Workers Deserve Better Pension Plan
Featured in the Worthington Daily Globe
June 17, 2009
by Diana Furchtgott-Roth
WASHINGTON — On June 22 a court hearing is scheduled to decide whether the Minneapolis Star Tribune, now in bankruptcy, will be allowed to withdraw from the underfunded Central States Teamsters pension plan, which provides pensions to 190 of its full- and part-time drivers. For the sake of the workers, the Star Tribune should be allowed to withdraw.
First, a word of explanation: pension plans with 100 percent of assets can fully pay workers’ pensions when they retire. Plans with less than 100 percent of assets cannot do so.
In 2007 the Central States plan had 47 percent of assets it needed to meet its obligations to current and future retirees. The plan is now listed as in “critical” status (less than 65 percent funded) by the Labor Department. And data released by the Central States Funds Financial and Analytical Information on March 31, 2009, show $16 billion in assets, down from $44 billion in 2007, so the fund has approximately 35 percent of the assets needed to meet its liabilities.
This means that the Star Tribune is currently paying into a plan that may never be able to give benefits to its drivers. No worker would rationally choose to be part of such a plan. Instead, the newspaper wants its drivers to join a 401(k) plan that it has set up for its other employees.
Under 401(k) plans employers and workers contribute tax-free donations — up to a federal maximum — to individual accounts. Employees own the assets in the plan and can choose the investments. Most important, they can take the assets with them if they change jobs.
Although the Central States plan for rank-and-file workers is underfunded, the plan for Central States union officials, the Teamsters Retirement and Family Protection Plan, is not. In 2006, the latest data available, the plan for union bosses was funded at 98 percent, compared to a 2006 funding level of 46 percent for the rank-and-file plan. Union officials know how to take care of themselves, but do not choose to take care of the rank-and-file workers.
The question of whether to withdraw from the Central States pension plan has come up before. In October of 2007, United Parcel Service bought out nearly 45,000 workers from the union pension fund. That is, the parcel-delivery company assumed the pension obligations of the fund and paid the Teamsters $6.1 billion.
The buyout of 45,000 UPS workers’ pensions by their employer means that these lucky workers have a better likelihood of a decent pension to support them in their old age. The benefits are generous and supported by UPS alone.
In the same way as the Teamsters union is fighting to keep Star Tribune rank-and-file workers in decaying pension plans, contrary to their best interests, unions are working hard to push even more workers into such funds.
The union-supported Employee Free Choice Act, now awaiting action in the House of Representatives and the Senate, would, among other provisions, require the Federal Mediation and Conciliation Service to set up arbitration panels to craft mandatory two-year contracts between workers and newly-unionized firms, if they cannot come to an agreement on their first collective bargaining contract within 120 days.
Firms could be forced into unproductive agreements, including underfunded pensions, that would whittle away retirement security for workers. Newly-unionized workers could be required to give up their portable 401(k) plan contributions. And under EFCA, rank-and-file workers would not have an opportunity to choose members of the panel, nor would they have recourse to a higher authority, such as the courts, if they were dissatisfied with the contract.
The Star Tribune workers deserve better than the underfunded Central States pension plan. They should have their own 401(k) accounts that they carry with them as they move up the career ladder. On June 22, the court should set Star Tribune workers free.
Diana Furchtgott-Roth, former chief economist of the U.S. Department of Labor, was a Senior Fellow at Hudson Institute from 2005 to 2011.