller cuts spread across the
board could — as a last resort
— preserve a pension plan for
the long run, it would be better
than to wait until the plan was
insolvent, at which time the
PBGC would inflict maximum
cuts to everyone.
Union multi-employer benefit
plans, by law, are overseen by an
equal number of trustees ap-
pointed by the union and partic-
ipating employers. Trustees
have a fiduciary duty to serve
only the well-being of the bene-
ficiaries, not that of the union or
contributing employers. But se-
vere distress among some mul-
tiemployer retirement plans has
made it more murky how to in-
terpret that legal obligation.
The beauty of the multiem-
ployer model is that small em-
ployers can provide a generous
benefit at a relatively low ad-
ministrative cost. It works par-
ticularly well in industries like
construction, where workers
may go from project to project
and from employer to employer,
yet have each employer make a
contribution to their benefits.
Multiemployer plans work be-
cause they pool funds from
many employers. They’re all in
it together, and in general, multi
employer plans have proven
much more stable than pension
plans sponsored by single em-
ployers. But when the plans get
into serious trouble, they run the
risk of all going down together.
To make up for losses, partici-
pating employers are made to
pay heavy surcharges. That can
lead to a vicious cycle, because
new employers are reluctant to
join the plan, and the heavy sur-
charges make participating em-
ployers less competitive with
nonunion firms; they lose busi-
ness, and thus contribute less to
the plan, or they even go under.
Some union plans in the con-
struction industry got into trou-
ble because they were hit with a
double whammy: Their assets
lost value in the stock market at
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