Treasury rejects pension cuts for Teamsters

The Treasury Department on Friday rejected an application that would have allowed a pension fund covering members of the Teamster unions to cut benefits for hundreds of thousands of current and future retirees.

The request was denied “because the suspension fails to satisfy the statutory criteria for approval of benefit suspensions,” Treasury Special Master Kenneth Feinberg said in a letter to the plan’s trustees.

{mosads}Central States Pension Fund made the request to cut benefits under the Multiemployer Pension Reform Act of 2014. Had the fund’s request been approved, it would have been the first time that Treasury signed off on benefit reductions under the law.

Feinberg said in a call with reporters that there were three major reasons why Central States’ application failed to comply with the law: The submission used unreasonable assumptions, the proposed benefit cuts were not “equitably distributed” and the notice Central States sent to beneficiaries about its application was not “readily understandable” to the average plan participant.

The rejection of Central States’ petition does not mean that Treasury will reject other plans’ applications, Feinberg said. 

Central States Executive Director Thomas Nyhan said in a statement that the fund is “disappointed with Treasury’s decision, as we believe the rescue plan provided the only realistic solution to avoiding insolvency.” The fund is going to “carefully consider the most appropriate next steps,” he added.

Nyhan said that Central States is projected to become insolvent in 10 years or less and called on lawmakers who opposed its application to pass legislation to protect the benefits of its plan participants.

Since the Pension Benefit Gauranty Corporation (PBGC) is also expected to run out of money, “today’s decision means that, absent legislative action or an approved rescue plan, Central States participants could see their pension benefits reduced to virtually nothing,” he said.

Other groups also criticized Treasury’s decision.

“By denying a rescue plan that responsibly but regrettably employs benefit reductions, the administration creates false hope that a better deal for affected retirees is possible,” said Stephen Sandherr, chief executive officer of the Associated General Contractors of America. “The sad truth is that this is the best deal available”.

But lawmakers and groups that opposed Central States’ application were pleased with the department’s action. They also expressed crticisms of the MPRA.

“On behalf of our union and the more than 400,000 retirees and participants in Central States Pension Fund, I would like to thank Mr. Feinberg and the Department of Treasury for denying these massive cuts that would destroy so many lives,” Teamsters General President Jim Hoffa said in a statement. 

“This decision means that there won’t be any cuts to retirees’ pensions this July or the foreseeable future. We will find a solution to this problem that will allow members and retirees to continue to retire with dignity,” he added.

The Teamsters supports legislation sponsored by Sen. Rob Portman (R-Ohio), that would only allow proposed pension cuts under the MPRA to occur if they were approved by a majority of voting plan participants. The union also backs legislation sponsored by Sen. Bernie Sanders (I-Vt.) that would reverse the provision in the MPRA that allows plans to seek benefit cuts.

Senate Finance Committee Ranking Member Ron Wyden (D-Ore.), whose committee held a hearing on multiemployer pension plans in March, said he was “relieved” by Treasury’s decision. 

“Today’s decision proves that MPRA, which I opposed, was the wrong approach,” he said. “However, there are no easy answers here and Congress needs to work harder on a bipartisan basis to develop other solutions.” 

Rep. Debbie Dingell (D-Mich.), who lead a bipartisan group of 89 House members in sending a letter to Treasury to reject the application, said that “while we are pleased that Treasury agreed that placing an inordinate burden on workers and retirees is not the only option for Central States, it is now time for all stakeholders to return to the negotiating table to find a solution that guarantees workers the pensions they have earned and doesn’t threaten their security in their retirement years.” 

– updated 3:45 p.m.