Some union pension plans are in hot water. The US government requires notification to be sent to participants and beneficiaries if a multi-employer pension plan moves to critical or endangered status. At present more than 200 union pension plans are listed as critical or endangered by the Dept. of Labor.
Conservatives often criticize union pension plans because of poor planning—benefits are often set during good times but there is no planning for financially troubled times.
The government requires employers to help make up shortfalls. As an example of this predicament, Teamsters Local 102 Pension Fund’s problems will require the employer to ante up. DOL, in a letter to the fund manager, said, “The law requires that, until it enters into an agreement with the Union that implements a contribution schedule adopted as part of the Rehabilitation Plan (a ‘Conforming Agreement’), a contributing employer must pay a surcharge to help correct the Plan’s financial situation.”
DOL said the amount of the surcharge equals a percentage of the amount the employer is otherwise required to contribute to the Plan under the applicable collective bargaining agreement. That surcharge can begin at 5 percent and increase to 10 percent. Who bears the increased cost for the employer? Will those costs be passed along in higher prices for services, labor or goods, or will they be shifted onto existing employees?
Chicago has a problem with two city pension funds, and the tale of those funds is a narrative in corruption and duplicity. The Chicago Tribune published a story on Wednesday. Here’s the lede:
“All it took to give nearly two dozen labor leaders from Chicago a windfall worth millions was a few tweaks to a handful of sentences in the state’s lengthy pension code.”
The story goes on to explain how legislators inserted crony provisions in a law passed in 1991. The paper said the law “is so shrouded in secrecy that there’s no way of knowing exactly whom to hold responsible.”
As a result, 23 retired union officials could reap a windfall—“about $56 million from two ailing city pension funds thanks to the changes…”
The paper pointed out those union officials will get pensions that are approximately 3 times higher than a “typical retired city worker receives.”
When fiscal conservatives like Gov. Scott Walker (R-Wisc.) attempt to address issues related to benefits for union members, unions mount a hostile campaign to stop the process. Walker has been repeatedly attacked politically for doing what must be done, including character assassinations and an FBI raid on a former aide’s home.
It will come as no surprise that unions were at the top of the lobby pile in the Wisconsin Legislature during 2011. The Wausau Daily Herald said, “Figures released Thursday by the Wisconsin Government Accountability Board show that the four labor unions spent $6.3 million in the first half [of] the year.”
It’s hard to fathom the possibility of the taxpayer picking up the tab for union pension funds that come up short, even as labor unions spend millions to lobby state legislatures and the White House.
The administration of President Barack Obama has close ties to labor unions. Government watchdog group Judicial Watch had to go to federal court to get Obama to disclose visitor logs for the White House.
The Washington Examiner said former labor leader, the Service Employees International Union’s Andy Stern, had visited the White House 53 times as of February, 2011. Obama even appointed Stern to the failed fiscal commission.
Fox News said SEIU members spent $60 million “to help Obama win the presidency.”
Some conservatives believe the president’s push for the Patient Protection and Affordable Care Act (PPACA, also called ObamaCare) was partly because of benefits unions have promised retirees but may be unable to pay if their pension funds get into financial trouble.
Although unions routinely back employers into a corner over benefits, the unions enjoy flexibility when their pension plans go astray. According to DOL, adjustable benefits may be reduced or eliminated when a pension plan adopts a rehabilitation plan. Adjustment options include post-retirement death benefits, disability benefits for those not yet in pay status, early retirement benefits and other benefits. Union members don’t protest, however, when their union cuts the benefits.